ARC International plc Releases Trading Update for the Six Months Ended 31 December 2005

ELSTREE, England, 6 January 2006 – ARC International (LSE: ARK), the world leader in configurable CPU/DSP processor cores and application subsystems, today released a trading update for the year ended 31 December 2005. Its unaudited revenue for the second half of financial year 2005 will be approximately £5.0 million. This reflects 19 licensing agreements that were completed in the past six months, several of which were for ARC’s new multimedia subsystem products. The company’s year-end backlog of licensing agreements was more than £1.0 million, an increase from less than £0.5 million compared to the corresponding reporting period in 2004.

ARC continued its drive toward delivering larger, more complex customer engagements with higher average selling prices. This resulted in a number of licensing agreements being deferred, taking longer than expected to close and being delayed into the first half of 2006. These agreements had been expected to be completed before the end of the financial year. Consequently, revenues in the second half of financial year 2005 did not meet management’s expectations.

Commenting on the trading update, Carl Schlachte, president and CEO, said, “ARC International continues to benefit from the industry’s increasing adoption of configurability and our leadership position within this market. The environment for intellectual property licensing is improving, and despite the revenue shortfall, ARC continues to make good progress towards achieving its strategic goals.”

Announcement of Preliminary Results for Financial Year 2005

On Wednesday 15 February 2006 ARC International will announce results for the twelve months ended 31 December 2005. A morning meeting will be held in London for analysts. Interested parties should contact Tulchan Communications for more information.

About ARC International

ARC International is the world leader in low-power, high-performance 32-bit configurable CPU/DSP processor cores, subsystems, real-time operating systems and development tools for embedded system design. ARC’s patented configurable CPU technology assists customers in the development of next generation digital media, consumer and communications devices, resulting in lower cost, higher performance SoC products.

ARC International maintains a worldwide presence with corporate offices in San Jose, California, USA and Elstree, UK. The company has research and development offices located in England and the United States. For more information please visit the ARC website at: www.ARC.com. ARC International is listed on the London Stock Exchange as ARC International plc (LSE: ARK).