ARM warns the smartphone bubble is bursting
Processor supplier braces itself for a slowdown in high end handsets, even during the holiday quarter this year
Published: 4 September, 2012
The smartphone boom cannot go on forever, and already the profits it delivers are being squeezed by a shift to lower end models, and by consolidation in the hands of Apple and Samsung. ARM, whose processor architecture underpins over 90% of handsets, has warned that weakening sales of smartphones may affect its financial results in the second half of 2012.
CEO Warren East indicated, in an interview with the UK Financial Times newspaper, that his firm was bracing itself for a slowdown, even as it accelerates its moves into new markets including larger-screened devices, low power cloud servers, and the 'internet of things'.
East said: "Many of the chip companies are indicating that they are not expecting an uplift and mathematically that will hit us." This is particularly worrying for the industry as the fourth quarter holiday period is usually the strongest for consumer device sales, and because ARM has such a broad range of industry alliances and sources of intelligence, so its forecasts are taken seriously.
In the medium term, however, East is still confident of processor growth, particularly in new form factors and machine-to-machine systems. "We get excited about ARM's technology being designed into all sorts of infrastructure products that make phones work and allow your internet connected televisions to communicate with the internet," he said. "These sorts of changes unfold over multiple of years. They may be a little slowed by economic cycles but they are an inexorable trend."
In anticipation of the smartphone squeeze, ARM has initiated cost control measures for the rest of the year, including a cut in new recruitment. For the past few years it has been hiring 200 to 250 additional engineers each year but will now reduce this figure somewhat and look for lower cost recruits. East added: "We would have liked to do more this year but the uncertainty of the business climate has made us hold off. We are also tilting slightly from hiring more experienced people towards hiring graduates, who tend to be a bit cheaper."