ARM: Chip industry to slow this year

Warren East, the CEO of Cambridge based chip designer ARM, has warned that sales will slow in the second half of 2012 amidst growing global economic “uncertainty”.

East said that he expected usual second half growth to be muted this year, with chip manufacturers not expecting the significant increase in revenues later this year.  ARM generates income from the sale of processors based on its designs.

In an interview with the Financial Times (video here), East voiced concerns over global economic uncertainty, fearing recession in Europe could affect wider markets.

“We are entering a period of uncertainty, and it is a period of uncertainty rather than anything else that is causing us concern,”  East said, warning that the crisis in the Eurozone  could spread further afield into the US.

East claimed that its manufacturing customers were expecting a slowing down in the second half of the year, and will consequently recruit a smaller amount of staff. Many chip firms have reported lower than expected revenues, and analysts are expecting low revenue growth at best for 2012.

However, East said he was “encouraged” regarding plans to release ARM based servers.  Major vendors such as Dell have been developing ARM-based servers, with the Cambridge firm agreeing to future server chip development with TSMC.  He added that in order to keep up with the ongoing data explosion, it would be necessary to double the amount of power stations to supply enough energy to meet the demands of connected devices – unless more energy efficient servers are used.

East also said that Moore’s Law is “alive and kicking”, despite shrinking chips approaching what is perceived to be a cut off point for silicon-based chips at around the 7nm mark.  

East said that there is at least another ten years in CMOS technology before production problems are encountered, though he acknowledged that the structure of the chip industry is changing as production gets more expensive. This could mean that companies will become more specialised in aspects of the industry such as specialising in the design phase – just as ARM has done – or the manufacturing, system design and marketing phase.   

“No one firm can do it all,” East said.  “It is getting more expensive”.

In the interview, East said that he was “heartened” by the way that technology companies are perceived in the UK, with greater visibility and more understanding of the business credibility of tech firms from government bodies.   Tech firms are viewed as profitable businesses rather than being part of a dotcom bubble, he said.