'There may be trouble ahead,' warns ARM CEO Warren East

Warren East, CEO of chip designer ARM (pictured), has warned that sales growth will slow in the second half of 2012 due to increasing global economic uncertainty and, in particular, the rising expectation of recession and renewed financial crisis in Europe.

"We are entering a period of uncertainty, and it is a period of uncertainty rather than anything else that is causing us concern," East told the Financial Times in an interview. He warned that the bubbling sovereign debt and related banking crises in the eurozone could spread further afield, in particular to the US.

ARM sells licences to its chip designs to almost all the top chip makers, including Samsung, TSMC, Qualcomm, Broadcom, Nintendo and IBM. It makes money from selling initial licences, ongoing royalties and the sale of tools to licensees.

East said that the company's manufacturing customers were expecting business to slow down in the second half of 2012, and that this mood has already been reflected in a reduction in recruitment. Many semiconductor companies have already reported lower than expected revenues, and analysts expect low revenue growth, at best, for the rest of 2012.

East expects ARM to continue growing, but at a slower rate. East added that he was "encouraged" by plans from companies such as HP and Dell to release new low-power-consumption servers based on ARM. It is also working with Taiwanese semiconductor contract manufacturing giant TSMC on server chip development.

East pointed out that just to keep up with current data growth would require a doubling in the number or output of power stations around the world – unless servers were made vastly more power efficient.

However, he added, Moore's Law – which states that the number of transistors that can be fitted on integrated circuits doubles approximately every two years – has at least another 10 years of life left before current CMOS technology runs out of steam as chip lithography approaches seven nanometres.

Due to the immense expense of manufacturing at such levels of precision, no one company can do everything, said East, which means that companies will have to specialise in either manufacturing, system design or marketing.