LONDON – Warren East, the CEO of U.K. processor licensor ARM Holdings plc, is warning that sales will slow in second half in 2012 due global economic uncertainty.
In an interview with the Financial Times East warned that the semiconductor industry's second half growth would likely be less than its usual robust performance. ARM makes royalties on shipments of processors including its intellectual property so the company and its CEO pay attention when its chip selling partners dial down their forecasts.
But for East it is not that there is anything specifically wrong or that anything bad that has happened or is about to happen. The problem is uncertainty. And uncertainty tends to lead consumers - and many business operations directly dependent on consumers – to keep their discretionary money in their pockets and to try and wait for greater visibility. Undoubtedly one key bad thing and a cause of that uncertainty is the unresolved Euro financial crisis (see A Hitchcockian Nightmare: Europe falling off a cliff).
With global chip sales for the first seven months of 2012 remaining behind where they were in the previous year and mixed signals from chip companies with regard to the third quarter results, it is hard to argue against East's position. There is also a evidence from within the chip industry that an earlier loss of confidence in Europe is now infecting the United States in its run up to the presidential election.
In the latest SIA/WSTS figures Americas region sales for May, June and July – as represented by the three month average were – at $4.15 billion per month and 10.4 percent behind the equivalent figure in 2011. By the same measure Europe is 10.0 percent behind where it was in 2011. While Europe's bad numbers are slowly improving as the annual comparisons wash through, the Americas region is getting worse. Certainly the consensus view for global semiconductor industry annual growth amongst market analysts has started to move into negative territory.
However, Warren East is now very experienced at managing expectations. His longer term view of the semiconductor industry as a whole, and of ARM's place within it, is justifiably positive. And while uncertainty can breed indecision and stagnation there is also every possibility that ARM will have better than par third and fourth quarters allowing observers to write in commentary "And with one bound he was free."
Uncertainty as a problem in its own right provides echoes of a famous phrase from the inaugural address of President Franklin D. Roosevelt. "The only thing we have to fear is fear itself," he said in 1933 when the Great Depression was at its nadir.
In the same speech Roosevelt also said: "Only a foolish optimist can deny the dark realities of the moment," and that could equally well be applied today to the towering sovereign debts hanging over Europe and the United States.
Roosevelt also had plenty to say about bankers in the speech: "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men." And later in the same speech added: "They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish."
We could definitely do with some leaders – in politics and business – to show some vision right about now.
"Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men" - 80 years have passed, this still remains true, maybe even more so...Kris
Ah yes....but one of the problems for democracy in many parts of the world is that telling the truth on economic matters will not get you elected.
SO politicians choose to say (believe?) that they have a magic solution that will make all the nasty debt, global competition and the slide into poverty go away; taxes will be contained/reduced and important public sector spending maintained/increased.
It is interesting to note that the most successful and most respected politicians of the past managed to get into power while addressing bad news head-on and not by appealing to an electorate's most self-serving instincts.
Good point Peter...I don't think politicians believe they have a magic solution, they just say so to get elected...facing the problems heads on might get you elected in truly exceptional times and if you have enough charisma...not in today's not so good but not so bad either climate...Kris
I liked the Roosevelt speech, however today it would be considered a scandal because he quoted the Bible, Proverbs 29:18, "Where there is no vision, the people perish: but he that keeps the law, happy is he."
Probably the greatest American president ever, for he managed to bring down the British, German and French empires in one single masterstroke!
To go back to the uncertainties of today's economic climate, John Maynard Keynes referred to this as the collapse of the animal spirit! He advocated the active involvement of Governments in rekindling this spirit but it does not seem to be working despite the trillions of dollars pumped into Western economies. In the last great depression, it was the second world war really that rekindled the animal spirit. Let's hope it won't come to that this time round.
For one thing, Keynesian economics is hardly "gospel truth," if I may use that term figuratively.
True, WWII was required to pull the US out of the 1929 depression. So, what was that all about? It was a draconian redistribution of public wealth to industry and to productivity. It was not redistribution of wealth from the productive sector into mere consumer spending.
Even using Keynes' lingo, a government doesn't rekindle the "animal spirit" by subtracting more from the "real animals," the producers.
I agree Bert22306. Most of the quantitative easing (QE) money that was "printed" in the last few years went to the finance Barons who got us into this mess in the first place. If anyone had any doubt on who is running the world economy, that doubt has now completely disappeared.
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