London Calling: ARM's East copes with uncertainty

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.


Related links and articles:

ARM TechCon 2012

News articles:

A Hitchcockian nightmare: Europe falling off a cliff

Chip sales grew slightly in July

June global chip sales stay soft on U.S. weakness