Qualcomm, Arm hit by concern that memory shortage is spreading
The companies are positioning themselves to get more revenue from data centre operators
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[SAN FRANCISCO] Shares of Qualcomm and Arm Holdings fell steeply after the semiconductor companies delivered quarterly reports, hurt by concern that a shortage of memory chips will crimp growth in the electronics industry.
Both stocks declined more than 8 per cent in extended trading late Wednesday (Feb 4) after management signalled that memory constraints will limit phone production. Qualcomm is the largest maker of processors that run smartphones, and Arm gets much of its revenue from royalties on technology used by that industry.
The historic build-out of artificial intelligence (AI) infrastructure is driving the shortage of memory chips, which help computers manage data. Manufacturers of the components have concentrated on supplying AI data centres, leaving less production for phone components.
That means fewer products ultimately reach consumers, who will have to pay higher prices.
“Industrywide, memory shortages and price increases are likely to define the overall scale of the handset industry,” Qualcomm chief executive officer Cristiano Amon told analysts on a conference call. Amon said that Chinese customers in particular have said that they will build fewer phones than planned because they cannot get enough memory chips.
On the other hand, both Qualcomm and Arm are poised to benefit from the AI boom. The companies are positioning themselves to get more revenue from data centre operators, a shift that should help them in the long run. But they are still vulnerable to swings in the smartphone market.
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One silver lining is that phone manufacturers are prioritising the most expensive phones. That’s helping bolster Qualcomm’s sales of higher-end chips and propping up Arm’s royalty revenue.
Other companies have raised alarm bells about the memory crunch. MediaTek, a chipmaker based in Taiwan, cited the issue during a conference call this week, calling it an “evolving” situation. Intel CEO Tan Lip-Bu, meanwhile, said the shortages are likely to persist for years.
“There’s no relief as far as I know,” he said during an event on Tuesday. Suppliers have told him that things won’t improve until 2028, Tan said.
Samsung Electronics, SK Hynix and Micron Technology are the three biggest makers of memory chips. Their technology is used to hold information in everything from cars to smartphones, but a key focus right now is keeping up with AI demand.
Data centres rely on an advanced chip called high-bandwidth memory, or HBM, to run AI software and services. Memory companies have invested heavily in expanding production of those components, at the expense of other supplies.
The industry is now attempting to increase its total capacity. But that will take time: Building and equipping factories can take more than a year. BLOOMBERG
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