By Arsheeya Bajwa and Juby Babu
Feb 5 (Reuters) – Memory shortages will constrain sales of cell phones for some time, hurting demand for chip industry companies like supplier Qualcomm and chip architecture designer Arm Holdings, executives and analysts said on Wednesday as both companies reported results that disappointed investors.
Shares of Qualcomm slumped more than 11%, while those of Arm dropped 7% in premarket trading on Thursday.
Among the world’s largest smartphone chip designers, Qualcomm is dealing with relatively tepid orders as customers fail to secure memory allocations to ship complete products, resulting in the company forecasting revenue in the current quarter below market estimates.
“Industry-wide memory shortage and price increases are likely to define the overall scale of the handset industry through the fiscal year,” Qualcomm CEO Cristiano Amon said during a post-earnings call.
“Unfortunately, I think that the whole sector is impacted by memory.”
Arm designs the architecture that forms the basis of a large chunk of the smartphone chips in the world today – including Qualcomm’s – leaving it with the prospect of dampened royalty revenues on Wednesday, as mobile processor sales stall.
Arm’s royalty revenues over its next year could be hurt by as much as 2% due to the impact of memory shortages on cell phone supply, Chief Financial Officer Jason Child said on a call with analysts after his company’s results.
Qualcomm executives said the memory supply shortage could last through the current fiscal year, potentially dragging supply pressures into 2027.
In December, Morningstar analysts said they expect memory supply tightness persisting well into 2027. J.P. Morgan analysts also expect the supply shortage to last through 2027.
Global shipments of advanced smartphone chips are expected to decline 7% in 2026, partially due to rising memory prices, according to data from Counterpoint Research.
J.P. Morgan analysts said on Thursday that they expect a double-digit percentage decline in global smartphone shipments too, as rising memory costs curb demand in the mid to low-end device segment.
The surging memory prices are also expected to broadly dim the outlook for consumer electronics.
“The results largely reflect broader industry trends rather than Qualcomm-specific issues. The company is dealing with the same memory constraints affecting parts of the smartphone supply chain,” said eToro analyst Zavier Wong.
Qualcomm and Arm have both been working to reduce their dependence on the market for mobile phone chips, though, venturing into the high-growth, high-margin data center market.
Qualcomm’s Amon told Reuters on Wednesday he does not expect the global memory shortage to affect his company’s rollout of AI chips for data centers. Qualcomm expects to launch those chips in the second half of this year, with meaningful revenue coming in the firm’s fiscal 2027.
Underlying chip demand appears to remain strong and Qualcomm’s higher-end smartphone segment may be relatively more insulated, Bernstein analysts said, adding that original equipment manufacturers could direct the impact of scarce chip supply towards more profitable product lines.
(Reporting by Arsheeya Bajwa and Zaheer Kachwala in Bengaluru, and Juby Babu in Mexico City;additional reporting by Rashika Singh; Editing by Tom Hogue and Shinjini Ganguli)
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