Qualcomm and Arm hit by memory chip shortage fears: may limit smartphone production

Shares of Qualcomm Inc. and Arm Holdings Plc plummeted after the release of quarterly reports from the semiconductor companies, fueled by fears that a shortage of memory chips would limit the growth of the electronics industry, Bloomberg reports, according to UNN.

Details

Shares of both companies fell more than 8% in after-hours trading on Wednesday evening after management indicated that memory chip constraints would limit phone production. Qualcomm is the largest manufacturer of smartphone processors, and Arm derives most of its revenue from royalties on technologies used in the industry.

The historical development of artificial intelligence infrastructure is leading to a shortage of memory chips that help computers manage data. Component manufacturers have focused on supplying AI data centers, leaving less production for phone components. This means that ultimately fewer products reach consumers, who will have to pay higher prices.

"Industry-wide, memory shortages and rising prices are likely to define the overall mobile phone market size," Qualcomm CEO Cristiano Amon told analysts on a conference call. Amon noted that Chinese buyers, in particular, said they would produce fewer phones than planned due to a shortage of memory chips.

On the other hand, both Qualcomm and Arm are poised to benefit from the AI boom. The companies are positioning themselves to generate more revenue from data center operators — a shift that should help them in the long run. But they remain vulnerable to fluctuations in the smartphone market.

One positive is that phone manufacturers are prioritizing the most expensive models. This helps boost high-end chip sales for Qualcomm and support Arm's royalty revenue.

Other companies are also sounding the alarm about memory chip shortages. MediaTek Inc., a chipmaker from Taiwan, mentioned the issue on a conference call this week, calling the situation "evolving." Meanwhile, Intel Corp. CEO Lip-Bu Tan said the shortage is likely to persist for many years.

"As far as I know, there is no improvement in the situation," he said during an event on Tuesday. Suppliers told him the situation would not improve until 2028, Tan said.

Samsung Electronics Co., SK Hynix Inc., and Micron Technology Inc. are the three largest memory chip manufacturers. Their technologies are used to store information in everything from cars to smartphones, but the key focus now is on meeting AI demand.

Data centers use advanced chips called high-bandwidth memory (HBM) to power artificial intelligence software and services. Memory chip companies have invested heavily in expanding the production of these components — at the expense of other supply sources.

Currently, the industry is trying to increase its overall capacity. But this will take time: building and equipping factories can take more than a year, the publication notes.

US buys 10% stake in chipmaker Intel for $8.9 billion23.08.25, 22:20 • 4929 views