Microchip maker ARM Holdings hit by smartphone sales slowdown

Microchip-designer revealed flagging shipments of high-end smartphone chips in fourth quarter

Microchip-designer ARM added to fears of a slowdown in the smartphone market today, as it revealed flagging shipments of high-end smartphone chips in the fourth quarter.

Cambridge-based ARM Holdings, whose chip designs are used in around 90 per cent of smartphones, saw fourth quarter pre-tax profit jump 19 per cent to £95.5 million, while revenue rose 15 per cent to £189.1 million in the quarter.

But ARM said there was slower growth in royalties from shipments of premium smartphone chips. The expected rush of manufacturers migrating to ARM’s 64-bit microchip designs after Apple’s inclusion of the next-generation chips in its iPhone 5S appears not to have materialised.

The news adds to fears of a slowdown in the global smartphone market.

iPhone sales in the fourth quarter disappointed analysts expectations, while Samsung, the world's biggest smartphone and TV maker, recently reported its first quarterly fall in profits for more than two years.

ARM's chief financial officer Tim Score said: “There’s been quite a lot of focus on the slowdown in the high end or premium smartphone market, but there’s still a lot of growth in the medium and low end.”

Score added that ARM was diversifying its business, signing up new customers making chips for servers, smart devices and wearable technology, which ARM sees as growth areas.

“We’re just moving into a world where our non-mobile shipments are now more than mobile and I think that’s a trend that’s going to continue. ARM is no longer just a mobile play, it addresses the whole computing spectrum."

Score said a quarter of license agreements signed in the year were with new customers.

ARM’s shifting business strategy appears to be paying off, with full-year revenue jumping 24 per cent to £714.6million and pre-tax profit in 2013 climbing 32 per cent to £364 million.

The company said 50 billion ARM-based chips have been shipped since 1993, with 10 billion in the last year alone. ARM raised its full-year dividend by 27 per cent to 5.7p. Shares were down 4.57 per cent.