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The semiconductor industry’s longstanding “waterfall effect” – where yesterday’s premium technology becomes today’s affordable mainstream – is showing signs of strain. According to Arm executive Chris Bergey, AI-driven complexity and soaring manufacturing costs are creating a breaking point in how chipmakers deliver innovation across price segments. This fundamental shift could reshape how consumers access advanced technology in everything from smartphones to laptops.

For decades, the semiconductor industry has operated on a simple principle: today’s cutting-edge technology becomes tomorrow’s affordable mainstream. That economic model, often called the “waterfall effect,” has delivered everything from powerful processors to advanced cameras into budget-friendly devices. But according to Chris Bergey, Arm’s Senior VP and GM of the Client Line of Business, that longstanding dynamic is facing unprecedented pressure.

In recent discussions with industry analysts, Bergey revealed that the surging complexity and costs at the premium end are creating a widening gap between flagship and mainstream chips. The result? Simply repackaging last year’s high-end silicon for cheaper devices “may not work” anymore. This represents a potential breaking point for an industry that has long relied on trickle-down economics to spread innovation across price segments.