The Cambridge-based group issued a profits warning two weeks ago and today (15 October), said the headcount reduction would save the company £5m per year.
In the three months to September, ARM made £8m pre-tax profit, down from £16.2m in the three months to June. In the same period it sold just eight new licences, down from 27 in the second quarter
Chief executive Warren East said that by adjusting its cost base to the downturn, ARM would be better positioned to benefit from a recovery in the market.
"In the meantime, we will continue to focus on strengthening our competitive position, building on our leadership in the wireless market and increasing our penetration of newer markets," he added.