Chip shortage hits smartphone makers


Shipments are slowing down and customers are seeing their first significant price increases in years. Some companies have had to cut back on production and delay new versions. All of this brought to an end what had been a good start to the year.

Smartphone makers, for much of the year, have avoided part interruptions encountered in the automotive, personal computer and home appliance industries. Phone makers buy key parts about six months in advance, but those stocks are now down.

For Samsung Electronics Co.

, the world’s largest smartphone maker, key parts supply issues contributed to an expected 20% drop in shipments from the previous quarter. Alphabet Inc.

Google has said its Pixel 5a 5G device will only be available in the United States and Japan, following the wider release of the previous year’s models.

In March, the Chinese Xiaomi Corp.

unveiled its latest flagship device in India, the Redmi Note 10, priced at around $ 161. But as of this month, the phone sells for $ 174, around 8% more than the original price. Xiaomi also launched the Mi 11 Ultra in India in April, but sales were delayed and it wasn’t until early this month that the phone became available for purchase.

“Many industries around the world have been affected by the shortage of chipsets,” said a spokesperson for Xiaomi.

Chip supply difficulties are not evenly distributed across the smartphone industry. Apple Inc.,

which accounts for about a sixth of the 1.3 billion smartphones sold each year, has remained out of trouble given its influence on the supply chain, industry analysts say, as have most of the top devices. range of Samsung. But that still leaves more than 80% of the smartphone industry in shock over parts.

A global chip shortage is affecting how quickly we can drive a car or buy a new laptop. WSJ visits a manufacturing facility in Singapore to see the complex chip-making process and how a manufacturer is trying to overcome the shortage. Photo: Edwin Cheng for The Wall Street Journal

Global smartphone shipments for the first three months of 2021 were up 20% from the previous year and were 4% higher than the comparable period of 2019, according to the Counterpoint Research market research.

The industry appeared poised for a strong 2021 as Covid-19 vaccines rolled out, economies reopened and people started spending again. Global smartphone shipments hit a low last year in the April-June quarter as countries stalled. And historically, second quarter deliveries have exceeded first quarter numbers.

This year promises to be an exception, despite high hopes. Industry-wide shipments are expected to fall 10% in the second quarter from the first, Counterpoint estimates.

Meanwhile, smartphone unit sales for the rest of the year also appear relatively stable compared to 2019 and 2020. Counterpoint Research predicts that global smartphone shipments in the second half of this year will total around 771 million. units, up 1.3% from 761 million units shipped. one year earlier. The parts shortage held back what could have been larger gains in the second half of the year, said Tarun Pathak, research director at Counterpoint.

The rise in component prices caused by chip shortages is being passed on for the time being by increasing the prices of the devices. The average worldwide wholesale price of phones rose 5% in the March-June quarter, according to the Strategy Analytics market research. This is a break with recent years when prices had not increased by more than 2%.

The pricing power of the phone industry is expected to protect, if not boost, business bottom lines, and buyers might not fend off the higher costs if they consider new devices that can connect to next-generation 5G networks, a said Neil Mawston, executive director of Strategic Analysis.

“Consumers almost expect higher prices,” Mawston said.

Much of the phone industry struggles to source a variety of semiconductors, industry analysts say, with pronounced difficulties in procuring power management chips, display drivers, application processors, in addition to 4G and 5G chipsets.

In June, the average lead time for semiconductors was 19 weeks, or more than 16 weeks, which is considered a danger zone for the supply chain, said Duksan Jang, associate researcher at Susquehanna Financial Group. A healthy delivery time is considered to be between 12 and 14 weeks.

Tight supply was highlighted recently in Taiwan Semiconductor Manufacturing second quarter results Co.

, the world’s largest contract chip maker. TSMC’s total sales increased 20% from the previous year. But the company’s revenue from smartphone chips fell 3%.

Phone makers buy key parts about six months in advance, but those stocks are now down.


Photo:

Shannon Stapleton / Reuters

In the case of Samsung, the South Korean tech giant announced around 77 million smartphone shipments in the first quarter, beating market forecasts. But at that time, Koh Dong-jin, the company’s head of mobile telephony, warned that a chip shortage would hurt its business in the April-June quarter.

Sanjeev Rana, senior analyst at Seoul-based brokerage firm CLSA, initially forecast Samsung would ship around 65 million phones in the second quarter. But he now predicts the company has missed that mark by 7 million units, about half of which is due to component shortages.

“We are closely monitoring industry challenges and doing our best to minimize the impact on our business,” said a Samsung spokesperson.

Across the industry, phone makers have also had to contend with persistent outbreaks of Covid-19 which have not only reduced consumer spending, but also affected production in major production centers in India and the United States. Vietnam.

These delays, combined with the chip shortage, affected the total number of new phone releases: around 310 phones were launched in the first half of 2021, down 18% from 370 devices a year earlier, according to Counterpoint. Research.

Delays are unlikely to affect the United States, the world’s most profitable smartphone market, although they can reach poorer markets and lower-end phones, said Cliff Maldonado, senior analyst at Baystreet. Research LLC, which primarily tracks smartphone sales in the United States.

“If you have limited chips, where will you put them?” The ones that give you the most profit, ”he said.

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Previous Long Term Medical Care (LTC) System Market Dynamics Analysis 2021-2027
Next What can you do with an MBA?