Cell phone manufacturers are also hard to escape! Global chip shortage begins to sweep smartphone industry

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The global chip shortage has reportedly affected many products, from cars to video game consoles, and the next product on the list will be smartphones.

This year, the global semiconductor has been in short supply for a number of reasons, including factory closures due to the New Crown pneumonia epidemic, as well as rising demand for consumer electronics.

During the period, automakers have been affected by chip shortages as significantly, with companies such as General Motors and Ford Motor reducing, or even halting, production of certain vehicles. In addition, video game consoles were also affected, with gamers having a hard time getting their hands on the new Microsoft Xbox and Sony PlayStation 5.

In contrast, smartphones have been largely unaffected by the chip shortage so far as manufacturers such as Apple and Samsung stockpile key components.

Ben Wood, principal analyst at research firm CCS Insight, told the media, “The automotive industry is moving at a different pace than the smartphone industry. They look at the problem at a slower pace than smartphone manufacturers.”

Samsung

Wood said automakers rely on larger, older chips, while cell phone makers use the latest processors. Smartphones also sell far more than cars, making them a preferred customer for suppliers.

At the same time, Syed alam, global semiconductor director of Accenture, a consulting service company, said that at the beginning of the epidemic, smart phone companies did not think that market demand would decline sharply like automobile manufacturers.

Alam added: “in fact, smartphone companies benefit from the additional capacity left by auto companies, which leads to a chip shortage in the auto industry when auto demand grows faster than expected.”

Cell phone manufacturers are also hard to escape

But today, cell phone manufacturers are also starting to feel the effects of the global chip shortage.

Alam said, “Now that the automotive industry and other industries are catching up and starting to reclaim the capacity they gave up, the competition for semiconductor supply is fierce. This has caused pressure on the supply of smartphone chips.”

Gartner data show that smartphone demand weakened last year as the epidemic raged, with sales falling 12.5 percent. However, this demand has been recovering rapidly this year as embargo restrictions have been lifted in several countries. In the first quarter, global smartphone sales rose 26 percent.

A warning from Apple

Apple CEO Tim Cook warned yesterday that tight silicon supplies will affect sales of other products such as the iPhone and iPad.

Cook said the shortage is not of the high-performance processors Apple makes for its devices, but of chips that power mobile displays and decode everyday functions such as audio.

Glenn O’Donnell, vice president and research director at analyst firm Forrester, said, “Although Apple is one of the chip makers’ priority big customers, it is as vulnerable to chip shortages as anyone else today.”

“Although everyone focuses on CPU (high-end chip), in fact, every device (including iPhone) contains more other chips,” O’Donnell said. Without the support of these chips, mobile phones are almost useless. “

However, wood said that so far, Apple has proved to be very flexible throughout the epidemic, which shows that Apple attaches great importance to the supply chain.

Wood added that smaller manufacturers such as Lenovo, TCL and Nokia handset maker HMD global may be struggling for supply.

HMD, which will launch some new Nokia smartphones this summer, warned that the shortage of semiconductors could pose a challenge to smaller device manufacturers.

Florian seiche, HMD CEO, told the media: “we have seen that there is an overall tension in the supply chain. In the future, we may see some imbalance in the whole market. “

Samsung is not out of the woods yet

Like Apple, Samsung has benefited from its scale and bargaining power. But analysts say the company is not out of the woods yet.

Dale Gai, a semiconductor analyst at research firm Counterpoint Research, told the media that Samsung appears to have been more affected in the first half of this year.

Earlier this year, Samsung’s semiconductor manufacturing plant in Austin, Texas, was closed for up to a month after a snowstorm caused a power outage. Meanwhile, Samsung’s plant in Vietnam also suspended operations after cases of the outbreak were detected.

In March, Samsung Electronics said there was a serious imbalance between supply and demand for chips in the IT industry and it may skip the release of its next-generation Galaxy Note phone.

Today, Samsung Electronics said the company’s second-quarter profit rose 54 percent as chip prices soared. Samsung expects the cell phone market to return to pre-epidemic levels; but also warned that the shortage of “non-memory chips” may affect the recovery of the cell phone market.

Cell phone prices will rise

In terms of the overall impact on smartphones, Gay said the chip shortage is expected to reduce device makers’ production by an expected 10 percent. forrester vice president O’Donnell said the chip shortage won’t have too serious an impact, but it certainly will.

So, what does it all mean for consumers? Donnay said: “The likely result is higher phone prices and a more severe shortage of certain models of phones.”

Donnay said also: “In the case of Apple, you might be able to buy the high-end iPhone 12, but not the low-end iPhone XS. Other smartphone manufacturers such as Samsung and LG, as well as Chinese manufacturers such as Xiaomi, will feel the pressure.”

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