Chip shortage spreads, hurting sales at Apple and Samsung.
SEOUL—The smartphone industry is showing battle scars from the world-wide chip crunch. Shipments are slowing and customers are seeing their first significant price increases in years.
The damage of the global semiconductor shortage continues to widen beyond automakers, with Apple, Samsung and Caterpillar warning this week of current or potential impacts.
According to online sources, the global shortage of semiconductor products has begun to have a negative impact on the smartphone industry. Deliveries are slowing and buyers are seeing significant price increases for the first time in years. Some manufacturers have had to cut production and delay the launch of new devices.
Apple chief executive Tim Cook said this week that the global semiconductor shortage is hampering his company's production of iPads and Mac computers.
For most of the year, smartphone makers have avoided the problems faced by car, computer and consumer electronics companies due to chip shortages. This is due to the fact that large smartphone manufacturers usually buy components for six months in advance; but now the time has come when these stocks are coming to an end.
For Samsung, the world’s largest smartphone maker, the chip shortage caused shipments to decline by 20% from the previous quarter, the source said. Google announced that the new Pixel 5a 5G smartphones will only be available in the US and Japan markets; while previous Pixel models have been available in more countries. The Chinese Xiaomi has raised the price of the Redmi Note 10 sold in India; by about 8% relative to the price at the time of the device’s launch. In April, Xiaomi introduced the Mi 11 Ultra smartphone in India; but sales were delayed and the smartphone hit retail only this month.
Apple on Wednesday said a lack of chips is hampering production of iPads and Mac computers, which could cost the company about $3 billion to $4 billion in sales in the quarter ending in June.
The companies released the details in quarterly earnings reports that were otherwise strong, fueled by soaring demand as the global economy begins to emerge from the coronavirus pandemic. The scarcity of chips could cloud some of that recovery if it continues to hamper manufacturing in the coming months.
Semiconductor availability “will get worse before it gets better,” Ford said in a statement as it reported earnings. “Currently, the company believes that the issue will bottom out during the second quarter, with improvement through the remainder of the year.”
Also this week, Volkswagen said it will suspend production of Jettas and Tiguan SUVs in Mexico next month because of the chip shortage. General Motors, Ford and others also have been idling factories.
At the same time, demand for computers and other electronics soared as many consumers began working from home. That caused electronics manufacturers to step up their chip purchases. When auto demand bounced back, car companies found semiconductor factories too busy with other orders to fill their needs.
Making matters worse, semiconductor factories in Texas were forced offline during this year’s cold snap and have taken a while to restore production. Fires at two different Japanese factories also have lowered chip output.
“There are many different people, not only in the same industry, but across other industries that are using legacy nodes,” Tim Cook said, according to a transcript.
The global shortage of chips has reached smartphone manufacturers.
According to Counterpoint Research, global smartphone shipments increased 20% in the first three months of 2021 compared to the same period in 2020 and 4% in the first quarter of 2019.
The industry seems to be aiming for a successful year; when the coronavirus vaccine release began and people foresaw the impending end of a time of restrictions; started spending again. In the period from April to July last year, smartphone deliveries fell as far as possible; This is mainly due to the fact that strict restrictive measures have been introduced in many countries due to the pandemic.
Counterpoint estimates that global smartphone shipments will decline 10% in the second quarter from the first quarter. Even so, they expect smartphone shipments to be more stable in the third and fourth quarters than in the same periods of 2019 and 2020.
Counterpoint analysts estimate that smartphone manufacturers will launch 771 million devices in the second half of this year; 1.3% more than 761 million units shipped in the second half of last year. The rise in component prices due to a lack of chips is currently being compensated by manufacturers by increasing the price of devices. According to researchers, the average wholesale price of smartphones worldwide rose 5% in the second quarter.
We see the supply gap in the smartphone segment in the quarterly figures of Taiwan Semiconductor Manufacturing Co., the world’s largest chip manufacturer. TSMC’s total sales increased 20% year over year, but the company’s smartphone chip sales decreased 3%.
The company this week reported strong demand for its electronics and chips. But a Samsung plant was among the chip factories in Texas knocked offline this year, hurting the company’s profits. And Samsung expects its sales of mobile display panels to continue to be weak.
The White House has been leaning on big chip producers and their host nations, including Taiwan, to increase output. It is also calling for $50 billion in federal funding to incentivize more domestic chip production, though those funds, if approved by Congress, would be too far off to alleviate the current shortages.