Global chip shortage is beginning to hit the smartphone industry –

A show window in Dublin, Ireland. The iPhone and Samsung Galaxy handset are on display.

Artur Widak | NurPhoto | NurPhoto via Getty Images

The global shortage of computer chips has affected everything from cars to video game consoles. And the smartphone looks like this on the list:

Semiconductors are in short supply this year for a variety of reasons, including the closure of factories due to the Covid-19 pandemic and rising demand for home appliances.

Automakers are particularly vulnerable to shortages, such as companies such as General Motors and Ford cutting or stopping production of certain vehicles.

Video game consoles have also been affected, and gamers are struggling to get the new Microsoft Xbox Series X and Sony PlayStation 5 systems.

Smartphones have been largely protected from fallout so far, thanks to manufacturers like Apple and Samsung stockpiling important components.

“The automotive industry isn’t running at the same pace as the smartphone business,” Benwood, chief analyst at CCS Insight, told CNBC. “They saw the problem more slowly than the people on their smartphones.”

Automakers rely on larger and older chips, but phone makers use the latest processors, Wood said. Smartphones are also sold in much larger quantities than vehicles, making them a supplier’s priority customer.

Meanwhile, Accenture’s global semiconductor leader Saeed Alam said at the start of the pandemic, “Smartphone companies did not reduce chip demand as the automotive sector expected to decline.” I told CNBC.

“In fact, smartphone companies are benefiting from the extra capacity left by the car business, causing the car sector to experience a chip shortage when demand for cars grows faster than expected,” he said. Added.

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However, mobile makers are now beginning to feel the impact of a global chip shortage.

“Now that the automotive sector is catching up and starting to regain the ability to give up, there is fierce competition for semiconductor supply,” Alam added. “This created the supply pressure for smartphone chips.”

According to Gartner, demand for smartphones declined in 2020 and sales fell 12.5% ​​as the coronavirus pandemic intensified. However, demand is recovering rapidly this year as some countries have lifted Covid’s blockade restrictions. Global smartphone sales increased 26% in the first quarter, according to Gartner.

Apple warning

On Tuesday, Apple CEO Tim Cook warned that restrictions on silicon supply would affect the sale of other products such as the iPhone and iPad.

According to Cook, what’s missing isn’t the high-performance processors Apple manufactures for devices, but chips for everyday functions such as powering mobile displays and decoding audio.

Glen O’Donnell, vice president and research director of analyst company Forester, told CNBC, “Apple is one of the top priority’big dogs’ from chip makers, but like everyone else, it’s against silicon shortages. It’s vulnerable. “

“Everyone is focusing on the CPU (the high end of the chip), but every device (including the iPhone) contains more, and without these support chips, the phone is almost useful. not.”

Still, Apple “has proven to be very resilient so far through a pandemic,” said Wood of CCS Insight. “This is a testament to our great focus on the supply chain.”

Wood added that small manufacturers such as Lenovo and TCL in China and HMD Global in Finland are likely to be struggling to supply.

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The HMD, which launched several new Nokia smartphones this summer, warned that a shortage of semiconductors could prove difficult for small device makers.

HMD CEO Florian Seiche told CNBC that the supply chain “definitely has an overall tightness.” “There can be some imbalances across the market,” he added, adding that demand for low-end models is very high.

Like Apple, Samsung benefits from its size and bargaining power. But analysts say the company isn’t out of the forest yet.

“Samsung seems to be more affected,” Dale Gai, a semiconductor analyst at Counterpoint Research, told CNBC in early 2021.

A major South Korean electronics company closed its semiconductor manufacturing plant in Austin, Texas earlier this year for a month after a power outage caused by a snowstorm. Meanwhile, Samsung’s Vietnam factory shut down after detecting a case of coronavirus.

In March, the company said there was a serious imbalance in the supply and demand of chips in its IT department, which could skip the launch of the next Galaxy Note handset.

Samsung said Thursday that second-quarter profits increased 54% as chip prices soared. The company predicts that the mobile market will recover to pre-pandemic levels, but warned that a shortage of non-memory chips poses a risk to the forecast.

Higher price

Regarding the overall impact on smartphones, Guy said the shortfall is expected to reduce device makers’ production forecasts by 10%.

“I don’t think the shortage will have a serious impact, but it will,” Forester’s O’Donnell said.

So what does this all mean to you as a consumer?

“The likely consequences here are rising phone prices and a serious shortage of certain models,” says O’Donnell.

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“For Apple, the high-end iPhone 12 may be available, but the low-end iPhone XS may not be available,” he said. “All Chinese smartphone makers such as Samsung, LG, Xiaomi and Huawei will feel a pinch.”

–CNBC’s Sam Shead and Kif Leswing contributed to this report.


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