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Slowdown in China’s Q221 Smartphone Shipments Causing Little Impact on Component Shortages
Smartphone shipments in China were weak during the Labor Day holiday and generally in May, and June sales are expected to up ~10%, Q221 shipments will be down 22.7% sequentially and down 30.6% Y/Y. The weaker first half is actually a relief from the component shortages. Unfortunately, capacity increases are more of a long-term process, and with some component suppliers seeing less demand from China in Q221, they might be a bit more cautious on how much to expand, given the time it takes to build out capacity. To illustrate the point, Taiyo Yuden, a major producer of MLCCs (Multi-layer Ceramic Capacitors), a component that has been in short supply, recently announced committing $45m (construction only) to build a new MLCC plant, with construction set to start in September. While this will add to capacity the new plant will not be ready for production until the end of 2023, doing little to alleviate near-term shortages. MLCC demand has been growing as they are necessary for electric vehicles, but demand has also been spurred by their increased use in 5G smartphones, and that demand is quite volatile. Suppliers that are seeing lower component orders from Chinese smartphone brands are also expecting production for the iPhone 13 to begin in July, offsetting any slowdowns, so there has been little change in component pricing. Given the lead time for new component capacity and the even longer lead time for semiconductor capacity expansion, it will likely take more than a slowdown in Chinese smartphone sales to loosen the component shortage deadlock and slow upward pricing momentum or actually bring down component prices, but in the CE space that theory is only good until the day when buyers postpone orders expecting a lower price the next day.
Smartphone shipments in China were weak during the Labor Day holiday and generally in May, and June sales are expected to up ~10%, Q221 shipments will be down 22.7% sequentially and down 30.6% Y/Y. The weaker first half is actually a relief from the component shortages. Unfortunately, capacity increases are more of a long-term process, and with some component suppliers seeing less demand from China in Q221, they might be a bit more cautious on how much to expand, given the time it takes to build out capacity. To illustrate the point, Taiyo Yuden, a major producer of MLCCs (Multi-layer Ceramic Capacitors), a component that has been in short supply, recently announced committing $45m (construction only) to build a new MLCC plant, with construction set to start in September. While this will add to capacity the new plant will not be ready for production until the end of 2023, doing little to alleviate near-term shortages. MLCC demand has been growing as they are necessary for electric vehicles, but demand has also been spurred by their increased use in 5G smartphones, and that demand is quite volatile. Suppliers that are seeing lower component orders from Chinese smartphone brands are also expecting production for the iPhone 13 to begin in July, offsetting any slowdowns, so there has been little change in component pricing. Given the lead time for new component capacity and the even longer lead time for semiconductor capacity expansion, it will likely take more than a slowdown in Chinese smartphone sales to loosen the component shortage deadlock and slow upward pricing momentum or actually bring down component prices, but in the CE space that theory is only good until the day when buyers postpone orders expecting a lower price the next day.
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