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Tight Foundry Capacity & Component Shortages Could Reduce Sales of Handsets in 2021
The economic crisis took a very different shape than originally projected, and demand, instead of dipping...spiked. People loaded up on electronics as they worked/studied/gamed at home. Flush with stimulus checks and wary of public transportation, Americans kept buying cars. But because they dramatically lowered their chip orders, car manufacturers were stuck making jigsaw puzzles with a missing piece. 100% of the blame doesn’t go to Covid. That wild weather in Texas and other factory hiccups also knocked out chip production, compounding the problem. The chip shortage affected “virtually every major car company in recent months,” according to the WSJ, forcing automakers to halt production of their most popular cars. Both GM and Ford said the shortage could knock profits by at least $2 billion. Sony said the chip shortage is the reason why there are so few PS5s available.
For the smartphone market, Samsung Electronics and Apple will be less impacted than other brands, but Chinese vendors face significant challenges in terms of supply chain management and sales marketing. The impact of component shortages on Samsung will be less significant than on other brands because the Korean handset vendor boasts integrated production lines for CMOS sensors, memory chips and other parts in addition to its handset hardware manufacturing capacity. Apple's market leadership gives its strong bargaining power for the purchases of handset components, said the observers, adding it is estimated to be able to sell 230-240 million iPhone devices in 2021. Xiaomi, OPPO and vivo face more challenges in the procurement of components and difficulties in hiking their product prices to sustain profits, because they have been focusing on entry-level to midrange 5G phones that carry lower profit margins.
More positive news is that Samsung expects to regain full output at its Austin, Texas, fab by summer after a production pause in February due to weather-related power outages.
The economic crisis took a very different shape than originally projected, and demand, instead of dipping...spiked. People loaded up on electronics as they worked/studied/gamed at home. Flush with stimulus checks and wary of public transportation, Americans kept buying cars. But because they dramatically lowered their chip orders, car manufacturers were stuck making jigsaw puzzles with a missing piece. 100% of the blame doesn’t go to Covid. That wild weather in Texas and other factory hiccups also knocked out chip production, compounding the problem. The chip shortage affected “virtually every major car company in recent months,” according to the WSJ, forcing automakers to halt production of their most popular cars. Both GM and Ford said the shortage could knock profits by at least $2 billion. Sony said the chip shortage is the reason why there are so few PS5s available.
For the smartphone market, Samsung Electronics and Apple will be less impacted than other brands, but Chinese vendors face significant challenges in terms of supply chain management and sales marketing. The impact of component shortages on Samsung will be less significant than on other brands because the Korean handset vendor boasts integrated production lines for CMOS sensors, memory chips and other parts in addition to its handset hardware manufacturing capacity. Apple's market leadership gives its strong bargaining power for the purchases of handset components, said the observers, adding it is estimated to be able to sell 230-240 million iPhone devices in 2021. Xiaomi, OPPO and vivo face more challenges in the procurement of components and difficulties in hiking their product prices to sustain profits, because they have been focusing on entry-level to midrange 5G phones that carry lower profit margins.
More positive news is that Samsung expects to regain full output at its Austin, Texas, fab by summer after a production pause in February due to weather-related power outages.
- Nikkei Asian Review sources says Samsung hopes to finish its production calibration and replacement of equipment components by May with delivery volume returning to pre-pause levels as early as June.
- Research firm TrendForce estimates the pause at Samsung's fab handling chips for smartphones and clients like Qualcomm will cause a 30% drop in global 5G phone output during the second quarter.
- Chipmakers Infineon and NXP also had fabs affected by the Austin outage, and those facilities represented 6% and 10%, respectively, of the total production capacities of the companies.
- Auto chip giant Renesas, which also produces driver ICs, was more experienced a fab fire in Japan. The fab will restart with minimal output this weekend to help with calibration. The company hopes to resume normal deliveries by the end of June.
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