SAN FRANCISCO / SHANGHAI (Reuters) – Qualcomm Inc. is struggling to keep up with the demand for processor chips used in smartphones and gadgets as a shortage of chips that hit the auto industry for the first time spreads to the electronics industry, they told Reuters industry sources.
Samsung Electronics Co Ltd, the world’s largest smartphone maker, is facing a lack of Qualcomm application processors, the heart of smartphones, two people told the South Korean giant’s suppliers.
Demand for Qualcomm chips has risen in recent months, as Android phone makers try to win customers who abandon phones produced by Huawei Technologies Co Ltd due to US sanctions. Qualcomm has barely met this higher-than-expected demand, in part due to a lack of subcomponents used in its chips.
A person from a Samsung supplier said that a shortage of Qualcomm chips hit the production of mid-range and lower-end Samsung models. The second person, at another supplier, said that there was a lack of Qualcomm’s new flagship chip, Snapdragon 888, but did not say whether this would affect the production of state-of-the-art Samsung phones.
A Samsung Electronics spokesman declined to comment. A Qualcomm spokesman on Wednesday made public comments to directors, reiterating that they believe they can reach a second-quarter sales tax forecast for February.
Separately, an executive at a top manufacturer for several major smartphone brands told Reuters that it is facing a shortage of a range of components from Qualcomm and that it will reduce phone deliveries this year. The executive spoke on condition of anonymity.
Last month, Lu Weibing, vice president of Chinese phone maker Xiaomi, lamented the chip crisis. “It’s not a shortage, it’s an extreme shortage,” he wrote on Weibo, the Chinese social network Twitter.
An increase in demand for consumer electronics has led to a global shortage of chips that has damaged car factories. The deficit so far has been largely focused on chips made using older technology, rather than advanced phone processors designed by Qualcomm.
But Qualcomm’s constraints show how problems in one area of the complex chip supply chain can bleed into others and how quickly a change in market dynamics can prevent chip companies from having to establish series production plans years in advance.
“We still have our demand virtually higher than supply,” Qualcomm chief executive Cristiano Amon told investors at Wednesday’s annual meeting.
Qualcomm’s flagship processor, Snapdragon 888, is still new. Its key parts come from Samsung Electronics’ separate chip manufacturing division and use a new 5-nanometer manufacturing process that is difficult to expand quickly.
A Samsung plant in Texas, which produces some of Qualcomm’s radio frequency radio transmitters, was also forced to shut down operations last month due to a power outage caused by winter storms, although it is unclear whether the effects of the shutdown have diminished. to smartphone makers.
OLDER TECHNOLOGY
Qualcomm’s full range of application processors contains power management chips made with older technologies from companies, including China’s Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Co.
“You need a complete kit,” said Stacy Rasgon, a Bernstein brokerage analyst. “If you can’t get them, you can’t build whatever you want to build. Supply chains are global and very well integrated. It is prepared for efficiency, but it is less resistant. ”
Qualcomm is targeting the supply of these power management chips to its highly profitable Snapdragon 888 application processors to match what Samsung foundries can build, but this affects the supply of lower-level Qualcomm application processors, sources said. .
Xiaomi in China acquires most of its chips from Qualcomm and Taiwan MediaTek Inc.
PANIC PURCHASE
The chip shortage, which has led to panic buying, continues to squeeze capacity and increase costs even for the cheapest components of almost all microchips, industry experts said.
For example, a commonly used microcontroller chip from STMicroelectronics at a starting price of $ 2 now sells for $ 14, according to Case Engelen, CEO of Titoma, a designer and contract maker.
Simon Wan, co-founder of Chinese robotic vacuum cleaner brand Roborock, said the company’s chip suppliers are demanding higher deposits on chip orders. He pays to secure the stock.
“Everyone places orders like crazy, when in fact they can’t even consume all their chips,” said Wan, who declined to name his chip suppliers.
Smaller companies suffer more.
Fabien Gaussorgues, who runs an electronics plant in the southern Chinese city of Dongguan, said supply problems had worsened since December.
His company was about to mass-produce a smart home device designed by an overseas customer before the Chinese New Year. But a lack of key chipsets from Japanese Murata delayed the launch by three weeks, he said, forcing him to eventually use a slightly weaker chipset as a replacement. Murata did not respond to the request for comment.
Meanwhile, some of his other clients have delayed their projects indefinitely.
“We’ve seen components where we see a lead time of six weeks, then the week after ten weeks, and then a week later is a year,” he said.
Reporting by Josh Horwitz in Shanghai and Stephen Nellis, Hyunjoo Jin in San Francisco, Heekyong Yang and Joyce Lee in Seoul, Yimou Lee in Taipei, Pei Li in Hong Kong, Shanghai editorial office; Editing by Sayantani Ghosh, Jonathan Weber, Ana Nicolaci da Costa and Peter Henderson