SAN FRANCISCO / SHANGHAI (Reuters) – Qualcomm Inc struggles to keep up with demand for its processor chips used in smartphones and gadgets as chip shortages that first hit the auto industry spread across the electronics industry, sources said from the industry to Reuters.
Samsung Electronics Co Ltd, the world’s largest smartphone maker, is struggling with a shortage of Qualcomm’s application processors, the heart of smartphones, said two people at suppliers of the South Korean giant to Reuters.
Demand for chips from Qualcomm has skyrocketed in recent months as Android phone makers try to convince customers to abandon phones from Huawei Technologies Co Ltd due to US sanctions. Qualcomm has found it difficult to meet this higher-than-expected demand, in part due to a shortage of some of the sub-components used in its chips.
A person at a Samsung supplier said that a shortage of Qualcomm chips was causing the production of mid- and low-end Samsung models. The second person, at a different vendor, said there was a shortage of Qualcomm’s new flagship Snapdragon 888, but did not say whether this affected the production of Samsung’s high-end phones.
A Samsung Electronics spokesperson declined to comment. A Qualcomm spokesman pointed to public comments from executives on Wednesday reiterating that they believe they can meet a second quarter February sales forecast.
Separately, a senior executive at a leading contract manufacturer for several major smartphone brands told Reuters that it was facing a shortage of a range of Qualcomm components and would reduce the number of cell phones this year. The executive branch spoke on condition of anonymity.
Last month, Lu Weibing, a vice president of Chinese phone manufacturer Xiaomi, complained about the chip crisis. “It’s not a shortage, it’s an extreme shortage,” he wrote on Weibo, China’s Twitter-like social network.
A surge in demand for consumer electronics has led to a global chip shortage that has shut down car factories. The shortage so far has largely focused on chips made using older technology rather than the advanced phone processors Qualcomm designed.
But Qualcomm’s limitations show how problems in one area of the complex chip supply chain can spill over into others and how rapidly changing market dynamics can stumble chip companies that have to prepare mass production plans years in advance.
“We still have greater demand than supply,” Qualcomm’s new Chief Executive Cristiano Amon told investors at the company’s annual meeting on Wednesday.
Qualcomm’s flagship application processor, the Snapdragon 888, is still new. Its major components come from Samsung Electronics’ separate chip manufacturing division and utilize a new 5 nanometer manufacturing process that is difficult to scale up quickly.
A Samsung factory in Texas, which makes some of Qualcomm’s radio frequency transceivers, was also forced to shut down operations last month due to power shortages caused by winter storms, although it is unclear whether the effects of that interruption have filtered through so far to the smartphone makers.
OLDER TECHNOLOGY
Qualcomm’s full line of application processors include power management chips made with older technology by companies including China’s Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Co.
“You need a full kit,” said Stacy Rasgon, an analyst at Bernstein real estate. ‘If you can’t get them, you can’t build whatever you want. Supply chains are global and very tightly integrated. It’s set up for efficiency, but it’s less resilient. “
Qualcomm is directing delivery of these power management chips to its highly profitable Snapdragon 888 application processors to match what Samsung’s foundries can build, but that is hurting deliveries from lower-end Qualcomm application processors, sources said.
Chinese Xiaomi buys most of its chips from Qualcomm and Taiwanese MediaTek Inc.
BUY PANIC
The chip shortage, which has led to panic buying, further depresses capacity and increases the cost of even the cheapest components of nearly all microchips, industry experts say.
For example, a widely used microcontroller unit chip from STMicroelectronics, originally priced at $ 2, is now selling for $ 14, according to Case Engelen, CEO of Titoma, a contract designer and manufacturer.
Simon Wan, co-founder of the Chinese robotic vacuum cleaner brand Roborock, said the company’s chip suppliers are asking for larger deposits on chip orders. He pays to insure the stock.
“Everyone is placing orders like crazy when in fact they can’t even use up all their chips,” said Wan, refusing to name his chip suppliers.
Smaller companies are more in pain.
Fabien Gaussorgues, who runs an electronics factory in the South China city of Dongguan, said supply problems have worsened since December.
His company was on track to mass-produce a smart home device designed by a foreign customer before the Chinese New Year. But a shortage of key chipsets from Japan’s Murata delayed launch by three weeks, he said, eventually requiring him to use a slightly weaker chipset as a replacement. Murata did not respond to the request for comment.
Meanwhile, some of his other clients have postponed projects indefinitely.
“We’ve seen components where we see a six-week turnaround time, and the next week it’s ten weeks, and then a week later it’s 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 newsroom; Edited by Sayantani Ghosh, Jonathan Weber, Ana Nicolaci da Costa and Peter Henderson