Global Chip Shortage Starting To Affect Smartphone Makers

Submitted by News Desk on

The global shortage of semi-conductor chips that has hurt automotive makers and other industries has now begun affecting smartphone makers with Apple and Samsung both telegraphing lower smartphone availability in the coming months.  In particular, the mid tier and lower tier smartphones along with other smaller smartphone makers are experiencing shortages the worst.  Companies like Lenovo, Huawei and HMD/Lenovo, smartphones like the iPhone XS and Samsungs Galaxy Note are expected to be in short supply. 

Apple’s Tim Cook warned of lower availability of some of the company’s iPhones due to the chip shortage, but said their higher end iPhone’s should be ok.  Along with the iPhone XS, the iPad and some MacBook models appear to be suffering from the shortage.  Both Apple and Samsung had stockpiled chips in advance of the chip shortage.  Meanwhile at Samsung, it has been hit with a double-whammy, its Austin, Texas chip factory was forced to shut down for a month during the winter freeze that hit Texas knocking out power to millions across the state and  its Vietnam factories temporarily closed after the the coronavirus was detected.  (Samsung has removed all of its manufacturing from China).

The main reason the chip shortage didn’t hit smartphones until now are that smartphones use higher end chips capable of processing far more compared to the chip used in automobiles which use a significantly lower end and simpler chip.  Chip makers sell hundreds of millions of chips to smartphone makers, so they have a higher priority status to chip makers than  automotive makers who buy a significantly smaller amount and of cheaper chips.  Apple and Samsung had stockpiled or pre-ordered almost one third of the chips they would need in 2021 for advance before the chip shortage ever became apparent.  This means the chip shortage isn’t going to affect them as much as HMD/Nokia and other smaller smartphone makers who don’t buy a large enough volume from chip makers to be given priority status and don’t have the resources to have bought in advance and stockpiled their chips.  

Apple said it expects to see about t10% decrease in sales due to the chip shortage, Samsung said it expects about a 12% decline.