Qualcomm’s smartphone AP (application processor) was in short supply, causing an emergency for smartphone makers. The photo shows a smartphone with Qualcomm chips at an information technology (IT) exhibition held in China. yunhap news
Global smartphone company A recently stopped selling mid- to low-priced models that are popular in Southeast Asia and the Middle East. It was a model that was in the’Top 10′ in local sales last year, but it was a decision that was made after difficulties in product production due to a lack of Qualcomm Application Processor (AP).
According to related industries on the 8th, due to the shortage of chips from Qualcomm, the world’s number one semiconductor semiconductor company for smartphones, Samsung Electronics and Xiaomi are disrupting the production and supply of smartphones. A high-ranking domestic smartphone company official said, “The shortage of semiconductors is rapidly spreading from the automobile industry to smartphones.” It is reported that even Apple, which relies on Qualcomm’s 5G modem chip, is in the affected area.
The cause is a shortage of supply. Demand for chips has exploded, but production has not been able to keep up. From the second half of last year, major smartphone makers such as Samsung Electronics and Xiaomi launched new products competitively. According to market research firm CPR, global smartphone shipments increased from June of last year compared to the previous month for seven consecutive months.
With the expectation of an economic recovery due to the development of the Corona 19 vaccine, the competition for semiconductor APs among smartphone makers has begun as the production volume has increased significantly. Orders were driven by Qualcomm, the world’s No. 1 market share (30.7% of shipments in 2020). Qualcomm is a fabless (design specialist) that does not have a factory, so it leaves production to foundries (consigned semiconductor production) companies such as TSMC and Samsung Electronics in Taiwan.
At the same time, production orders from other fabless were also rushing to the foundry, and orders were pushed back more than a year. Samsung Electronics’ Austin plant, which produces Qualcomm’s mid-range APs, was shut down for more than two weeks in recent years due to a cold wave (temporarily suspended from operation), which aggravated the supply shortage.
Foundries such as TSMC and fablesses such as Qualcomm have raised the unit price of products and services by more than 20%, taking the fruit of the’supplier advantage’ market. Smartphone makers are in a very nervous state. Senior officials of Chinese smartphone makers, such as Xiaomi, have recently raised concerns that “the lack of Qualcomm chips can make smartphones” with Lee Gu-dong.
There is also a prospect that the shortage of APs will lead to a decrease in smartphone shipments and an increase in cost, which will bring cold water to the market. According to CPR, global smartphone shipments declined 6.0% from the previous month in January.
Foundry’shutdown’ due to heavy orders from Chinese companies… Intensifying supply shortage
Companies clamor for “out of stock…it doesn’t matter the price, please have a different chip”
“Semiconductors for smartphones were sold out this year. It’s not just lacking, it’s’extremely lacking.’”
This is an article posted on China’s social media Weibo on the 24th of last month by vice chairman Liu Weibing Xiaomi (representative in China). Xiaomi is the world’s third largest smartphone maker (11% market share as of the fourth quarter of last year) and possesses considerable’buying power’. However, it is discontinuing models with chips that have run out of stock of APs (application processors) for smartphones. In the industry, there is an evaluation as “a case showing how serious semiconductor shortage is”.
Supply shortage as severe as secondary semiconductors
According to the semiconductor industry on the 8th, it is known that the shortage of semiconductors for smartphones is as severe as the automotive market. According to market researcher IHS Markit, the lead time for automotive semiconductors (the time from order to procurement) is currently analyzed to be 26 to 38 weeks. Semiconductor lead times for smartphones are also similar.
Although there are differences by model, Qualcomm’s Snapdragon AP lead time is known to be about 30 weeks and the Bluetooth chip is about 33 weeks. This means that if you place an order with Qualcomm now, it will only be available in 7 to 8 months. A senior official from China’s RealMe, the world’s seventh-largest smartphone maker, recently revealed that “Qualcomm’s AP and RF chips have run out.”
The primary cause of’Qualcomm Shortage’ is the aggressive product launch of Chinese smartphone makers. As Huawei, which has been ranked second in the world, has lost power due to US sanctions, Xiaomi, Oppo, Vivo, and Real Me are expanding their strides.
According to market research firm Counterpoint Research, Huawei’s smartphone shipments declined 21% last year to 187.7 million units, but Xiaomi shipments were 145.8 million units, up 17% from the previous year. The total annual shipments of Oppo, Vivo, and Real Me under BBK Group totaled 262.7 million units, beating Samsung Electronics (2557 million units) for the first time.
Unlike Huawei, Xiaomi and Oppo did not have the ability to develop semiconductors, so orders were rushing to Qualcomm in the United States. Apple, which manufactures its own AP, also relies 100% on Qualcomm for its 5G modem chip, which is a key component. However, Qualcomm does not have a production facility, so it leaves production to foundries such as Samsung Electronics and TSMC. As consumption improved from the second half of last year, orders to produce not only APs, but also PCs, game consoles, and semiconductors for artificial intelligence devices, increased the lead time of Qualcomm chips to 30 to 33 weeks.
The fact that Samsung Electronics’ Austin foundry plant in the US is in a’shutdown’ situation for more than two weeks has fueled the supply shortage. The Austin plant is known to produce Qualcomm’s AP and RF chips.
Increasing foundry service prices
Qualcomm also acknowledges the seriousness of the chip shortage. Qualcomm President Christian Amon said in a recent interview with foreign media, “The shortage of communication chips will continue until the end of the year.” Smartphone makers are exploring the possibility of urgent AP procurement to Taiwan’s Media Tech and Samsung Electronics System LSI Division, but it is known that it is not easy to secure the quantity. Mediatek, like Qualcomm, does not have its own production facilities, so it is only looking at foundries. It is said that it is not easy for Samsung Electronics to even supply the quantity for its smartphones.
As the AP market turns to’supplier advantage’, companies are having mixed joys. Fabless, which designs and sells chips such as Qualcomm and MediaTek, and foundry companies such as TSMC, have raised their unit prices by 15-20%. On the other hand, it acts as a’cost rise’ factor for Chinese smartphone makers. There are even talks in the industry that “if we can secure the chip, the price is not a problem.”
It is known that some smartphone makers, such as Xiaomi, are discontinuing mid-to-low-priced models that contain chips that have run out of stock in the Middle East and Southeast Asia, and are urgently introducing models with chips that are in stock. There are also concerns that smartphone production will decrease. According to market research firm TSR, global smartphone shipments, which increased for 7 consecutive months (compared to the previous month) since June last year, decreased by 6.0% in January this year.
Reporter Hwang Jeong-soo [email protected]