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Qualcomm struggles to meet chip demand as shortage spreads to phones

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Qualcomm Inc is struggling to keep up with demand for its processor chips used in smartphones and devices as the chip shortage that first hit the auto industry spreads across the electronics business, sources said. the industry to Reuters.

Samsung Electronics Co Ltd, the world’s largest smartphone maker, is experiencing a shortage of application processors from Qualcomm, the heart of smartphones, two people from the South Korean giant’s suppliers told Reuters.

Demand for Qualcomm chips has exploded in recent months as Android phone makers look to win over customers ditching phones produced by Huawei Technologies Co Ltd due to US sanctions. Qualcomm has struggled to meet this higher-than-expected demand, in part due to the shortage of some subcomponents used in its chips.

A person from a Samsung supplier said that Qualcomm’s chip shortage was affecting the production of mid-range and low-end Samsung models. The second person, from another vendor, said there was a shortage of Qualcomm’s new flagship chip, the Snapdragon 888, but did not say whether this was affecting the manufacturing of Samsung’s high-end phones.

A Samsung Electronics spokesperson declined to comment. A Qualcomm spokesperson pointed to public comments from executives on Wednesday in which they reiterated that they believe they can meet a fiscal second-quarter sales forecast given in February.

Meanwhile, a senior executive at a major manufacturer hired for several major smartphone brands told Reuters it was facing a shortage of a range of Qualcomm components and would cut phone shipments 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 is not a shortage, it is an extreme shortage,” he wrote on Weibo, the Chinese social network similar to Twitter. A surge in demand for consumer electronics has led to a global chip shortage that has left car factories idle. Until now, the shortage has been mostly centered on chips made with older technology rather than the advanced phone processors Qualcomm designs.

But Qualcomm’s limitations show how problems in one area of ​​the complex chip supply chain can affect others and how changing market dynamics can stumble chip companies that must establish mass production plans with years of experience. anticipation.

“We still have our demand basically higher than supply,” incoming Qualcomm CEO Cristiano Amon told investors during the company’s annual meeting on Wednesday.

Qualcomm’s flagship application processor, the Snapdragon 888, is still new. Key parts come from Samsung Electronics’ separate chip manufacturing division and use a new 5-nanometer manufacturing process that is difficult to scale.
quickly.

A Samsung factory in Texas, which makes some of Qualcomm’s radio frequency transceivers, was also forced to stop operations last month due to power shortages caused by winter storms, although it is unclear whether the effects of that disruption have still leaked to smartphone makers.

OLD TECHNOLOGY

Qualcomm’s entire line of application processors contains power management chips made with older technology by companies like China’s Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Co. “You need a complete kit,” said Stacy Rasgon, analyst at the brokerage. Bernstein. “If you can’t get them, you can’t build what you want to build. Supply chains are global and tightly integrated. It is configured to be efficient, but it is less resistant. “

Qualcomm is directing the supply of these power management chips towards its highly profitable Snapdragon 888 application processors to match what Samsung foundries can build, but that is hurting supplies of lower-end Qualcomm application processors, sources said. Qualcomm and MediaTek Inc. of Taiwan

PANIC BUY

Chip shortages, which have led to panic buying, are further reducing capacity and increasing costs for even the cheapest components in nearly all microchips, industry experts said. For example, a commonly used microcontroller unit chip from STMicroelectronics originally priced at $ 2 now sells for $ 14, according to Case Engelen, Titoma CEO, designer and contract manufacturer.

Simon Wan, co-founder of Chinese robotic vacuum brand Roborock, said the company’s chip suppliers are requesting larger deposits on chip orders. He is paying to secure stocks. “Everybody is ordering like crazy, when in reality they can’t even use all of their tokens,” said Wan, who declined to name his token suppliers. Smaller companies are suffering the most.

Fabien Gaussorgues, who runs an electronics factory in South China’s Dongguan City, said supply problems have worsened since December. His company was on its way to mass producing 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 the launch by three weeks, he said, forcing it to eventually use a slightly weaker chipset as a substitute.

Murata did not respond to a request for comment. Meanwhile, some of his other clients have delayed projects indefinitely. “We have seen components where we see a lead time of six weeks, and then the week after ten weeks, and then a week later is a year,” he said.

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