The latest from the global chip shortage: smartphones are now impacted

on Jul 29, 2021
  • Coronavirus pandemic has forced industries involved in manufacturing Semiconductors to down shutters.
  • World-wide chip shortage beginning to impact Smartphone manufacturers.
  • Smartphone giants have hitherto not felt the pinch in the chip shortage as they have stocked the component.

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Semiconductors power a majority of electronic gadgets and the global chip shortage could soon become problematic for the smartphone industry. In fact, a global shortage in the component and a surge in demand for electronic gadgets, especially smartphones, has resulted in demand not meeting supply, according to CNBC.

Smartphone manufactures are the preferred customer of Semiconductor suppliers

In conversation with CNBC, chief analyst at CCS Insight, Ben Wood said:

“The automotive industry doesn’t run at the same cadence as the smartphone business. They saw the problems more slowly than the smartphone guys.”

While carmakers depend on larger, older chips, Smartphone manufacturers take advantage of the latest processors. Moreover, more smartphones are sold compared to cars, thus, making the former a preferred customer of suppliers.

Accenture’s global semiconductor lead, Syed Alam, said:

“Smartphone companies didn’t drop their demand for chips as the automotive sector did when they expected a drop in demand for cars. In fact, Smartphone companies benefited from the extra capacity left behind by automotive businesses, which led the automotive sector to experience a chip shortage when demand for cars rose faster than they anticipated.”

However, Semiconductors has tough competition in the backdrop of the auto sector and other industries opening up. The shortage is impacting smartphone manufacturers.

The demand for smartphones dropped, with sales declining 12.5%, according to Gartner. However, with nations lifting lockdowns, demand for smartphones soared, and sales grew 26% in the first quarter.

Silicon supply constraints will impact sales

Apple Inc (NASDAQ: AAPL) CEO Tim Cook cautioned that the silicon supply constraints would impact sales of its products. While giants like Apple Inc and Samsung (KRX: 005930) can take advantage of bargaining power, smaller companies could be struggling with supply.

According to reports, South Korean electronics giant Samsung could skip its next Galaxy Note handset launch. However, the company recorded a 54% jump in profit in the second quarter on Thursday.

Consumers could end up shelling out more money for smartphones, and the demand for select models could soar.