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Samsung Electronics Co. has warned that it is grappling with the fallout of a “serious imbalance” in semiconductors globally, becoming the biggest tech giant to voice concerns over chip shortages that are spreading beyond the automotive industry.
Samsung, one of the world’s largest manufacturers of chips and consumer electronics, expects the crisis to pose a problem for its business next quarter, said co-CEO Koh Dong-jin during an annual meeting of shareholders in Seoul. The company is also planning to skip the introduction of a new Galaxy Note – one of its best-selling models – this year, although Koh has said this is aimed at streamlining its lineup.
WATCH: Samsung Electronics Co. has warned of a “serious” imbalance in the semiconductor industry and said it may have to delay the introduction of one of its major smartphones.
Industry giants Continental AG at Renesas Electronics Corp. and Innolux Corp. has warned in recent weeks of longer-than-expected deficits thanks to the Covid-era’s unprecedented demand for everything from cars to game consoles and mobile devices. Samsung, the world’s largest smartphone maker, is working with overseas partners to resolve the imbalance and avoid potential setbacks in its business, according to its co-CEO.
Samsung shares slipped as much as 1% in Seoul on Wednesday, while several Asian chipmakers and suppliers, including Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. also tear down. The Note series has contributed around 5% of Samsung’s smartphone shipments over the past two years, IDC estimates, but accounts for a larger share of revenue because it is one of the more expensive in the line.
“If Samsung talks publicly about future products, you know the silicon crisis is serious,” said Avi Greengart, analyst and founder of consulting firm Techsponential.
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Chipmakers like Samsung and TSMC is at the forefront of a global effort to fill a shortage of chips, the building blocks of a plethora of consumer gadgets. The deficit has closed auto factories around the world and now threatens the supply of other products.
To compound the surge in demand, Samsung’s Austin, Texas semiconductor plant has been sidelined in February by statewide power outages and has not resumed full production. The resulting production deficit Qualcomm Inc.’s 5G radio frequency chips could reduce global smartphone production by 5% in the second quarter, estimates research firm Trendforce. The breakdown Samsung’s mid-range phones and laptops are likely to affect more than its high-end models or server chips, said Greg Roh, senior vice president of HMC Securities.
“There is a serious imbalance between supply and demand for chips in the computing industry globally,” said Koh, who oversees the company’s computing and mobile divisions. “Despite the difficult environment, our business leaders are meeting with partners abroad to resolve these issues. It is difficult to say that the shortage problem has been solved 100%. “
Read more: Chip shortage spirals extend beyond cars to phones and consoles
Automakers were hit the first in part due to poor inventory planning and are expected to miss $ 61 billion in sales this year alone. Honda Motor Co. Wednesday said it would temporarily halt some production next week at the majority of US and Canadian factories, pointing to the worsening crisis.
A few analysts say the shortages could be absorbed in the coming months. But the problem is that tight supply in certain segments – like in more mature semiconductors where capacity building takes time – could potentially strangle the wider consumer electronics industry and drive up prices. if it persists. Semiconductors are now at the top of the official agenda from Washington to Brussels.
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Crisis mode
Auto industry could lose $ 61 billion in sales in 2021 due to chip shortages
Source: AlixPartners. Estimates based on current rate of volume loss.
Tuesday, Hon Hai Precision Industry Co. – the assembler of most of the world’s iPhones – has joined a chorus of industry executives stressing that it will take time to resolve imbalances between demand and supply.
“We see a shortage, we feel he. But the impact for most of our customers is not that big, ”Hon Hai chairman Young Liu told reporters in Taipei. “For some customers who have orders that are better than expected, there is some impact. For large clients who plan well, where there is no big increase in orders, these clients are doing well. “
Koh said Samsung may decide not to introduce its Galaxy Note in the second half of 2021, breaking a series of years of annual launches for the marquee line.
“The Note series is positioned as a top model in our business portfolio,” he said. “It could be a burden to unveil two flagship models in a year, so it might be difficult to release the Note model in 2 hours. The timing of the Note model launch can be changed, but we are looking to release a Note model next year. “
– With the help of Debby Wu, Vlad Savov and Abhishek Vishnoi
(Updates with analyst comments from the fourth paragraph)
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