Samsung Electronics Co. warned that it was facing the effects of a ‘serious imbalance’ in semiconductors worldwide, becoming the biggest technology giant to worry about chip shortages spreading outside the automotive industry.
Samsung, one of the world’s largest manufacturers of chips and consumer electronics, expects the predicament to be a problem for its business next quarter, co-CEO Koh Dong-jin said at an annual shareholders’ meeting in Seoul. The company is also considering leaving the launch of a new Galaxy Note – one of its top-selling models – this year, though Koh said it aims to streamline its range.
LOOK: Samsung Electronics Co. warned of a ‘serious’ imbalance in the semiconductor industry and said it might have to delay the launch of one of its key smartphones.
Industry giants of Continental AG tot Renesas Electronics Corp. Innolux Corp has warned in recent weeks of longer-than-expected shortages thanks to unprecedented Covid-era 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 prevent potential setbacks for its business, according to its co-CEO.
Samsung shares fell to 1% in Seoul on Wednesday, while several suppliers and Asian chipmakers also Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. also fell. The ID series has contributed about 5% of Samsung’s smartphone supply over the past two years, but IDC estimates, but is responsible for a larger share of revenue because it is one of the most expensive in the series.
“When Samsung talks publicly about future products, you know that the oxygen in silicone is serious,” said Avi Greengart, analyst and founder of Techsponential.
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Chipmakers like Samsung and TSMC is at the forefront of a global effort to fill a shortage of stock chips, the building blocks of an abundance of consumer goods. The shortage has shut down car plants around the world and now threatens the supply of other products.
Along with the demand demand was Samsung’s semiconductor factory in Austin, Texas was eliminated in February by nationwide power outages and did not resume full production. The consequent shortage of production of Qualcomm Inc. 5G radio frequency chips could reduce global smartphone output by 5% in the second quarter, estimates research firm Trendforce. The interruption there is likely to be an impact on Samsung’s mid-range phones and laptops more than the top models or server chips, said Greg Roh, a senior vice president at HMC Securities.
“There is a serious imbalance in the supply and demand of chips worldwide in the IT sector,” Koh said. It oversees the IT and mobile division of the company. “Despite the difficult environment, our business leaders are meeting partners overseas to solve these problems. It is difficult to say that the deficit issue is 100% resolved. ”
Read more: Chip shortage spirals outside cars to phones and consoles
Car manufacturers fell first in part due to poor inventory planning and are expected to miss only $ 61 billion in sales this year alone. Honda Motor Co. Wednesday said it would temporarily suspend production at a majority of U.S. and Canadian plants next week, highlighting the deepening of the crisis.
Some analysts say deficits can mostly be ironed out in the coming months. The concern, however, is that the tight supply in certain segments – such as in more mature semiconductors where it takes time to increase capacity – could eventually stifle the broader consumer electronics industry and increase prices if it continues. Semiconductors are now close to the top of the official agenda from Washington to Brussels.
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Crisis mode
The automotive industry could lose $ 61 billion from 2021 sales due to shortage of chips
Source: AlixPartners. Estimates based on the current rate of volume losses.
On Tuesday, Hon Hai Precision Industry Co. – the compiler of most iPhones in the world – has joined a chorus of industry executives, stressing that it will take time to resolve imbalances in supply and demand.
‘We see a shortage, we bird It. But the impact for most of our customers is not that great, ”Young Liu, chairman of Hon Hai, told reporters in Taipei. ‘For some customers who have better than expected orders, there is some influence. For large customers who plan well, where there is no large increase in orders, the customers fare well. ”
Koh said Samsung may decide not to launch its Galaxy Note during the second half of 2021, which breaks a year-long series of annual launches for the marquee tentacle length.
“Note series are positioned as a top model in our business portfolio,” he said. ‘It can be a burden to launch two flagship models in a year, so it can be difficult to release the Note model in 2H. The timing of the launch of the Note model may change, but we want to release a Note model next year. ”
– With the help of Debby Wu, Vlad Savov and Abhishek Vishnoi
(Updates with the comments of analysts from the fourth paragraph)