Qualcomm is struggling to meet chip demand as shortages spread to phones: stores

SAN FRANCISCO / SHANGHAI (Reuters) – Qualcomm Inc. is struggling to keep up with the demand for the processor chips used in smartphones and devices, as chip shortages have hit the automotive industry initially spread across the electronics industry, industry sources told Reuters.

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

Demand for Qualcomm chipsets has skyrocketed in recent months as Android phone makers try to win over buyers who are abandoning phones made by Huawei Technologies Co Ltd as a result of sanctions in the US. Qualcomm has struggled to meet higher-than-expected demand, in part due to a shortage of some of the sub-components used in its chips.

One Samsung supplier said Qualcomm’s chip shortage was affecting Samsung’s mid- and end-of-end model production. The second, at another provider, said there was a shortage of Qualcomm ‘s new flagship chip, the Snapdragon 888, but did not say whether this was affecting Samsung’ s high – end smartphone manufacturing.

A Samsung Electronics spokesman declined to comment. A Qualcomm spokesman noted public comments from executives Wednesday in which they reiterated that they believe they can release a second-quarter fiscal sales forecast in February.

Separately, a chief executive of a major contract company for several major smartphone brands told Reuters that he was opposed to a shortage of a range of parts from Qualcomm and would cut handsets this year. The executive team spoke on condition of anonymity.

Last month, Lu Weibing, vice president for Chinese handset maker Xiaomi, lamented the chip crash. “It’s not a shortage, it’s a big shortage,” he wrote on Weibo, a social network similar to Twitter in China.

Rising demand for consumer electronics has led to a global chip shortage that has reduced car factories. The shortage so far has largely focused on chipsets made using old technology rather than Qualcomm’s advanced phone processors.

But Qualcomm’s limitations illustrate how problems in one area of ​​the complex chip supply chain can erode into others and how rapidly changing market dynamics can erode chip companies. large production plans need to be set up years in advance.

“Demand still outstrips supply,” Qualcomm’s new CEO Cristiano Amon told investors at the company’s annual general meeting on Wednesday.

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

Samsung’s Texas factory, which makes some of Qualcomm’s radio frequency transceivers, was forced to suspend operation last month due to a power shortage caused by winter storms, although it is not clear if the impact of that halt has still waned to smartphone makers.

OLDER TECHNOLOGY

In a complete line of Qualcomm application processors power management chips are manufactured with state-of-the-art technology by companies including China Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Co.

“You need a full kitten,” said Stacy Rasgon, an analyst with broker Bernstein. “If you don’t get them, you can’t pick up anything you want. Supply chains are global and tightly integrated. It’s set up for efficiency, but it’s not as robust. ”

Qualcomm is directing the supply of these power management chips towards the highly profitable Snapdragon 888 application processors to match what Samsung’s furnaces can build, but that hurts the supply of application processors Qualcomm at the lowest end, sources said.

Xiaomi China gets most of its chips from Qualcomm and MediaTek Inc.

PANIC HEAD

The chip shortage, which has provoked panic buying, is pushing up extra capacity and raising costs even the cheapest parts of almost all microchips, industry experts said.

For example, a commonly used microcontroller unit chip from STMicroelectronics priced at $ 2 now sells for $ 14, according to Case Engelen, CEO of Titoma, a contract designer and manufacturer.

Simon Wan, co-founder of Chinese robotics cleaner brand Roborock, said the company’s chip suppliers want greater investments on chip orders. It pays to secure stock.

“Everyone is placing orders like smart, when of course they can’t even use their chips,” said Wan, who declined to name their chip suppliers.

Smaller companies are hurting more.

Fabien Gaussorgues, who runs an electronics factory in the Chinese city of Dongguan, said supply conditions have worsened since December.

His company was on track to produce a smart home appliance designed by an overseas client before the Chinese New Year. But a shortage of major chipsets from Murata Japan delayed their launch by three weeks, he said, prompting the use of a slightly weaker chipset as a replacement. Murata did not respond to a request for comment.

Meanwhile, some of his other clients have delayed endless projects.

“We’ve seen components where we see a six-week lead time, and then the week after ten weeks, and then a week after that it’s a year,” he said.