TOKYO / SEOUL / TAIPEI – The chip shortage that has plagued car manufacturing has now spread to the making of smartphones and personal computers, threatening to reverse economic recovery following a pandemic.
The shortage fueled by strong chip demand during the pandemic is exacerbated by the closure of Samsung’s plant in Texas following a winter storm. The chip manufacturing plant that accounts for 5% of global supply has been idled since February 16, causing widespread disruption throughout the supply chain.
“There is a real imbalance in the supply and demand of chips in the global IT sector,” Koh Dong-Jin, co-head of Samsung’s mobile division, told Wedensday at a shareholders ’meeting.
Samsung Texas plant manufactures telecommunication chips for US semiconductor giant Qualcomm. The facility also provides outlets for diode panels that emit organic light and for image sensors.
The supply crisis hitting Qualcomm will affect a wide range of smartphone makers that rely on the company for key components. Apple, which buys OLED panels from Samsung, could also be involved in iPhone production.
Samsung’s Austin plant accounts for about 5% of the capacity of contract manufacturers that use 12-inch wafers, according to Taiwanese research firm TrendForce. The shutdown is expected to lead to a 5% decline in global smartphone production in the second quarter.
Samsung Electronics’ chip center in Austin, USA is still idled without an expected restart date. (Image courtesy of Samsung Electronics)
Among smartphones that are only comparable to 5G, global output is expected to decrease by 30%. While Samsung is scrambling to resume operations at the plant, the agency has not set any timeline for a restart.
The effects of the Texas freeze, which affected the state’s power grid, have extended to semiconductors beyond those powered by smartphones. NXP Semiconductors, a strong Dutch apparel in auto chips, unveiled two Austin-area plants last month. Infineon Technologies, a German-based supplier of car chips, also shut down the Austin plant.
NXP has since restarted both of their plants, but the shutdown caused about a month of production losses, according to a statement from the company.
Tesla temporarily suspended production at a plant in California in late February due to a shortage of parts. Honda Motor will suspend activity at five plants in the U.S. and Canada for a week starting next Monday partly due to a broken chip supply.
Only a few contract manufacturers handle chip production. Samsung and Taiwan Semiconductor Manufacturing Co. only accounting for 72% of contract production in the fourth quarter of 2020. Stopping one plant with this group will have a widespread impact.
If communications and OLED semiconductors used in smartphones are scarce, “clients will be treated by stimulating the production of smartphones that use a variety of telecom chips or melt crystal displays,” said a senior official at semifinal maker.
That will lead to more orders for contractors like TSMC. The product has already come down to the PC industry.
“Supply cannot keep up with demand,” Jason Chen, chairman and CEO of Taiwanese computer maker Acer, said on March 3rd. “Our staff is scrambling to make parts secure. This is unparalleled in the personal computer industry.”
Acer can only fulfill 30% of client orders, confirming the severity of the business environment.
Asus, another Taiwanese PC manufacturer, has said that a supply of 30% PC semiconductors and LCD panels is in short supply. The company expects shipments to fall sharply in the first quarter.
Taiwanese players make up more than 80% of global PC production, a situation that could deepen the impact on the international market.
Demand for PCs was rapid last year as people turned to telecommunications and distance learning. “The production plans of the big-name PC manufacturers will surpass those for 2020,” said a global hemisphere manufacturer’s executive group.
In China, competing smartphone manufacturers such as Xiaomi and Oppo have acquired strong shares as Huawei Technologies struggled with U.S. sanctions. Since they all use similar semiconductors, they all fight over a declining supply.
LCD panels may also be scarce. “We will not be able to produce results if we do not accept price increases in semiconductors, but it is not certain to what extent we can shift costs to higher product prices,” said a manager at Japan Exhibition, known as also as JDI.
Insufficient supply of semiconductors makes operational displays impossible. “Supply could reach an emergency level in April,” the JDI manager said.
The production of semiconductors requires complex acidification of circuits on silicon wafers. The process usually takes about two to three months from the start of production to shipment, making a quick response to orders impossible.
A number of observers point out that the chip shortage will continue in the long run. General Motors in February expected its profits to decline by as much as $ 2 billion this year as a result of production cuts.