Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance” in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages spreading beyond the automaking industry.
Samsung, one of the world’s largest makers of chips and consumer electronics, expects the crunch to pose a problem to its business next quarter, co-Chief Executive Officer Koh Dong-jin said during an annual shareholders meeting in Seoul. The company is also considering skipping the introduction of a new Galaxy Note — one of its best-selling models — this year, though Koh said that was geared toward streamlining its lineup.
Industry giants from Continental AG to Renesas Electronics Corp. and Innolux Corp. have in recent weeks warned of longer-than-anticipated deficits 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 avert potential setbacks to its business, according to its co-CEO.
The Note series contributed roughly 5% of Samsung’s smartphone shipments over the past two years, IDC estimates, but accounts for a more significant chunk of revenue because it’s one of the priciest in the lineup.
“If Samsung is publicly talking about future products, you know that the silicon crunch is serious,” said Avi Greengart, analyst and founder of consultancy Techsponential.
Chipmakers like Samsung and TSMC are at the forefront of a global effort to plug a shortfall in supply of chips, the building blocks of a plethora of consumer gadgets. The deficit has closed auto plants around the world and now threatens supply of other products.
Compounding demand surge, Samsung’s semiconductor fab in Austin, Texas was sidelined by power outages and hasn’t resumed full production. The resulting shortfall in production of Qualcomm Inc. 5G radio frequency chips could reduce global smartphone output by 5% in the second quarter. The outage there is likely to affect Samsung’s mid-tier phones and laptops more than its top-of-the-range models or server chips, said Greg Roh, a senior vice president at HMC Securities.
“There’s a serious imbalance in supply and demand of chips in the IT sector globally,” said Koh, who oversees the company’s IT and mobile divisions. “Despite the difficult environment, our business leaders are meeting partners overseas to solve these problems. It’s hard to say the shortage issue has been solved 100%.”
Carmakers got hit first in part because of poor inventory planning and are expected to miss out on $61 billion of sales this year alone. Honda Motor Co. on Wednesday said it will temporarily suspend some production next week at a majority of U.S. and Canada plants, underscoring the deepening crisis.
Some analysts say shortages could get mostly ironed out in coming months. But the concern is that tight supply in certain segments — such as in more mature semiconductors where it takes time to build capacity — could eventually throttle the broader consumer electronics industry and jack up prices if it persists. Semiconductors are now near the top of official agendas from Washington to Brussels.
Hon Hai Precision Industry Co. — the assembler of most of the world’s iPhones — joined a chorus of industry executives stressing it’ll take time to resolve imbalances in demand and supply.
“We see a shortage, we feel it. But the impact for most of our customers is not that big,” Hon Hai Chairman Young Liu told reporters in Taipei. “For certain customers that have better than expected orders, then there’s some impact. For major customers that plan well, where there’s no big surge on orders, those customers are doing fine.”