Qualcomm struggles to meet chip demand as scarcity spreads to phones: sources

SAN FRANCISCO / SHANGHAI (Reuters) – Qualcomm Inc is struggling to keep up with demand for its processor chips used in smartphones and gadgets, as the chip shortage that hit the auto industry is spreading across the electronics industry, sources say. industry to Reuters.

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

Demand for Qualcomm chips has skyrocketed in recent months as Android phone makers seek to win over customers who abandon phones made by Huawei Technologies Co Ltd due to U.S. sanctions. Qualcomm found it difficult to meet this higher-than-expected demand, in part due to the scarcity of some subcomponents used in its chips.

A person at a Samsung vendor said Qualcomm’s chip shortages were hitting production of mid-range and low-end Samsung models. The second person, from another vendor, said Qualcomm’s new flagship chip, the Snapdragon 888, was missing, but did not say whether it was affecting the manufacture of Samsung’s next-generation phones.

A spokesman for Samsung Electronics declined to comment. A Qualcomm spokesman pointed to public comments made by executives on Wednesday, in which they reiterated that they believe they can achieve the February second-quarter sales forecast made in February.

Separately, a senior executive at a contracted manufacturer of several major smartphone brands told Reuters that she was facing a shortage of a variety of Qualcomm components and would cut handset sales this year. The executive spoke on condition of anonymity.

Last month, Lu Weibing, vice president of Chinese cellphone maker Xiaomi, deplored the chip crisis. “It is not a shortage, it is an extreme shortage,” he wrote on Weibo, the Chinese social network similar to Twitter.

An increase in demand for consumer electronics has led to a global chip shortage that has paralyzed car factories. The scarcity so far has focused mainly on chips made with older technology, rather than Qualcomm’s advanced phone processor designs.

But Qualcomm’s restrictions show how problems in one area of ​​the complex chip supply chain can spread to others and how rapid changes in market dynamics can hinder chip companies that need to define mass production plans with years of experience. advance.

“We still have our demand basically greater than the supply,” Qualcomm’s new chief executive, Cristiano Amon, told investors during the company’s annual meeting on Wednesday.

Qualcomm’s flagship application processor, the Snapdragon 888, is still new. The main parts of it come from Samsung Electronics’ separate chip-making division and use a new 5-nanometer manufacturing process that is difficult to rapidly increase.

A Samsung factory in Texas, which makes some of Qualcomm’s radio frequency transceivers, was also forced to stop operations last month due to a power outage caused by winter storms, although it is unclear whether the effects of this shutdown have already reached the smartphone manufacturers.

OLD TECHNOLOGY

Qualcomm’s entire line of application processors contains power management chips made with older technology by companies such as China’s Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Co.

“You need a complete kit,” said Stacy Rasgon, an analyst at brokerage Bernstein. “If you can’t get them, you can’t build anything. Supply chains are global and tightly integrated. It is configured for efficiency, but it is less resilient. “

Qualcomm is directing the supply of these power management chips to its highly profitable Snapdragon 888 application processors to match what Samsung foundries can build, but this is hampering the supply of low-cost Qualcomm application processors, said the companies. sources.

China’s Xiaomi acquires most of its chips from Qualcomm and MediaTek Inc. in Taiwan

PANIC SHOPPING

The shortage of chips, which sparked a panic in the purchase, is further reducing capacity and driving up costs for even the cheapest components of almost all microchips, industry experts said.

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

Simon Wan, co-founder of the Chinese brand of robotic vacuum cleaners Roborock, said the company’s chip suppliers are asking for larger deposits on chip orders. He’s paying to secure the stock.

“Everyone is placing orders like crazy, when in fact they can’t even use all of their chips,” said Wan, who declined to name his chip suppliers.

Smaller companies are suffering more.

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

His company was about to mass produce a smart home device designed by a foreign customer before the Chinese New Year. But the shortage of major chipsets by Japan’s Murata delayed the launch by three weeks, he said, forcing it to use a slightly weaker chipset as a replacement. Murata did not respond to a request for comment.

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

“We saw components where we see a delivery time of six weeks, then, in the following week, it is ten weeks and, a week later, it is one year,” he said.