Samsung Electronics Co. has warned that it is battling the consequences of a “serious imbalance” in semiconductors worldwide, becoming the biggest technology giant to express concerns about the chip shortage spreading beyond the auto industry.
Samsung, one of the world’s largest manufacturers of chips and consumer electronics, expects the crisis to be a problem for its business in the next quarter, said co-chief executive Koh Dong-jin during an annual shareholders’ meeting in Seoul. The company is also considering skipping the launch of a new Galaxy Note – one of its best-selling models – this year, although Koh said it was aimed at optimizing its lineup.
WATCH: Samsung Electronics Co. warned of a “serious” imbalance in the semiconductor industry and said it may have to delay the launch of one of its flagship smartphones.
Industry giants Continental AG for Renesas Electronics Corp. and Innolux Corp. has warned in recent weeks of larger-than-expected deficits, thanks to unprecedented demand from the Covid era for everything from cars to game consoles and mobile devices. Samsung, the world’s largest smartphone maker, is working with foreign partners to resolve the imbalance and avoid possible setbacks for its business, according to its co-CEO.
Samsung’s shares fell up to 1% in Seoul on Wednesday, while several Asian chip vendors and manufacturers, including Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. also dropped down. The Note series has contributed about 5% of Samsung’s smartphone shipments in the past two years, IDC estimates, but it accounts for a more significant share of revenue because it is one of the most expensive in the line.
“If Samsung is talking publicly about future products, you know that the silicon crisis is serious,” said Avi Greengart, an analyst and founder of consultancy Techsponential.
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Chip makers like Samsung and TSMC is at the forefront of a global effort to address a shortage in the supply of chips, the building blocks of a multitude of consumer devices. The deficit has closed car factories around the world and now threatens the supply of other products.
To aggravate the increase in demand, Samsung’s semiconductor plant in Austin, Texas was marginalized in February by power outages across the state and did not resume full production. The resulting deficit in the production of Qualcomm Inc.’s 5G radio frequency chips could reduce global smartphone production by 5% in the second quarter, estimates research firm Trendforce. THE interruption It is likely to affect Samsung phones and laptops more than its high-end models or server chips, said Greg Roh, senior vice president at HMC Securities.
“There is a serious imbalance in the supply and demand of chips in the IT sector globally,” said Koh, who oversees the company’s mobile and IT divisions. “Despite the difficult environment, our business leaders are meeting with partners abroad to solve these problems. It is difficult to say that the scarcity problem has been solved 100%. “
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Automakers were hit first in part because of poor inventory planning and are expected to lose $ 61 billion in sales this year alone. Honda Motor Co. on Wednesday He said he would temporarily suspend part of production next week at most plants in the US and Canada, highlighting the worsening of the crisis.
Some analysts say scarcity can be eliminated mainly in the coming months. But the concern is that limited supply in certain segments – such as in more mature semiconductors, where it takes time to build capacity – could eventually strangle the broader consumer electronics industry and raise prices if it persists. Semiconductors are now near the top of the official agendas from Washington to Brussels.
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Crisis mode
The auto industry could lose $ 61 billion from 2021 sales due to chip shortages
Source: AlixPartners. Estimates based on the current volume loss rate.
On Tuesday, Hon Hai Precision Industry Co. – the maker of most of the world’s iPhones – has joined a chorus of industry executives emphasizing that it will take time to resolve imbalances in demand and supply.
“We see a shortage, we to feel this. But the impact for most of our customers is not so great, ”Hon Hai’s president, Young Liu, told reporters in Taipei. “For certain customers who have better-than-expected orders, there is an impact. For large customers who plan well, where there is not a huge increase in orders, these customers are doing well. “
Koh said Samsung may decide not to launch its Galaxy Note during the second half of 2021, breaking a series of years of annual releases for the sign line.
“The Note series positions itself as a leading model in our business portfolio,” he said. “It can be a burden to reveal two iconic models in one year, so it can be difficult to launch the Note model in 2H. The timing of the Note model launch can be changed, but we are looking to launch a Note model next year. “
– With the help of Debby Wu, Vlad Savov and Abhishek Vishnoi
(Updates with comments from fourth paragraph analysts)