Since the start of the pandemic and global lockdown last year, different industries have suffered from the global chip shortage. It was car manufacturers that had to suffer the most. Then we saw the global chip shortage create problems in the making and supply of computers and consoles. And now, the shortage has finally started showing its effects on the smartphone industry. According to the latest reports, Qualcomm is now feeling the heat of the global chip shortage. Let’s learn more about the global chip shortage and how it is affecting brands like Qualcomm and Samsung.
What is a chip and why is it important?
Chip is the heart of any electronic component. While the term is mostly associated with processors, chips are found everywhere including memory, modems, and other components.
It is actually an integrated circuit that consists of different components like transistors, diodes, and resistors built on a layer (wafer) of semiconductor material like silicone. It is where all the important functions are carried out. The chip in the graphics card is called GPU and it’s where all the major functions of the component are carried out including rasterization and coordination with the rest of the computer.
Global chip shortage
As mentioned earlier, the global chip shortage first hit the car industry ever since countries started imposing lockdowns last year because of the pandemic. This resulted in the reduction in the demands for cars and as a result, they stopped ordering chips. Foundries that manufacture the chips then shifted to other consumer products instead.
Because of the pandemic, demands for computers, laptops, and their corresponding components and foundries were more than happy to supply chips for them. Still, that was not enough as apparent by the fact that every major console and computer component including GPUs went out of stock pretty quickly.
Qualcomm is facing chip shortage
The smartphone industry that was unaffected all this time seems to be feeling the heat at the moment. This comes from the latest report from Reuter that states that Qualcomm is struggling to meet the demand for its chips. Qualcomm and MediaTek are the two biggest suppliers of smartphone chips in the world. The former is also the go-to supplier for premium and flagship Android offerings.
One of the reasons for this could be the increased demand for chips this year. With the US-imposed ban on Huawei and in-house HiSilicon, Qualcomm has seen a rise in the demands of its chips.
According to the report, Samsung, which happens to be the world’s biggest smartphone manufacturer, is experiencing a shortage of Qualcomm chips. A source in Samsung’s supply chain claims that this has affected the production of entry-level and mid-range devices. Another source has claimed that Qualcomm is not supplying enough Snapdragon 888 chips to other companies at the moment. Similarly, another source in the manufacturing industry told Reuters that the shortage of Qualcomm components could lead to a compromise in the smartphone shipments this year.
Opinions on current chip shortage (Samsung, Qualcomm, Xiaomi)
Earlier this year, Samsung predicted that the global chip shortage would soon affect mobile components. Back then, the company was referring to its memory business. With the resurgence of the automotive industry post lockdown, foundries such as TSMC started rushing to meet the demand of the industry. As foundries were utilizing their full capacity, they could not take future orders for smartphone manufacturers.
Qualcomm’s President, Cristiano Amon, admitted that the demand is higher than the supply during the recently concluded annual meeting of the company. Still, the company is confident that it can meet the fiscal Q2 sales forecast given in February.
Even Xiaomi has addressed the current situation. Lu Weibing, the Vice President of the company stated that it’s not just a shortage but an extreme one on its official Weibo handle.
There can be a lot of consequences of this global chip shortage. For starters, given the limited amount of chips, suppliers will prioritize the premium market segment. Just like what Huawei is doing right now. This could limit the supply of low-end and mid-range devices. On the other hand, it will result in a reduced shipment altogether.
Whenever a situation like this occurs, there is always a chance of panic buying driving the price of the component and eventually the end product to a higher level. Companies hoard huge volumes of products in advance that adds to the existing shortage. The components become difficult to get in the market, and their price increases significantly.
- Meanwhile, check out our gaming review of the Exynos 2100.