Chip shortage worsens smartphone vendors’ 2021 sales goals

New Delhi: The smartphone industry was set for a strong rebound this year after Covid-19 had hit the market hard in 2020. But semiconductor (or chip) shortage has left some smartphone vendors crippled as components that were once fully stored in the warehouse are bottoming and new components are not coming as requested.

According to Counterpoint Research, the total units shipped for 2021 are expected to grow by only 6 per cent annually to 1.41 billion units. The research firm had previously called for 9 per cent annual growth to 1.45 billion units for 2021.

“The semiconductor shortage seems to affect all brands in the ecosystems. Samsung, OPPO, Xiaomi have all been affected and we are lowering our forecasts. But Apple seems to be the most resilient and least affected by the AP shortage situation,” said Tom Kang, Research Director at Counterpoint.

Smartphone vendors placed large component orders from the end of last year, and consumer demand coming from delayed replacement purchases buoyed the market in the first quarter.

“However, some smartphone original equipment manufacturers (OEMs) and vendors are reporting they had only received 80 per cent of their requested volumes on key components during Q2 2021, and the situation seems to be getting worse as we move through Q3 2021,” the report mentioned.

Some smartphone makers are now saying they are only receiving 70 per cent of their requests, creating multiple problems.

Counterpoint Research believes 90 per cent of the industry is affected and this will impact the second half forecast for 2021.

In the case of application processors (APs), one of the most crucial elements in smartphones, the shortage was triggered by low-yield rates in newly-established fab lines.

With the situation seeming to persist, it caused a chain reaction throughout the industry.

“AP vendors like Qualcomm and Mediatek rely on these foundries and manufacturing problems result in fewer processors supplied which in turn affects smartphone OEMs,” the report said.