Samsung Electronics Co. warned that it is grappling with the consequences of a “serious imbalance” in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages that extend beyond the auto industry.
Samsung, one of the world’s largest chip and consumer electronics manufacturers, expects the crisis to pose a problem for its business next quarter, Co-CEO 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, although Koh said it was geared towards streamlining its lineup.
Industry giants Continental AG for Renesas Electronics Corp. and Innolux Corp. has warned in recent weeks of longer-than-anticipated deficits thanks to unprecedented Covid-era demand for everything from cars to game consoles to mobile devices. Samsung, the world’s largest smartphone maker, is working with overseas partners to resolve the imbalance and avoid potential business setbacks, according to its co-CEO.
Shares of Samsung fell as much as 1% in Seoul on Wednesday, while several Asian chip suppliers and manufacturers, including Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. also it fell. The Note series contributed about 5% of Samsung’s smartphone shipments in the past two years, IDC estimates, but it accounts for a more significant portion of revenue because it is one of the most expensive in the line.
“If Samsung is talking publicly about future products, you know the silicon crisis is serious,” said Avi Greengart, 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 fill a shortfall in the supply of chips, the building blocks of a large number of consumer devices. The shortfall has shut down auto plants around the world and now threatens the supply of other products.
Compounding increased demand, Samsung’s Austin, Texas semiconductor factory sidelined in February by statewide power outages and has not resumed full production. The consequent 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 court it is likely to affect Samsung’s mid-tier phones and laptops more than its higher-end models or server chips, said Greg Roh, senior vice president at HMC Securities.
“There is a serious imbalance in the supply and demand for 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’s hard to say that the shortage problem has been 100% solved. “
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Automakers were hit first in part due to poor inventory planning and $ 61 billion in sales are expected to be lost this year alone. Honda Motor Co. Wednesday It said it will temporarily suspend some production next week at most plants in the United States and Canada, underscoring the deepening crisis.
Some analysts say the shortage could mostly be fixed in the next few months. But the concern is that supply shortages in certain segments, such as in more mature semiconductors where it takes time to build capacity, could eventually strangle the overall consumer electronics industry and drive prices up if it persists. Semiconductors are now at the top of official agendas from Washington to Brussels.
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On Tuesday, Hon Hai Precision Industry Co., the assembler of most of the world’s iPhones, joined a chorus of industry executives who emphasized that it will take time to resolve imbalances in supply and demand.
“We see a shortage, feel that. But the impact for most of our customers is not that great, ”Hon Hai Chairman Young Liu told reporters in Taipei. “For certain customers who have better orders than expected, then there is some impact. For the top customers who plan well, where there’s not a big increase in orders, those customers are fine. “
Koh said Samsung could decide not to unveil its Galaxy Note during the second half of 2021, breaking a streak of years-long annual releases for the marquee line.
“The note series is positioned as a high-end model in our business portfolio,” he said. “It could be a burden to present two flagship models in a year, so it could be difficult to launch the Note 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 analyst comments from the fourth paragraph)