Chip shortage will hit the biggest smartphone manufacturers even harder than previously thought, research says

The chip shortage, which has severely hindered the manufacturer of smartphones and other technology, is expected to hit harder than previously thought, new research suggests.

The number of smartphones shipped next year is expected to grow by only six per cent – compared to initial projections of nine per cent – according to CounterPoint Research.

It was thought that the industry would rebound after the effects of the coronavirus in 2020, with vendors placing large component orders at the end of the year.

However, it has been reported that these businesses are only receiving 80 per cent of their requests, and the situation is likely to get worse.

Many manufacturers tried to weather this storm by hoarding certain components like Application Processors and camera sensors, but new components are now not coming as requested and many companies are losing stock.

“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,” Tom Kang, research director at Counterpoint Research, said.

For application processors, a key component in smartphones, the shortage was triggered by low yield rates – causing a chain reaction for companies like Qualcomm and Mediatek who rely on foundries to make their chips and, in turn, supply them to smartphone manufacturers.

It has not only been smartphones that have been affected; Microsoft’s Xbox chief Phil Spencer has said that both the Xbox Series X and its rival the PlayStation 5 will remain difficult to buy into 2022.

“I think it’s probably too isolated to talk about it as just a chip problem,” Mr Spencer said. “When I think about, what does it mean to get the parts necessary to build a console today, and then get it to the markets where the demand is, there are multiple kind of pinch points in that process.”

Spencer has not been the only executive to voice his concerns, as the CEOs of Intel and the Taiwan Semiconductor Manufacturing Company (TSMC) say this scarcity may last two more years.

The pandemic had caused a “cycle of explosive growth in semiconductors”, Pat Gelsinger, Intel’s chief executive, has said. "But while the industry has taken steps to address near term constraints it could still take a couple of years for the ecosystem to address shortages of foundry capacity, substrates and components.”

With 12 per cent of the world’s chip manufacturing done in the US already, the country is attempting to boost its domestic supply by getting TSMC to build $12 billion chip factory – but such a development could take several years before it is completed.