Samsung Warns of Severe Chip Crunch on a Global Level

Samsung expects the chip shortage to pose a problem to its business next quarter.

By Sohee Kim, Bloomberg | Updated: 17 March 2021 12:44 IST

Samsung Warns of Severe Chip Crunch on a Global Level

Chipmakers like Samsung and TSMC are at forefront of global effort to plug a shortfall in supply of chips

Highlights

Carmakers got hit first in part because of poor inventory planning
Samsung may decide not to introduce Galaxy Note during 2021
Samsung’s shares were largely unchanged in Seoul

Samsung Electronics warned it's grappling with the fallout from a “serious imbalance” in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages spreading beyond the automaking industry.

Samsung, one of the world's largest makers of chips and consumer electronics, expects the chip shortage to pose a problem to its business next quarter, co-Chief Executive Officer Koh Dong-jin said during an annual shareholders meeting in Seoul. The company is also considering skipping the introduction of a new Note - one of its best-selling models - this year, though Koh said that was geared toward streamlining its line-up.

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Industry giants from Continental AG to Renesas Electronics and Innolux have in recent weeks warned of longer-than anticipated deficits thanks to unprecedented COVID-era demand for everything from cars to game consoles and mobile devices. Samsung, the world's largest smartphone maker, is working with overseas partners to resolve the imbalance and avert potential setbacks to its business, the executive said.

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“There's a serious imbalance in supply and demand of chips in the IT sector globally,” said Koh, who oversees the company's IT and mobile divisions. “Despite the difficult environment, our business leaders are meeting partners overseas to solve these problems. It's hard to say the shortage issue has been solved 100 percent.”

Samsung's shares were largely unchanged in Seoul. Chipmakers like Samsung and Taiwan Semiconductor Manufacturing Co. are at the forefront of a global effort to plug a shortfall in supply of chips, the building blocks of a plethora of consumer gadgets. The deficit has closed auto plants around the world and now threatens supply of other products.

Carmakers got hit first in part because of poor inventory planning and are expected to miss out on $61 billion (roughly Rs. 4,42,740 crore) of sales this year alone. Honda Motor on Wednesday said it will temporarily suspend some production next week at a majority of US and Canada plants, underscoring the deepening crisis.

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Some analysts say shortages could get mostly ironed out in coming months. But the concern is that tight supply in certain segments - such as in more mature semiconductors where it takes time to build capacity - could eventually throttle the broader consumer electronics industry and jack up prices if it persists. Semiconductors are now near the top of official agendas from Washington to Brussels.

On Tuesday, Hon Hai Precision Industry - the assembler of most of the world's iPhone models - joined a chorus of industry executives stressing it'll take time to resolve imbalances in demand and supply.

“We see a shortage, we feel it. But the impact for most of our customers is not that big,” Hon Hai Chairman Young Liu told reporters in Taipei. “For certain customers that have better than expected orders, then there's some impact. For major customers that plan well, where there's no big surge on orders, those customers are doing fine.”

Koh said Samsung may decide not to introduce its Galaxy Note during 2021's second half, breaking a years-long streak of annual launches for the marquee line.

“Note series is positioned as a high-end model in our business portfolio,” he said. “It could be a burden to unveil two flagship models in a year so it might be difficult to release Note model in 2H. The timing of Note model launch can be changed but we seek to release a Note model next year.”

- With assistance from Debby Wu and Vlad Savov.

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