Samsung Warns Auto Chip Shortage May Affect Smartphones

Samsung has warned that a global shortage in semiconductors for automobiles could have a knock-on effect on the memory chips used in smartphones.

Samsung is the world’s biggest memory chip manufacturer, and its comments are likely to add to concerns over how the worldwide chip shortage could constrain countries’ economic recoveries from the coronavirus pandemic.

Semiconductor makers have reorganised production to try to meet demand for automobile chips, and as a result many are operating at full capacity.

This limits their ability to take on new orders, which could disrupt their ability to supply chips for mobile devices.

Mobile disruption

In delivering its quarterly financial results last week, Samsung said the situation could lead to a slowdown in mobile device orders, affecting demand for its DRAM and NAND memory chips aimed at smartphones and tablets.

“This is a global issue,” said Samsung memory chip business executive vice president Han Jinman. “There is a possibility that the shortage of other semiconductor parts may impact mobile demand, and so we are carefully watching how that plays out.”

Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chip maker, said it is prioritising chips intended for the automotive industry.

“While our capacity is fully utilised with demand from every sector, TSMC is reallocating our wafer capacity to support the worldwide automotive industry,” the company said in a statement.

Samsung reported record quarterly revenues for the period ending in December, led by demand for 5G and server chips.

Competition

However, its results came in lower than analysts had estimated, and it warned of a decline in profitability this quarter due to weakness in its memory chip business and issues with currency fluctuations.

The company’s net income for the quarter was 6.45 trillion won (£4.2bn), below the 7.3tn won average of estimates compiled by Bloomberg.

Samsung’s note of caution contrasted with the results of other tech companies benefiting from coronavirus lockdowns, with Apple and Facebook both reporting results well over what analysts had predicted.

The company’s smartphone sales struggled over the Christmas period against heavy competition from Apple and Chinese rivals, with Apple taking over the No. 1 spot ahead of Samsung and China’s Xiaomi.

Some industry analysts say they expect a rebound in memory chip prices due to demand for servers and 5G smartphones.

Samsung said it expects its contract chip manufacturing business to expand this year as it begins making chips for Intel.