Semiconductor Shortage... Samsung Smartphone '300 Million Units' Recovery Difficult Again This Year

Semiconductor Chip Prices Surge Up to 20%
Stock Market Analysts Lower Forecasts
Some Downgrade from 300 Million to 287 Million

[Image source=Yonhap News]

[Asia Economy Reporter Cha Min-young] As the semiconductor supply crisis causes component prices to surge by up to 20%, Samsung Electronics is inevitably forced to change its smartphone shipment strategy. Following the direct hit from COVID-19 last year, there is a growing consensus that Samsung Electronics' global smartphone shipments will remain below 300 million units this year as well.

Second Quarter Shipment Hit Hard... Uncertainty in the Second Half

According to related industries and securities firms on the 29th, the recent semiconductor supply crisis has lowered Samsung Electronics' smartphone shipment forecasts for this year. At the beginning of the year, Samsung Securities expected a recovery to around 300 million units for the first time in four years, but they have now lowered their expected shipment volume to 287 million units, similar to last year. Shin Young Securities also revised their forecast downward from the early 300 million units range.

This reflects the impact of the recent semiconductor supply crisis. Due to component shortages in the second quarter, a decrease in smartphone shipments is inevitable, and amid uncertain demand in the second half, smartphone manufacturers have less incentive to bear high component procurement costs.

The semiconductor chip shortage, which showed signs since last year, became full-blown earlier this year. In particular, the shutdown of Samsung Electronics' Texas Austin fab due to the US cold wave, combined with aggressive moves by Chinese smartphone manufacturers such as Xiaomi and Oppo, caused a serious supply-demand imbalance in the smartphone market. Samsung Electronics' IM Division Head (President) Koh Dong-jin recently expressed concern at the shareholders' meeting, saying, "The second quarter is somewhat problematic." Lee Seung-woo, a researcher at SK Securities, analyzed, "Especially for display driver ICs (DDI), supply is estimated to be more than 20% short compared to demand."

The spot prices of semiconductor memory, which already carry a premium, continue to rise. Market research firm TrendForce forecasts that in the second quarter, server DRAM prices will increase by 20%, graphics DRAM by 10-15%, and NAND prices by 3-8% based on fixed prices. Additionally, they expect 5G smartphone production in the second quarter to decrease by about 30% compared to previous estimates. Overall smartphone production is also expected to decline by 5%.

Change in Smartphone Shipment Strategy Inevitable

Samsung Electronics is also facing a dilemma. Since 2018, Samsung Electronics' global annual smartphone shipments have fallen below 300 million units. Last year, hit directly by COVID-19, shipments hovered around 260 million units. However, with global vaccine distribution starting this year and the worldwide launch of 5G smartphones accelerating, there had been expectations to recover to the 300 million unit level. Samsung Electronics also showed its determination to fill the gap left by China's Huawei by unveiling its flagship Galaxy S21 model one month earlier than usual and strengthening its affordable Galaxy A series and foldable lineup.

The problem is that the semiconductor shortage is accompanied by growing market uncertainty. Shin Young Securities researcher Moon Ji-hye pointed out, "Currently, the semiconductor shortage phenomenon can be divided into two types: one where product supply itself is insufficient, and another where even if inventory exists, purchasing is impossible due to rising component prices." She explained that even if companies invest heavily to produce, if smartphones do not sell in the market, it could lead to inventory burdens.

From the flagship Galaxy S series to the mid-range Galaxy A series, all are not free from Qualcomm chip shortages. Lee Jong-wook, a senior researcher at Samsung Securities, said, "Chinese smartphone companies are rushing to secure component inventory due to fierce competition, but Samsung Electronics is relatively conservative about demand in the second half," adding, "It will be impossible to completely resolve supply disruption issues even ahead of the peak season in the third quarter."

This content was produced with the assistance of AI translation services.