3 Things About the Chip Shortage and Its Spread to Consumer Electronics

The automotive chip shortage is like 1958's sci-fi cult classic, The Blob. It's difficult to stop and spreading fast. Consumer electronics is on high alert.

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3 Things About the Chip Shortage and Its Spread to Consumer Electronics

Spotlight:

  • Is Apple immune to the shortage?
  • Gaming & entertainment take a hit
  • Who's to blame?

Qualcomm rang the alarm first.

The telecommunications giant made a statement in early February that it was struggling to meet chip demand. This statement came at the height of the chip-demand struggle for the automotive industry. It sparked news reports that chip scarcity for the automotive industry was likely to spread into consumer electronics. After all, the line between automotive tech and consumer tech is becoming more obscured each day—as electric vehicles and other contemporary vehicles become more intertwined with IoT (the Internet of Things).

Now, Samsung has joined Qualcomm at sounding alarms of its own. The tech powerhouse has raised concerns about a potential delayed launch for its newest smartphone, the Galaxy Note.

Once again, tech leaders and experts are warning the automotive chip crunch is finding its way into consumer electronics: causing an industry-wide chip shortage.

Yet when does this chip shortage move from warning to reality? If Qualcomm and Samsung find they are already affected by the current scarcity of chips, then perhaps the chip shortage has already spread to consumer electronics.

Everybody but Apple Isn't Quite True

If there was one tech leader immune from a chip shortage, most would assume it to be Apple. And they would be correct, to a degree.

MS Hwang, an analyst at Samsung Securities explains the current supply of chips produced by TSMC is "tightened" and is "affecting everybody except Apple."

Yet Hwang fails to point out the effect the chip shortage currently has on Qualcomm, which supplies 5G components to Apple. Earlier this year, Apple stated that its iPhone 12 sales were currently being impacted negatively by the ongoing component shortage. So Apple may not be affected by TSMCs chip strain, but they are still being impacted by Qualcomm's chip scarcity.

Hwang goes on to say that PCs and TVs are the next areas of consumer electronics to feel the strain of the shortage. Display driver ICs will be in short supply, and Hwang also says LCD panel prices will soar due to tight demand and impact the "profitability of TV."

The current chip shortage becomes further compounded by the fact that the Samsung S2 Fab in Texas is still closed due to the effects of snowmageddon.

The fact that Samsung is speaking out about the current chip shortage is in itself a big deal. The Korean company tends to remain tight-lipped about industry impacts, especially ones affecting them. And don't forget that the tech conglomerate is the number one phone producer in the world, according to TrendForce.

Apple's 5G market share might be a story for another day
Apple's 5G market share might be a story for another day

And while it is easy to say "everybody but Apple," it appears as though this chip shortage has taken a bite out of every giant in tech.

Gaming and Entertainment See Impact

Imagine the automotive chip shortage as something akin to The Blob. It's an unstoppable, rolling force scooping up everything in its path as it gradually moves from automotive to telecom to gaming and entertainment.

In case you needed a refresher...
In case you needed a refresher...

The spread of the shortage to gaming is evidenced by Sony's statement that it may be unable to fully meet supply demand for the PS5 due to bottlenecks in production.

Nintendo and Microsoft are also struggling to make enough of their respective gaming consoles to meet demand.

After all, companies like NXP Semiconductors NV—who have greater visibility over global chip supplies—have all but confirmed that the current shortage is no longer an automotive problem. It's a tech problem, and it's industry-wide.

Are Smartphones and Tablets to Blame?

But what's the big troublemaker? What can we point our fingers at and say, "ah, that's it. That's what's really going on here. They're the ones to blame!"

While the current chip shortage is a complex issue and cannot be defined in black and white, there is one answer we can try to use for greater understanding.

To make it almost too simplistic, every industry in tech from telecommunications to automotive to consumer electronics is using the same type of chips to power the tech. And perhaps more importantly, they are all relying on receiving the components from the same suppliers—more or less.

Yet smartphones and tablets are creating a demand for these highly coveted components like never before.

Literally.

Each year component demand for smartphones and tablets increases, with this past year seeing an increase in TDDI IC shipments for tablets by 46.2%.

And with this increased demand in components for smartphones and tablets, industry analysts predict key components to rise in price by as much as 15% in late 2021.

The new 5G smartphones are also using 50% more ceramic capacitors than 4G models, which adds just another layer to the already increased demand.

Despite this increase in demand, smartphones and tablets still fall victim to the current shortage. As stated earlier, tech giants like Apple and Samsung are seeing reduced sales and potentially delayed launches for their smartphones due to low supply.

Now, we're already reconsidering. Maybe we're feeling a little guilty about all of the evil eye we just sent toward smartphones and tablets.

In the midst of all of the vaccines and the decreasing rates of infection, it sometimes feels difficult to remember COVID catalyzed the current shortage.

Phase back to Q2 of 2020. Everything was shutting down. And that everything includes global component suppliers and manufacturers. What we're seeing right now is the "post-COVID rebound."

The second half of 2021 might be when we see some relief for the current shortage, according to industry analysts. However, all current signs point toward things getting worse before they get better.

As a wise man once said, "the darkest hour is just before dawn."

Right now, the hour appears to be pretty dark.

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