Chipset Shortage Bit Smartphone Brands Hard, But Situation Will Ease In The First Half Of 2022, Say Experts

Smartphone brands are feeling the squeeze of chipset shortage, fueled by the global coronavirus pandemic that wreaked havoc on the supply chains. Major smartphone brands like Samsung, Oppo, Realme and Xiaomi have all been affected, but Apple has been the most resilient. In short, the chip shortage this year led to a crisis in the smartphone industry worldwide, but the situation will ease in 2022, say industry experts.

The shortage is so bad that the global smartphone industry declined 6 per cent in the third quarter of 2021 as compared to the same period last year. The situation India is equally grim as vendors jostled with supply issues especially for low-end smartphones and smartphone shipments in India fell 5 per cent year on year in Q3, according to market research firm Canalys. The chipset crisis is real and will continue to hit the smartphone makers until at least the first half of next year. 

“As H2 2021 ends, COVID-19 lockdowns become intermittent, and supply chain become more adaptable, the situation is getting better. But, we are still not out of the woods yet and the situation is likely to improve by the first half of 2022, assuming no further COVID wave disrupts the supply-demand balance,” Varun Mishra, Analyst, Mobile Devices and Ecosystems at Counterpoint Research, told ABP Live.

However, according to Navkendar Singh, Research Director-Client Devices & IPDS, IDC India, the industry is not going to see a rebound until the mid of 2022.

“The supply issues faced since the pandemic have been exacerbated by the logistics and containers issue in the past few months. All else remaining same, we should see some normalcy returning by mid-to-late 2022,” Singh told ABP Live.

Interestingly, the supply chain crunch was a result of not only the ongoing COVID-19 pandemic but also the Suez Canal blockage. It was a temporary ‘nightmare’, but it had sure impacted the global supply chain severely. Experts had also warned that the blockage of one of the world’s busiest waterways will reverberate through supply chains.

“COVID-19 has been the major driver of this situation, further exacerbated by Suez canal blockage, resulting in severe supply chain crunch across the world and particularly in the region (India),” Singh noted.

Apart from these, the COVID-19-created supply issues along with a huge pent-up demand for devices also contributed to the situation. “There are several other reasons, including underinvestment in wafer capacity, low yield rates in newly-established fab lines, the increase in demand of semiconductor in 5G and others segments like automotive, and geopolitical situations to name a few,” Mishra added, highlighting the factors that worsened the chipset crisis.

As 2021 draws to a close, the situation has slightly improved at least on the smartphone side especially for the mid-to-high-tier smartphones. However, the lower-end or entry-level segment smartphones still wade through troubled waters. The shortages of components are also paving way for an increase in handset prices which is being transferred to consumers especially by brands that run on lower margins.

The hike in smartphone prices was also a result of OEMs opting for air transport instead of sea route due to unavailability of containers and increased fuel prices, etc. 

What Smartphone Makers Xiaomi And Realme Have To Say About The Chipset Shortage In India?

Realme Partnered With The Best Chipset Manufacturers

“India is one of the most significant markets for Realme. To address the issue of chipset shortages, we have been actively collaborating with burgeoning chipset manufacturers who can provide the best value processors without compromising the performance. Despite the prevalent issue, we have made sure that industry-leading and flagship chipsets for premium products are not compromised,” Madhav Sheth, CEO, Realme India, VP, Realme and President, Realme International Business Group, told ABP Live.

Xiaomi Expanding Manufacturing Capabilities In India

“With the uncertainty brought in by the pandemic, we have been witnessing shortages across the supply chain over the last year. As lockdown restrictions have eased out and the situation is returning to normal, we are optimistic that the supply chain situation will also pick up the pace. We are working with various vendors to ensure that there is enough and more supply to cater to the requirements of our consumers. We have also been working towards expanding our local manufacturing capabilities. Early this year, we onboarded two new manufacturing partners – DBG and BYD to cater to consumer requirements and bridge the demand and supply gap,” said a Xiaomi India spokesperson.