China, the world's handset factory floor, is feeling the global chip shortage as manufacturers juggle supply lines, speed up launches and redesign phones.

Robert Clark, Contributing Editor, Special to Light Reading

March 15, 2021

3 Min Read
China handset firms feel the pinch of global chip shortage

China, the world's handset factory floor, is feeling the impact of the global chip shortage.

Manufacturers are juggling supply lines, accelerating product launches and in some cases redesigning their phones.

While executives haven't disclosed numbers, they've been frank in speaking to domestic media about supply chain difficulties.

Figure 1: Endangered species: The global chip shortage has many causes – and it's got a lot longer to run yet. (Source: Infralist.com on Unsplash) Endangered species: The global chip shortage has many causes – and it's got a lot longer to run yet.
(Source: Infralist.com on Unsplash)

Xiaomi China President Lu Weibing has described the outlook as "not a shortage, but an extreme shortage," financial news site jrj.com reports.

Realme China chief Xu Qi said the shortfall wasn't confined to chips, but included "many materials" that could affect the entire procurement chain.

Zhao Ming, CEO of former Huawei handset brand Honor, said on state TV that it could not meet demand for any of its handset models.

Perfect storm

The tight supply is a result of multiple factors.

On the demand side it's the V-shaped recovery and the sharply higher requirements for handset chips.

On the supply side it's been natural disasters like the Texas blizzard and the earthquake in northeast Japan, as well as the Huawei bans that have dramatically increased demand for Qualcomm components.

Qualcomm CEO Steve Mollenkopf has warned it will probably take until the end of the year for supply to catch up with demand.

"Demand is far exceeding supply right now, which is something I think is going to be normalized over the next several quarters," he said.

The uncertainty has prompted fears among Chinese consumers of a hike in smartphone prices.

Rather than higher prices, however, the most likely outcome is that the price reduction cycle will be extended, analysts say.

In the hotly competitive domestic market, manufacturers have little room to raise prices. Experts cite the example of Xiaomi's Redmi K30 Pro, which reduced its price by nearly 700 yuan ($108) less than two months after its release.

Up and up

The components shortage aside, most Chinese brands see this is a year of huge opportunity as the US sanctions drive down Huawei's market share. According to Gartner, Huawei's Q4 2020 sales were down 41% year-on-year, falling to fifth place in global rankings behind Xiaomi and Oppo.

With Qualcomm component shipment times reportedly as long as 30 weeks, the Chinese firms say they must plan carefully.

One specific strategy is to deploy a dual-chip platform in the phone. Realme announced last month it would use both Qualcomm Snapdragon and MediaTek Dimensity chips in its high-end devices.

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But the tightness in the supply chain and the space opened up by Huawei appear to have intensified competition.

Most leading manufacturers have accelerated the release of flagship products this year, China Business News reports.

In the past month alone dozens of mid-to-high-end devices have hit the market, mostly carrying Qualcomm's Snapdragon 888 and MediaTek Dimensity 1200 chips.

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— Robert Clark, contributing editor, special to Light Reading

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About the Author(s)

Robert Clark

Contributing Editor, Special to Light Reading

Robert Clark is an independent technology editor and researcher based in Hong Kong. In addition to contributing to Light Reading, he also has his own blog,  Electric Speech (http://www.electricspeech.com). 

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