After a calamitous 2020, the handset industry is looking to bounce back in 2021.
The good news is that demand is surging; the downside is the supply chain will struggle to keep pace.
Thanks to the pandemic, global smartphone sales fell by a record-breaking 11% to 1.25 billion units last year, according to TrendForce.
This year TrendForce predicts a recovery driven by replacement demand and emerging markets and 5G growth.
It cautions that while the pandemic will remain the biggest variable, it expects production to increase by 9% to 1.36 billion units this year.
But due to a series of factors, the handset recovery faces a bottleneck in the stretched semiconductor supply chain.
One of the main reasons is that the robust demand for 5G phones and basestation chips has filled up virtually all the 200mm wafer capacity in Asian foundries.
"Every 200mm foundry is busy and fully operational at least until the end of next year," Bruce Kim, CEO of foundry equipment dealer SurplusGlobal, told Semiconductor Engineering.
It's not just 5G. The whole semiconductor sector is running close to capacity, as seen by recent sharp price hikes of wireless, automotive, gaming and flash-memory chips by TSMC and NXP.
The reason is rising demand – for cars and devices in the rebounding Chinese economy, and in phones and other electronics gear elsewhere. After a year of lockdowns it seems people who've not spent on dining out or travel are instead upgrading their home office gear or buying new devices.
The PC market, to take one example, is enjoying its biggest growth spike in a decade, according to IDC.
"Every segment of the supply chain was stretched to its limits as production once again lagged behind demand during the quarter," IDC said.
"The obvious drivers for last year's growth centered around work from home and remote learning needs, but the strength of the consumer market should not be overlooked," said Ryan Reith, an IDC vice-president, citing record sales of gaming PCs and PCs and monitors.
Another factor in the chip crunch has been Huawei's heavy buying of semiconductors ahead of the ban on sales of components made with US technology. Rival Xiaomi also stocked up as it positioned itself to take Huawei's market share, Reuters reports.
The renewed demand for smartphones is a good sign for the mobile business, but a lot depends on the performance of the supply chain.
— Robert Clark, contributing editor, special to Light Reading