Auto industry gloom has contributed to fuel chip shortage, says Qualcomm China chief
The chip shortage now plaguing the global auto industry is the result of a perfect storm of two major factors, including automakers’ underestimation of how quickly their industry would rebound as the pandemic abates, said the Chinese chief of global chip giant Qualcomm Corp.
Qualcomm is one of the world’s largest chip makers who are exclusively dedicated to product design and then outsource the actual production to third-party manufacturers such as TSMC and UMC from Taiwan. But these third-party manufacturers have become overwhelmed with more business than they can handle since the start of the year, as the auto industry has rebounded faster from the pandemic than many auto makers anticipated.
As automakers slashed future orders last year due to low expectations for 2021, the other factor in the perfect storm was emerging with growing demand for chips used in PCs, routers, smartphones and other devices. that people used to work from home during the pandemic.
“As (automakers) reduced capacity, a new form of demand increased,” Qualcomm China President Meng Pu said at an industry event on Friday. “So when the automakers came back to the chipmakers (looking for more production), they found there was no capacity.”
But Meng, who also goes by Frank Meng, was quick to point out that political factors could help ease the pressure on automakers to curb production for lack of the many chips needed to power today’s cars. hui.
He pointed out that automakers are often major contributors to their local economies, including as large employers. As a result, he said, any pain experienced by these companies in the form of parts shortages or other factors will be quickly passed on to local government officials who will then “ask a barrage of questions” with the aim of alleviate the problem.
“The only thing we can guarantee is that no automaker will have to shut down production due to (the lack of) Qualcomm chips,” he joked at the event.
In Detail: Pandemic Demand, Smartphone Reshuffle Put Pressure on Global Chipmakers
Qualcomm has been a major beneficiary of the computing device boom, as the chips that power many smartphones around the world are its bread and butter. Demand for smartphones has exploded so far this year, with global shipments increasing 25.5% to 346 million in the first three months of 2021, according to IDC. While the latest gain in the first quarter was in part due to depressed 2020 numbers at the start of the pandemic, it was also up 11% from the 312 million smartphones shipped in the first quarter of 2019 before the outbreak.
PC shipments grew even more, reaching nearly 84 million units shipped in the first quarter, up from 54 million and 58.5 million in the same quarter of 2020 and 2019, respectively, according to IDC data.
Soaring demand helped Qualcomm post 52% revenue growth in the first three months of this year, while profit nearly quadrupled. Likewise, Lenovo, the world’s largest PC maker, reported 22% revenue growth and 53% profit growth in the last three months of 2020. It has yet to release results for the first three months of this year, which could show even bigger gains.
Like many others, Meng acknowledged that the current chip shortage lasts longer than previous deficits for the notoriously cyclical industry.
“Typically there will be a shortage in our industry every three years,” he said. “But in the past it was no more than nine months (because) the industry could adapt through price adjustments and the start of production lines. But it’s been longer this time around and had a bigger impact partly because demand is growing faster than the industry can supply, and partly because the industry has misjudged demand.
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