Component shortages hit smartphone sales as Samsung spends big on chip plant

Global smartphone sales were down by almost 24 million in the third quarter of this year compared with the same period last year, hit by the ongoing component shortage.

Sales to end users came in at 342.3 million in the three months to the end of September, a decline of 6.8% on the year-earlier quarter, Gartner’s figures show.

The analyst firm, which earlier this year predicted that the worldwide semiconductor shortage will last into next year, noted that component shortages hit production schedules, with the inevitable result of reduced inventory and delayed availability of devices, ultimately affecting sales to end users.

“Despite strong consumer demand, smartphone sales declined due to delayed product launches, longer delivery schedule and insufficient inventory at the channel,” said Anshul Gupta, senior research director at Gartner. “Supply constraints impacted the production schedule of basic and utility smartphones much more than premium smartphones,” he said.

Indeed, the firm’s stats show that sales of top-end devices continued to grow, despite an overall decline in the market.

While leader Samsung saw its market share fall by almost two percentage points to 20.2%, Apple added more than three percentage points with 14.2% of the market, putting it back into second place ahead of Xiaomi.

Samsung’s figures mask growth in its premium smartphone segment, driven by strong demand for revamped foldable phones, Gartner said, while an underpenetrated 5G base and iPhone feature upgrades boosted Apple’s numbers. Xiaomi, which increased its market share to 13%, is benefitting from a strong online channel-led strategy for market expansion in Europe and the Middle East and its partnerships with telcos there.

Gartner appears to be standing by its May prediction that the component shortage – and associated lack of devices – will start to ease in the second quarter of 2022, which suggests that full-year figures could also be down on last year, despite the historically strong fourth quarter.

In the meantime, the big tech companies are making efforts to boost chip production.

On Wednesday Samsung announced that it will build a  new semiconductor manufacturing facility in Texas, investing an estimated $17 billion in the project, including buildings, machinery and equipment. It marks the South Korean firm’s largest ever investment in the US.

Naturally, it won’t do much for chip availability in the short term, since these things take time. The vendor aims to break ground in the first half of next year with a view to having the site operational in the second half of 2024.

The facility – its location chosen in no small part due to its proximity to an existing Samsung site in Austin, thereby enabling allowing the sharing of infrastructure and resources – will manufacture products for use in mobile, 5G, high-performance computing (HPC) and artificial intelligence (AI), Samsung said.

“With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply chain,” said Kinam Kim, Vice Chairman and CEO, Samsung Electronics Device Solutions Division.

Samsung is one of a number of big name companies working hard to boost chip production; SK Square has investment in semiconductors at its core, while China’s Semiconductor Manufacturing International Corp (SMIC) recently announced a new facility in Shanghai, for example. The chip shortage will continue for the next few months at least, but the longer-term future looks pretty rosy.