Smartphone chip giant Qualcomm warns of Global Semiconductor Shortage

Qualcomm Inc. has signalled towards a global semiconductor shortage, as the world’s largest smartphone chipmaker is struggling to meet demand.

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“The shortage in the semiconductor industry is across the board,” said incoming Chief Executive Officer Cristiano Amon, according to Bloomberg.

Like most chipmakers, the American company outsources production to companies such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics Co. These suppliers are trying to adjust to a vigorous rebound in demand far they are failing. The U.S. auto sector, in particular, has complained about this recently, but Qualcomm’s comments show the problems are deep-lying.

When the Covid-19 pandemic took the world by storm in early 2020, chip orders initially collapsed, and the R&D teams could not predict what holds for the future. But remote work and studying have seen demand for computers spur, while car buying has surged as people avoid public transport. That, in turn, has caused auto and electronics makers to need more chips than previously thought.

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Amon said orders for chips that run cars, computers, and many other devices that are internet-connected are swamping the industry, which mostly relies on just a handful of developed factories in Asia. Supply should see a positive effect in the second half of 2021, he added.

According to a report by Bloomberg, “Qualcomm shares fell about 6% in extended trading. The stock closed at $162.30 on Wednesday in New York, leaving it up 6.5% in 2021.”

On Wednesday, Qualcomm also reported quarterly results and gave an upbeat forecast. However, some analysts and investors were not satisfied as they have become more bullish on Qualcomm recently.

Outgoing CEO Steve Mollenkopf gave supply constraints as the reason why Qualcomm’s performance was curbed.

Apple Inc., a major Qualcomm customer and one of the biggest consumers of chips globally informed last week that some components’ availability limited sales of high-end iPhone 12 models. Earlier on Wednesday, American automaker, General Motors Co., warned that a global semiconductor shortage would bring in a decline in production this year as the company plans downtime at three plants.

Qualcomm is the largest maker of chips that connect smartphones to wireless networks and is also a supplier of processors that give the devices their computer-like capabilities. With customers including some of the big players of the market like Apple and Samsung, the company’s projections are a closely watched indicator of the health of the mobile phone market.

In its fiscal first quarter, Qualcomm said revenue was $8.24 billion, which is a gain of 62% from a year earlier, while analysts, on average, projected $8.25 billion. Net income was $2.12 a share. Excluding certain items, profit was $2.17 a share, compared with Wall Street’s average estimate of $2.09.

Last month, Qualcomm said Mollenkopf, who will retire in June, will be succeeded by Amon as the CEO of the company.

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