/>
X

The next problem for the smartphone industry: the global chip shortage

Smartphone shipments are on the rise but they could be higher were it not for the semiconductor supply shortage.
liam-tung.jpg
Written by Liam Tung, Contributor on

Smartphone shipments are expected to grow 12% in 2021 to 1.4 billion units worldwide, but a lack of components will hold back the industry and could drive up prices for consumers.

Smartphones are having a bumper year in 2021 after a slowdown in 2020 due to the pandemic, but analyst firm Canalys reckons bottlenecks in the supply of components will restrict growth in the coming year. The world is still facing chip supply constraints that have affected all industry sectors, from smartphones to vehicles: analyst firm Gartner estimates that the semiconductor shortage will last well into 2022.

"Backorders are building," says Canalys research manager, Ben Stanton. "The industry is fighting for semiconductors, and every brand will feel the pinch."

SEE: 5G smartphones: A cheat sheet (free PDF) (TechRepublic)

That brings a second problem: as key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers. And as there are major constraints around LTE chipsets, this will cause challenges at the low end, where customers are particularly price sensitive.

For all this, there appears to be strong demand for 5G smartphones as deployments of the new technology pick up pace around the globe. 

5G handsets accounted for 37% of global shipments in Q1 and should reach 43% for the full year, totaling 610 million units. 

"This will be driven by intense price competition between vendors, with many sacrificing other features, such as display or power, to accommodate 5G in the cheapest device possible. By the end of the year, 32% of all 5G devices shipped will have cost less than US$300. It is time for mass adoption," says Stanton. 

Canalys also reported that the US PC market grew 73% year-on-year Q1 2021. But while smartphone shipments to North America hit 159 million in Q1 2021, notebooks and tablet shipments totally 34 million units in the period. The global chip shortage is going to be a problem here too, as supply issues continue to hinder the industry and the analysts predict that unfulfilled demand will spill over into the early part of next year. 

A backlog of orders saw notebook shipments grow by 131% on a year-on-year basis, while tablets grew 52% over the period. 

HP was the leader of the PC industry, shipping 7.2 million units with 123% annual growth, followed by Apple with 6.7 million units and 36% growth. Canalys includes tablets in its calculations, so Apple's position is heavily influenced by iPad sales. 

Chromebooks were the real star of the US PC market in Q1. According to Canalys, Chromebook shipments grew 548% over the past year. 

SEE: Chip manufacturers' revenues are reaching a historical high as global shortage continues

Samsung saw 1,963% growth over the past year but that was because it only entered the US market this year with Chromebooks. But Asus, HP and Lenovo also saw growth of 900% for the year. 

"There is no return to normal for education," said Ishan Dutt, senior analyst at Canalys.

"The PC's role in the classroom will remain strong for years to come, ensuring ongoing demand for Chromebooks. The growing Chromebook installed base will lead to consistent upgrades and support for the product line. Educational institutions, teachers and parents have made investments in digital curricula and processes that they will not want to abandon." 

Related

Best Prime Day alternative deals on laptops
Three laptops and the Prime Day logo against a blue and pink background

Best Prime Day alternative deals on laptops

Laptops
Boomerang employees could be your best bet for fighting the talent shortage
Cheerful woman in headphones greeting friend while talking on laptop at home

Boomerang employees could be your best bet for fighting the talent shortage

Professional Development
Scribble me this: The uncertain future of note-taking apps
digital stylus

Scribble me this: The uncertain future of note-taking apps

Tablets