CHIP CRUNCH FOR CELLPHONES TO STAY FOR 6 MORE MONTHS
INDUSTRIES FACE MORE OUTPUT CUTS & DELAYS
Leading global chip design and manufacturing companies say that India will continue to face a shortage of chips for mobile devices for at least another six months. This will hit the affordable 4G segment phones particularly hard as they use a lot of low-priced high nanometer chips which are in even more short supply.
Reliance Jio yesterday announced that it was postponing the launch of its 4G smart phone to sometime before Diwali and cited chip shortage as an issue. Mukesh Ambani had announced in the last AGM that the phone would be launched on September 10. The company was expected to offer a low-cost 4G phone at a sub-~5000 price in collaboration with Google.
“Our estimate is that the chip shortage will go on for another six months. And it will be more pronounced for 4G phones at the lower end of the market. That is because they use a lot of high nanometer chips of 40 and above, whose production has been affected the most, as capacity has been shifted to the more cuttingedge low nanometer chips below 14, going down to 10 and even 6,” says the CEO of a global chip company.
Chipmakers say affordable 4G phones (under ~10,000) use a large percentage of higher nanometer chips compared to the mid and upperend phones. But because of the surge in demand for highend phones, fab plants have shifted to making lower nanometer chips which provide better margins and higher revenues (their sticker price is higher).
Hence, the shortage of chips is not that pronounced in 5G phones whose numbers are increasing globally, and are expected to hit over 600 million by the year end. Qualcomm estimated that by
the end of 2021, 5G phones will constitute 60-70 per cent of India's smart phone market.
Says Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association, “Indian mobile device players are suffering more than anyone else as they do not get priority.” The consolidation in the mobile device manufacturing space to four to five players globally has resulted in their dominating the market, and getting priority from chipmakers because of their long-term contracts and large volumes.