Auto chip shortage may have domino effect in smartphone industry

Samsung Electronics has warned that the global chip shortage that brought the automobile industry to a standstill could also disrupt orders for the memory chips used in smartphones, as semiconductor companies rush to address the ongoing crisis.

The world’s biggest smartphone and memory chip maker warns as companies and governments grow increasingly concerned that the severe chip shortage in the auto industry could pummel countries’ economic recoveries to the ground.

Major automakers across the world are shutting assembly lines due to hurdles in the delivery of semiconductors. The current shortage has affected Fiat Chrysler Automobiles, Ford Motor Co., Nissan Motor Co Ltd., Toyota Motor Corp., Volkswagen and other manufacturers.

Executives from several semiconductor foundries have agreed to provide priority to auto chips to meet demand. But many are in a conundrum as this could slow deliveries of smartphone chips. Even while operating at full capacity these foundries will have to limit their ability to take on new orders.

The ripple effect of global chip shortage 

Samsung Electronics on Thursday said this pinch could slowdown manufacturing of DRAM and NAND memory chips, which enable smartphones and tablets to perform multiple tasks at a time.

“Because of the foundry supply shortages that have become an issue globally, the supply issue of other semiconductor parts could affect mobile demand, so we are closely watching the implications,” said Han Jinman, executive vice-president of Samsung’s memory chip business.

Global semiconductor companies are already hard at work to address the ongoing auto chip shortage. According to Taiwan’s economics minister Wang Mei-Hua, executives from Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corp (UMC), Powerchip Semiconductor Manufacturing Corp and Vanguard International Semicondcutor Corp have agreed to give priority to auto chips.

“Chipmakers are willing to follow the government’s request and try to support auto chips as much as they can to support their production in the U.S., Europe and Japan,” Wang told reporters.

The Taiwan Semiconductor Manufacturing Company, which is the world’s largest semiconductor foundry, said on Thursday that it was expediting auto chips in an attempt to meet the global shortage.

“While our capacity is fully utilized with demand from every sector, TSMC is reallocating our wafer capacity to support the worldwide automotive industry,” the company said.

According to C.C. Wei, TSMC’s chief executive, the company had converted some manufacturing capacity to respond to the demand for automobile chips at the end of last year. The group’s increased attention came after global carmakers pushed governments to campaign on their behalf.

Major automakers in Japan, Europe and the U.S. have engaged in direct talks with chipmakers as well lobbied via industry associations’ diplomatic channels to Taiwan’s government. According to people familiar with the matter.

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Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

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