Apple and other companies are warning of manufacturing constraints due to a shortfall in critical components. Microprocessors, essential to smartphones and many other electronics, are in high demand and in short supply. “Overall, consumers should be prepared to pay more for smartphones and wait for some time to get the phones they want,” Nir Kshetri, a business professor who studies chip supplies at the University of North Carolina at Greensboro, told Lifewire in an email interview. “They may also be forced to buy expensive, high-end phones rather than the cheaper ones and from bigger phone makers rather than smaller ones.”
iPhones Price Hikes?
In July, Apple CEO Tim Cook warned that silicon “supply constraints” will affect sales of the iPhone and the iPad. “We do have some shortages,” Cook said on a recent earnings call with investors, “where the demand has been so great and so beyond our expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those.” The demand for microprocessors already was growing to support the development of new tech such as 5G and self-driving vehicles, Kshetri said. Natural factors and disasters, such as weather and factory fires, worsened the situation. “Smartphone makers are gradually feeling the pain of the chip shortage due to the fact that there are so many other industries that need chips, and new industries such as 5G, self-driving vehicles, artificial intelligence, and the Internet of Things are rapidly increasing worldwide,” Kshetri said. Smaller smartphone companies such as Lenovo, LG, Xiaomi, Oppo, Huawei, HTC, and Sony are more likely to be affected, Kshetri said. For instance, Chinese smartphone maker Xiaomi already has been forced to increase the price of some phone models and delay the launch of other models. “The current shortfall has been especially pronounced in less-advanced chips as the world’s biggest semiconductor players have been focusing on cutting-edge chips that offer higher profit margins,” Kshetri explained. “This means that Apple’s high-end smartphones such as the iPhone 12 are less likely to be affected compared to lower-end phones.”
No Quick Solution
Building new semiconductor manufacturing facilities requires a significant investment in capital equipment and takes many months to come online, IEEE Fellow Tom Coughlin told Lifewire in an email interview. “For this reason, the current semiconductor chip shortage will likely last into 2022 and possibly into 2023,” he added. Many buyers of semiconductor chips reduced their orders last year, as they expected reduced demand for their products, Coughlin noted. “As a result of the shortages of components and supplies and moving manufacturing from chips intended for one application to another application, when the economy began to recover, there were significant shortages,” he added. The rising cost of shipping components is also driving up smartphone prices, tech analyst Frank Kenney of the firm Cleo told Lifewire in an email interview. “Moving a container from east to west of the Pacific is significantly more expensive now than it was 18 months ago,” he added. “There are extensive delays at the Port of Seattle, Port of Long Beach, and Port of Los Angeles, and companies are having to reserve space on our cargo months in advance.” Even finding enough containers to ship goods is a problem. Companies aren’t making enough new containers to match demand, Kenney said. “Furthermore, there are dock operation delays as a result of limited manpower and social distancing requirements, which is hampering speed and efficiency,” he added. “Such shortages and delays will be remedied…and [as] social distancing requirements are reduced. But given their impact, companies that depend on semiconductor chips, and likewise their end customers, need to reset expectations.”
