Samsung Electronics said manufacturing of smartphones, televisions and home appliances has been disrupted by the deepening global chip crunch, and that it was “rebalancing” production in hopes of minimising the impact.
The disclosure by the South Korean technology group came as the chip shortage spread across industries from washing machines to toasters, for which demand has been turbocharged by the Covid-19 pandemic and outages at large production facilities.
“Due to the global semiconductor shortage, we are also experiencing some effects especially around certain set products and display production,” Ben Suh, head of Samsung’s investor relations, told analysts on Thursday. “We are discussing with retailers and major channels about supply plans so that we are able to allocate the components to the products that have more urgency or higher priority in terms of supply.”
Samsung did not specify the products from which it would divert manufacturing capacity.
The world’s top maker of computer chips and smartphones also reported a 46 per cent year-on-year increase in first-quarter net profit to Won7.1tn ($6.4bn), beating the Won6.7tn average of estimates compiled by Bloomberg.
However, Samsung’s quarterly chip earnings were hit by suspensions at its plant in Austin, Texas because of a huge snowstorm in February. The company estimated the lost production would cost Won300bn-Won400bn.
Samsung added that it was looking at some US sites to build an advanced $17bn foundry plant to meet surging chip demand.
The group forecast that profits from chips would increase in the second quarter on strong demand for servers, although smartphone sales were likely to fall because of the component shortages.
“For the second half, market conditions are expected to improve for the component business,” the company said. “However, global macroeconomic risks, including uncertainties over demand related to Covid-19, are likely to persist.”
Samsung has been riding a boom in sales of mobile gadgets and home appliances as people were forced to spend more time at home during the pandemic. The foundry companies that manufacture made-to-order chips have been running at more than full capacity, but analysts expect shortages to extend into next year.
“It is hard to find any sector that is not affected by the shortages, including autos, domestic appliances and smartphones,” said CW Chung, head of research at Nomura in Seoul.
“They are all juggling production of various products with limited chip supplies as so-called smart home appliances, as well as smartphones that cannot be made without chips,” said Kim Young-woo, an analyst at SK Securities. “Their output could be reduced if they don’t pay higher prices for components. The shortages may last several years.”