News: Markets
15 March 2021
Storm-hit Qualcomm RFIC shipments to reduce 5G smartphone production by 30% in Q2
Due to the impact of the winter storm in Texas, the Line S2 fab of Samsung in Austin sustained a power interruption that has forced it to suspend operation since mid-February. The latest investigations by TrendForce indicate that the capacity utilization rate for the entire fab is not expected to climb back to over 90% until the end of March. Samsung manufactures several products that are important for the production of smartphones, including the Qualcomm 5G RFIC, Samsung LSI OLED DDIC and Samsung LSI CIS Logic IC. Supply-wise, the first two products sustained the brunt of the winter storm’s impact, and global smartphone production for second-quarter 2021 is therefore expected to drop by about 5% as a result.
According to TrendForce, Samsung was able to prepare for the power interruption ahead of time as the firm had been forewarned by the local utility. Hence, the loss of WiP (work in progress) wafers caused by the incident was minimal. However, the delay to the resumption of full operation at the plant is expected to last more than two weeks, during which the fab will suspend its wafer input. The incident on the whole will have a definite impact on the global foundry industry that is already experiencing a serious capacity crunch. In terms of wafer input, the Qualcomm 5G RFIC, Samsung LSI OLED DDIC and Samsung LSI CIS Logic IC account for 30%, 20% and 15% of Line S2’s monthly production capacity, respectively.
Of the three aforementioned products, the Qualcomm RFIC is primarily supplied to smartphone brands to be used in 5G handsets. This product is delivered to clients as part of either AP bundles or 5G modems. The winter storm’s impact on the production of the Qualcomm RFIC is expected to take place in Q2/2021, resulting in a 30% decrease in 5G smartphone production for the quarter. However, TrendForce expects this incident to impair the Q2/2021 production of all smartphones by only about 5%, given smartphone brands’ existing inventory of 5G AP bundles and 5G modems, in addition to the fact that smartphone brands are likely to keep up their quarterly smartphone production by increasing the production of 4G handsets to make up for the shortfall in 5G handsets. Furthermore, TrendForce expects the Line S2 fab to prioritize resuming the production of RF products ahead of other products, in turn further mitigating the winter storm’s impact on global smartphone production.
On the other hand, the Samsung LSI OLED DDIC is primarily used in Apple’s iPhone 12 series. The winter storm’s impact on these DDICs will similarly take place by the end of Q2/2021. Even so, Apple likely possesses sufficient DDIC inventory, at least in the short term, since the period of peak DDIC demand for the firm’s existing smartphone models has already passed. Moreover, the iPhone 12 mini may reach end-of-life (EOL) earlier than expected due to disappointing sales. Should Apple decide to cut iPhone 12 mini production, the firm will be able to further minimize the impact of OLED DDIC undersupply. Finally, as sales of the iPhone 11 (which is equipped with an LCD, instead of OLED, panel and therefore does not require OLED DDIC) have been resurgent recently, Apple may increase the share of iPhone 11 in its total smartphone production in order to keep up its quarterly production volume. In light of these factors, TrendForce believes that the production volume of iPhones in Q2/2021 will suffer only limited impact from OLED DDIC supply disruptions.
On the whole, although the production of 5G smartphones will face a relatively considerable challenge in Q2, smartphone brands will be able to keep up their quarterly production volume by raising the production share of 4G smartphones instead. TrendForce thus projects that the winter storm will impair smartphone production for Q2/2021 by no more than 5%, while maintaining the previous forecast of 1.36 billion units produced for 2021. However, TrendForce also does not rule out the possibility that the winter storm will lower the penetration rate of 5G smartphones in 2021 from 38%, as previously forecasted, to 36.5%.
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