For high-tech OEMs such as Apple, Samsung, Sony, Dell, and other top makers of electronics gear, the first half of 2022 has been a wild ride. Despite the signs that global supply chains are rebalancing, shortages and delays of important components continue to weigh on revenues in some segments, such as PCs and smartphones. On the other hand, the continuing challenges with semiconductor supplies has been good for Samsung, TSMC, and other major chip players who are leveraging their positions to support pricing and expand their presence in key areas of the semiconductor value chain.
According to Gartner, worldwide PC shipments declined in Q2 by 12.6% YOY—the sharpest drop in nine years. Among top PC makers, only Apple showed growth in unit sales, shipping 9.3% more units than it did in Q2 2021, according to Gartner’s estimates.
While reduced demand caused most of the decline, supply chain issues also figured prominently, with supply chain disruptions continuing to shift from “component shortages to logistics disruptions,” according to Gartner. Importantly, lead times were improving by the end of the quarter, “partially because key cities in China reopened” after COVID lockdowns were lifted.
Strengths and weaknesses of PC makers’ supply chains varied by geographies, and those regional variations strongly influenced revenues for some firms. Lenovo, the largest PC maker by unit sales, saw 12.5% decline in unit sales globally for the quarter—but its sales grew 2% in EMEA due to supply chain strengths, according to Gartner. Not coincidentally, the company opened its first in-house European manufacturing facility in Budapest in June. “Hungary’s well-connected location puts us much closer to our European customers so that we can fulfil and sustain their needs while remaining at the forefront of innovation,” the company said in a news release.
As Apple builds toward its September launch of the iPhone 14 series, rumors are flying that delays in key components will make some versions hard to obtain. These rumors come a few months after CFO Luca Maestri’s April announcement that the company anticipated between $4 billion and $8 billion in Q2 revenue hits due to supply constraints, including supplies of semiconductors.
Leading chip makers such as TSMC and Samsung have enjoyed robust growth and profitability amidst the semiconductor shortages. In guidance released ahead of its quarterly report, Samsung estimated a 21% bump in revenues and 11% increase in profits over Q2 2021. According to Counterpoint Research, as quoted by Nikkei Asia, Samsung saw “favorable pricing, high utilization rate[s] and share wins in [the] foundry sector,” including strong growth in large-scale integration for products ranging from smartphones to automobiles.
Samsung follower SamMobile.com reports that Samsung is boosting its use of domestic Korean sources for expandable components in semiconductor manufacturing. Previously acquiring these components from global semiconductor suppliers, Samsung now has more domestic options because “more suppliers in South Korea have now emerged with the rising demand for memory chips,” according to SamMobile’s Mihai Matei.
But in the race to produce and sell smaller chips, analysts say Samsung lags global leader TSMC. Nikkei Asia questioned why Samsung’s announcement that it was making 3nm chips lacked clarity about customers. The newspaper also noted that the 3nm chips will be made at the Hwaseong campus—noted for “developing manufacturing technology. This has prompted observers to suspect that the production will be small in scale.”
TSMC says it will mass produce 3nm chips by the end of the year. “To that end, the company is setting up one production site each in the Taiwanese cities of Hsinchu and Tainan,” reports Nikkei Asia. Given Apple’s patronage of TSMC, including its reported use of TSMC’s 5nm process in its new M2 system-on-a-chip (SOC) CPU, Apple fans and analysts speculate that Apple will use TSMC’s 3nm tech in its iPhones by H1 2023.
For supply chain managers charged with semiconductor procurement, this statement from TSMC CEO CC Wei may be of the more direct interest. While reporting 76% YOY growth in profit and 43.5% in revenue growth over Q2 2021, TSMC acknowledged that a portion of its extraordinary growth arose from customers stockpiling large inventories. “Our expectation is for the excess inventory in the semiconductor supply chain to take a few quarters to rebalance to a healthier level,” said Wei, as reported by tech news publication The Register. “We believe the current semiconductor cycle will be more similar to a typical cycle, with a few quarters of inventory adjustment, likely through first half 2023.”
That should be music to the ears of supply chain managers in automotive and other industry sectors struggling to catch up with the disruptions in chip supplies. And, speaking of automotive, it’s worth noting the increasing integration of high-tech firms with makers of advanced vehicles. Recent tie-ups include: LG Energy Solutions battery deals with Stellantis (formerly Fiat Chrysler/PSA Group) and GM; Tesla and long-time partner Panasonic’s $4 billion investment in a Kansas battery plant; and Li Auto’s strategic cooperation with NVIDIA and Desay SV on 8nm SOC chips for autonomous driving.
And tech firms are getting into the automotive industry. According to a May 11 report from Bloomberg, Foxconn acquired electric-truck startup Lordstown’s Ohio factory in May for $230 million. According to Bloomberg, this is part of Foxconn’s strategy to take its contract manufacturing model—through which it has become Apple’s main iPhone assembler—more deeply into automotive. Foxconn will follow the Lordstown deal by building Fisker’s Pear model at an “Ohio factory starting in 2024. Another potential customer would be Apple, which has been exploring getting into the auto business for years.”
It seems that unprecedented realignments are underway in the high-tech arena—re-alignments that even cross formerly rigid industry boundaries. As Resilinc’s EventWatch data has shown for many years, changes in business ownership, management, and leadership cause some of the highest levels of disruptions in supply chains. So procurement pros should keep their eyes on how suppliers of semiconductors and other high-tech components may be changing their strategies.