Qualcomm reportedly struggling to cope with semiconductor demand

Production bottlenecks are said to be disrupting smartphone manufacturer output

The Samsung S21 Ultra's back cover

Semiconductor giant Qualcomm is said to be struggling to keep up with demand for its chips amid fears a global shortage has now spread from the automotive sector to the electronics industry.

The shortage has now affected the production of lower and middle range smartphones at Samsung, according to Reuters, which cites two people that work for suppliers to the South Korean giant.

Despite the market for smartphones actually shrinking, demand for Qualcomm mobile CPUs is increasing, with various Android phone makers keen to exploit gaps in the market left by Huawei. However, Qualcomm has reportedly found it difficult to meet the unexpected demand due to shortages of subcomponents used in its processors.

The company's entire lineup of application processors contains power management chips that are made with older technology from other suppliers. Qualcomm is said to be directing the supply of these power management chips towards its most profitable processor, the Snapdragon 888, which has had a knock-on effect on the supply of its lower-end processors, according to the sources.

Newer Chinese manufacturers, such as Oppo and Xiaomi, are thought to be behind the surge in demand as both look to capitalise on Huawei's declining sales in Europe and in China. Huawei is banned from using Qualcomm hardware due to the US trade ban and is now reportedly producing fewer middle and lower-tier smartphones as a result.

In response, Oppo has repositioned its Reno series of smartphones at a lower price point, according to research from Checkpoint, which has helped to boost its sales. The company surpassed Huawei as the number one vendor in China for the fourth quarter of 2020.

However, the chip shortage could potentially stunt the growth of both Oppo and Xiaomi, particularly if the Qualcomm rumours are true. Lu Weibing, the vice president of Xiaomi has previously complained about the shortage.

"It's not a shortage, it's an extreme shortage," he wrote on the Chinese social media site Weibo, according to Reuters.

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