Smartphone market projected to grow despite chip shortage

Phone shipments are expected to rise 12%, but prices may increase due to semiconductor costs

Despite the ongoing semiconductor shortage, tech market analysis firm Canalys expects global smartphone shipments to rise by a notable 12% in 2021.

This would be a significant bounce back from 2020, which saw shipments fall by 7% due to the COVID-19 pandemic. Despite this, Canalys expects the chip shortage to remain a bottleneck for smartphone manufacturers.

“Backorders are building,” said Canalys research manager Ben Stanton. “The industry is fighting for semiconductors, and every brand will feel the pinch.”

And even though smartphone shipments are projected to reach 1.4 billion units worldwide, phone manufacturers are likely to prioritize more lucrative and developed regions of the world such as the US, China and Europe, at the expense of Latin America and Africa.

Another effect of the chip shortage is that it may force phone makers to raise prices.

“The other angle to this is pricing,” said Canalys VP of Mobility Nicole Peng. “As key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers.”

What's more, the growing demand for 5G phones may lead manufacturers to skimp on other features.These 5G handsets accounted for 37% of global shipments in the first quarter of 2021 and are expected to account for 43% for the full year, or more than 600 million phones, according to Canalys.

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“This will be driven by intense price competition between vendors, with many sacrificing other features, such as display or power, to accommodate 5G in the cheapest device possible,” Stanton said. “By the end of the year, 32% of all 5G devices shipped will have cost less than $300.”

The White House says it’s exploring options to address the global chip shortage. President Joe Biden has already asked Congress for $50 billion to fund a bill that would help build more chip manufacturing capacity in the US.

Cisco CEO Chuck Robbins recently predicted it would take “another six months to get through the short term” of the shortage. Robbins added the crisis is unlikely to be fully resolved until 2022. 

Meanwhile, Dell Technologies founder and CEO Michael Dell recently said he predicts the chip crisis “will probably continue for a few years.”

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