The global chip shortage is anticipated to become a huge problem for devices like iPhones and Macs which require chips for storage. However, Wedbush believes the shortage could end up being beneficial to Apple and its vendors by improving the pricing of components.
The electronics industry has been suffering a shortage of computer chips since late last year due to factors such as the global coronavirus pandemic, sanctions against Chinese technology giants, trade wars, and poor anticipation of demand. While the shortage was originally concentrated in the automotive industry, it has since expanded to impact all types of chips in many different hardware products such as smartphones and desktops.
Semiconductor supply shortage to benefit Apple and its vendors in the long run
In its report, Wedbush states that Apple and other device manufacturers will have undergone stockpiling measures, it is expected that they will also be feeling the supply limitation. The limited component availability could force Apple and other manufactures to temporarily adjust their prices, which could hit customers hard. The firm believes that the situation could benefit device producers as “constraints yield forward pricing leverage.”
Not only could the shortage increase the pricing of components but it will also give Apple a chance to renegotiate contracts that get favorable terms from its suppliers.
The third-largest manufacturer of smartphones, Xiamoi, also recently admitted to having supply issues that indicate “shortages have reached a new level,” according to Wedbush. Xiaomi president Wang Xiang warned that the shortage could cause the company to increase the prices of its products.
“We will continue to optimize the costs of our hardware devices, that’s for sure,” he said during the company’s fourth-quarter earnings call. “To be honest, we will do our best to offer the best price we can to consumers. But sometimes, we may have to pass part of the cost increase to the consumer in different cases.”
Huawei also began hoarding components when is struck by the United States ban on key components which has caused its shipments to fall both within China and overseas. The shortage was also worsened by the Texas storm, in February, which affected Samsung’s operations in Austin.