The US wireless industry is experiencing the impact of a global semiconductor shortage expected to last throughout 2021, with associated impacts on product launches, profitability and network upgrades.
Qualcomm discussed the chip shortage when announcing its newest Snapdragon chipset [1] at its 5G Summit. On a media call ahead of the launch, the company said it accelerated the release of the Snapdragon 778G 5G due to the paucity, suggesting a concern supplies may get even tighter.
The launch came two months after Qualcomm launched the Snapdragon 780G [2]. The company said without the pressure of the chip shortage, it would not have launched two products in such rapid succession, but strong demand justified the decision. It is using separate foundries to make the two chipsets in an effort to minimise the impact of shortages: TSMC is making the 778G and Samsung is reportedly producing the 780G.
5G rollouts
AT&T CEO John Stankey said he feels “skittish” about supply chain issues during the operator’s recent earnings call, and this week told a JP Morgan conference supply chains were “stressed in a way I’ve never seen”.
The CEO said this was worrying as AT&T increases investment and moves “to a new air interface on 5G”.
He added AT&T is likely to find itself competing for chipsets with the automotive sector, which may need “a particular chip that needs to be in a dashboard of a car”, which the operator also needs for network equipment.
Margin erosion
On its fiscal Q3 2021 (the three months to 1 May) earnings call, Cisco said the shortages are constricting its supply chain and raising costs: CFO Scott Herren noted a negative impact on margins, which were down almost a full percentage point year-on-year.
“The decrease in product gross margin was largely driven by ongoing costs related to the supply chain challenges, offset by positive product mix, which includes some software benefit”, Herren said.
He predicted some of the supply chain issues would “linger with us” until the end of the calendar year.
Simon Leopold, MD at investment bank Raymond James, noted Cisco’s “supply chain-related headwind sounds stiffer than we imagined”, but highlighted the company still increased its sales outlook despite the problems.
He added other companies his team monitors have yet to report supply chain impacts as severe as Cisco’s.
Huawei
US operators have been told by the government to replace any network equipment made by Huawei or ZTE. Now the companies say they need more time because they can’t get replacements due to the chip shortages.
In a letter to the Federal Communications Commission (FCC), the Rural Wireless Association (RWA) said its members are being told by suppliers that they must wait at least eight months to a year for equipment they typically receive in six to eight weeks.
Most of the US operators with Chinese equipment in their networks are regional, with less bargaining power than national rivals.
The RWA asked the government to extend the deadline for its members to comply with the Secure Networks Act, which became law in March 2020.
Companies are meant to have one year to comply from the time they are approved by the FCC for reimbursement of their associated costs. The RWA is seeking an additional six months at least, with more time for companies which request it.
It explained its members are competing for components with automakers and nationwide operators deploying 5G.
Citing the “national security issue”, the group asked the FCC to consider forcing suppliers to prioritise smaller operators over larger rivals.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.
[1] https://www.mobileworldlive.com/featured-content/top-three/qualcomm-snapdragon-chipset
[2] https://www.mobileworldlive.com/devices/news-devices/qualcomm-pulls-trigger-on-latest-processor
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