broadcomm chips modems smartphone components [aa]  (2)

We already know that the reason behind the Snapdragon 600 and Exynos Octa split in the Galaxy S4 came down to production issues, and how can anyone forget the HTC One’s component shortages. It’s obvious that there’s a growing trend with production difficulties in the smartphone market, and it seems that other component manufacturers are also struggling to keep up with the growing demand for smartphone hardware.

Today we learn that SK Hynix Semiconductor, the world’s second largest chipmaker, will not be supplying mobile dynamic random access memory chips (DRAM) to Samsung Electronics. Unsurprisingly perhaps, the problem seems due to a lack of production capacity and a failure to meet Samsung’s demand.

According to one anonymous industry watcher on Wednesday:

[quote qtext=”The June plans seem to have fallen through because SK Hynix’s supplies can’t meet Samsung’s demands” qperson=”” qsource=”” qposition=”center”]

With devices like the Samsung Galaxy S4 taking a record number of pre-orders and proving to be phenomenally popular, it’s easy to see how the industry’s production capabilities can be put under strain. The smartphone market has grown substantially over the past few years, and yet manufacturing capabilities appear to be failing to keep the pace.

However, it also seems that a downward market pressure on prices is also becoming a major factor in these shortages. Looking specifically at SK Hynix, PC DRAM has been was showing much better margins than mobile DRAM, which has caused manufacturers to look elsewhere for suppliers. Whilst this switch in demand caused PC DRAM prices to rise over 90%, overall the increased competition in RAM production and the need to secure the best deal with big handset manufacturers has driven prices down, which could be stifling investment in new manufacturing facilities.

It’s clear that the industry needs to invest in new production technologies to prevent further problems with future handset launches. Samsung already owns and produces some of its own components, and it would make sense for other manufacturers to start producing their own components to avoid relying on other suppliers.

Having said that, Samsung is in quite a unique position as the dominant market leader, and without the spare capital to invest or the additional bargaining power, smaller manufactures may be stuck with limited production capacities for the foreseeable future.