With costs increasing by 30%, will mobile phone prices rise across the board?

This year is the explosive growth period for 5G commercial use. As a carrier of application scenarios, 5G mobile phones have become the mainstream communication tools in the market.

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In the second month of this year, the total shipments of the domestic mobile phone market were 21.759 million units, a year-on-year increase of 240.9%, of which 5G mobile phones accounted for as much as 70%.

Before the nationwide wave of phone replacement came, major mobile phone manufacturers were desperately trying to grab market share. After they had grabbed the market share, they found that there were not enough chips and they could not ship the phones.

Users who have been unable to get the physical product for a long time are beginning to worry: Will the price of 5G mobile phones increase?

Since the second half of 2020, the chip market has been extremely turbulent. First, there was a serious shortage of chips in the automotive market, which led to the emergency withdrawal of the world's first 5G car after mass production; then the game console industry faced a chip shortage, triggering a buying spree; and then the bigwigs in the mobile phone industry publicly announced an extreme shortage of chips, triggering panic about price increases for 5G phones.

Chip prices increased by 30%, and you can’t buy them even if you have money

The global chip shortage has made things more valuable due to scarcity. Chip manufacturers have begun to show their capital fangs and take the opportunity to raise prices. TSMC, the world's largest chip foundry, announced that it expects the price of 5G chips to increase by 30% in the second quarter of this year, which shocked the outside world.

But even with such a high price increase, TSMC still receives a steady stream of orders, and even has to work day and night to meet customer demand. Major mobile phone manufacturers are lining up with money waiting for TSMC to ship products, but they may not be able to buy chips.

my country's current chips are heavily dependent on imports. According to trade statistics, my country's chip import rate has remained high. Last year, the amount of chip imports exceeded 350 billion, ranking first among imported items.

If global chip prices rise sharply, my country's chip-related products will inevitably experience a price increase. How to control the chip industry chain and strengthen the development of domestic chip manufacturing is an important goal in promoting the 5G process.

Reasons for the global chip shortage

Why did the semiconductor supply chain that has been running half the world suddenly have problems, leading to supply shortages? There are two main reasons.

First, due to the impact of the epidemic, major factories around the world have stopped production and production capacity has decreased; coupled with changes in the way people work, many people choose to work from home, resulting in an increase in sales of electronic products such as computers and tablets, and an increase in demand for chips.

Data shows that in 2020, when the epidemic broke out, global notebook shipments exceeded 200 million units for the first time, setting a record high. The increase in chip usage in notebooks and other electronic devices is an emergency and will cause sudden tension in the industrial chain.

The second is the chain reaction after Huawei was sanctioned for chips. After Huawei was restricted by the United States from purchasing chips, in order to maximize its stockpiling, it placed additional orders with foundries and purchased as many chips as it could produce before the ban took effect. This caused foundries to focus on producing Huawei chips, squeezing out all production capacity, causing other mobile phone manufacturers to start running out of stock.

After Huawei's stockpiling ended, major domestic mobile phone manufacturers were afraid that they would also be restricted, and hurried to place additional orders with foundry companies. With food in hand, there was no need to panic. The chip buying spree triggered by major mobile phone giants has exacerbated the global "chip shortage."

Is it a real price increase or fake out of stock?

The chip industry supply chain, which has been operating for half a century, suddenly fell into chaos and could not even return to normal in a short period of time.

Judging from the reasons for the shortage, the influencing factors are very complex. All mobile phone giants are suffering from the chip shortage while filling their warehouses.

The reason why manufacturers are hoarding chips is simply because they are afraid of following in Huawei's footsteps. The current situation is volatile, and it is always good to keep a way out. But when will the chip industry chain recover? Prices will continue to rise sharply, and once they go up, they will never come down again.

Even if the chip industry chain returns to normal in the future, is there still room for the price to fall? Therefore, it is unknown whether this series of operations is a false shortage or a real price increase.

Will the chip shortage affect the development of 5G?

This year, 5G commercialization has entered a period of explosive growth. All major industrial chains need the supply of 5G chips. Many people are worried that the "chip shortage" will affect the development of 5G.

The general manager of China Telecom said that judging from the current situation, our entire 5G network equipment chips and 5G mobile phone chips will not be affected in 2021. The construction of 5G base stations by all operators this year is expected to be 700,000, which will not affect the current 5G progress.

Will 5G mobile phones increase in price significantly?

If the chip cost increases by 30%, then the corresponding 5G mobile phone prices will also increase. The industry predicts that the increase may be around 10% to 20%. The 1,000 yuan 5G mobile phones that mobile phone manufacturers wanted to vigorously promote before may not be realized in the short term.

Even if the price increases, it does not mean that 5G mobile phones will have no sales. Judging from the current market conditions, new products from many mobile phone manufacturers are out of stock and cannot be bought even if you have money.

Shortly after the Xiaomi Redmi mobile phone was released, it was out of stock on the official website. If users want to buy it, they have to make an appointment and wait patiently.

If you don’t want to wait, you can buy it on other platforms, but some netizens said that the selling price on third-party platforms has generally increased by about 400 yuan.

Domestic mobile phone manufacturers are anxious about orders, and international giant Apple is also having a hard time. The iPhone 12 series power management chips are in serious shortage, resulting in longer delivery time for mobile phones, and a large number of users are unable to get the goods in time.

The upgrading of 5G is inseparable from the support of 5G chips. If we want to lead the world in the future development of 5G, we must solve the current chaotic chip industry chain problems.

5G thousand-yuan phones are the trend of market development, but the premise is that chip prices cannot be too outrageous, otherwise the pressure on mobile phone manufacturers will be too great, which will affect the market share of 5G mobile phones.