Samsung Chip Production Returns to Near-Normal Levels in Texas

Qualcomm 5G radio frequency chips and Samsung display and image sensor chips account for 65 percent of the monthly production at the plant.

Samsung Chip Production Returns to Near-Normal Levels in Texas

Production facilities of Samsung in the area had seen shutdowns due to severe weather on February 16

Highlights
  • Samsung declined to comment when production would be fully back to normal
  • The disruption will impact on global chip contract manufacturing industry
  • German chipmaker Infineon said it expected a quarterly hit to revenues

Samsung Electronics said on Tuesday that production at its US chip plant at Austin, Texas had returned to near-normal levels as of last week after more than a month of disruption that exacerbated a global chip capacity crunch.

Samsung and other chipmakers with production facilities in the area had seen shutdowns due to severe weather on February 16.

Samsung declined to comment on when production would be fully back to normal.

The disruption will have a definite impact on the global chip contract manufacturing industry that is already battling a severe capacity crunch, research provider TrendForce has said.

Qualcomm 5G radio frequency chips and Samsung display and image sensor chips account for about 65 percent of the monthly production at the Samsung plant, TrendForce added.

Other chips include power management integrated circuits (PMICs) and a small amount of chips that control electrical parts, Seoul-based analysts said.

The disruption is expected to hurt production of smartphones globally over the April to June period by about 5 percent and may lower this year's penetration rate of 5G smartphones, TrendForce estimated.

"This was a problem because it exacerbated a worldwide foundry capacity shortage. But at least it won't get worse as production resumes," said Park Sung-soon, analyst at Cape Investment & Securities.

"Smartphone makers have chip stockpiles, but because vendors' inventories of smartphone sets are currently low, smartphone production may see some impact from the plant's shutdown in the second half of this year."

Analysts have estimated losses from the disruption at the plant at around KRW 300 billion (roughly Rs. 1,950 crore) - KRW 400 billion (roughly Rs. 2,600 crore), which they expected Samsung to mostly reflect in its January-March quarter earnings, to be announced in April.

Earlier this month, NXP Semiconductors NV said it expected an impact of about $100 million (roughly Rs. 735 crore) of revenue from its Texas production shutdown.

German chipmaker Infineon said it expected a quarterly hit to revenues in the high double-digit million euro range from its Texas plant outage.

© Thomson Reuters 2021


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