Business

Texas chip plant shutdown may cause big losses and fewer 5G phones

Samsung Electronics might be faced with massive financial losses on account of its chip manufacturing plant in Texas not becoming fully operational since it was temporarily shut down a month ago. More specifically, Samsung may suffer production losses of around 400 billion won ($353 million), according to industry analysts cited by The Korea Bizwire.

In case you’re unfamiliar with the timeline, Samsung was forced to shut down its chip manufacturing plant in Austin, Texas last month when an unexpected winter storm led to power outages and other infrastructure-related issues in the region. Two days later, Samsung was already making efforts to restart its Austin chip plant as soon as possible, but weeks have passed since and the plant has yet to become fully operational.

Reports say that Samsung’s facility has recovered power and water supply since mid-February, however, the plant has yet to resume normal operations following equipment inspections. Analysts believe that it will take at least one more month before the factory in Texas will be back to normal.

These problems could impact global smartphone production

Industry watchers expect Samsung’s facility in Texas to churn out wafers from mid-April, and this could lead to further losses being recorded by the company’s non-memory business in Q2, 2021.

Considering that non-memory products usually require two or three months of lead time, we think that the Austin factory is facing four to five months of disruption in its production schedule, said KTB Investment & Securities analyst Kim Yang-jae.

And because the facility in Texas is responsible for manufacturing 5G radio frequency integrated circuits (RFIC) for Qualcomm, OLED display driver integrated circuits (DDIC) for Samsung’s business, as well as image sensors, solid state drive (SSD) controllers, and 14-to-64nm-based microprocessors, the lower production yield could lead to production issues across different segments.

Global smartphone production could decline by 5% in Q2 2021, but 5G smartphones in particular might be facing a much bigger hit because of these recent developments. Market watcher TrendForce estimating that the Texas facility’s shutdown could lead to a whopping 30% decrease in 5G smartphone production in the second quarter of 2021.

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