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Samsung suffers shortages on two fronts

Supply constraints delay Galaxy S4 shipment to some carriers, while giant may have to buy memory chips from rival


Published: 25 April, 2013

READ MORE: South Korea | Samsung | Memory | Handset

Samsung is suffering from shortages on two fronts - it has been forced to delay shipments of its new flagship, the Galaxy S4, to some carriers; and it has turned to SK Hynix, a rival memory chip maker, as it runs short of these key components.

Some cellcos, including the US's Sprint and T-Mobile, will have to delay launching the much anticipated device, which could dampen the S4's impact in this critical market, given that challengers like the HTC One are emerging, and some reviews of the latest Galaxy have been tepid.

Samsung said the delays were down to far stronger demand than expected, which has landed it with uncharacteristic difficulties in achieving its usual big bang, global roll-out. This capability has been a hallmark of its success, and Apple has only recently managed to emulate it, with a broad worldwide shipment of the iPhone 5.

"Pre-order demand is much stronger than expected, so it's difficult to rapidly boost supply in the short term," said Lee Don Joo, head of strategic marketing at Samsung's mobile division. The handset will ship in South Korea today and in many other markets at the weekend. Verizon Wireless had not planned a launch until May 30 anyway and will start taking orders today, while AT&T said it did not expect to have to alter its schedule. But other cellcos will have to wait for inventory. This will particularly hit TMo, which had planned to sell the S4 from today.

Another looming issue for Samsung, and other high volume smartphone makers, will be memory shortages. The Korean giant has invested $24bn over the past two years in boosting its capacity to produce these chips, but demand is still outstripping its capabilities, with the rise of smartphones the key driving factor. Although Samsung makes over 50% of the world's mobile DRAMs, it will still have to buy additional supplies from rival SK Hynix for the first time, according to Shin Jong Kyun, head of the firm's mobile business.

"Not only DRAM chips, but all memory chips for mobile devices show signs of shortages," Kim Sung In, an analyst at Kiwoom Securities, told Bloomberg. Samsung's biggest chip customer is itself and things will only get out of hand with the approach of the third quarter, typically the strongest time of year." In the second half of this year, Samsung will gear up for the holiday buying season with new smartphones, including an updated Galaxy Note phablet and a Tizen device. And its other DRAM customers, including Apple, will also be unveiling new models and ramping up production for the year's biggest quarter for mobile sales.

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