The shortage of NAND & DRAM chips could affect iPhone 8’s launch

Samsung – the world’s no. 1 chip manufacturer will not be effected by this crunch.

With Apple set to launch its flagship, iPhone 8, later this year, electronics manufacturers across the globe are scrambling to stock up memory chips to keep production lines running.

The iPhone 8 threatens to worsen the mismatch between supply and demand for memory chips.

As per analysts and industry sources, this crunch will not hit Samsung Electronics Co Ltd since it is the world’s no. 1 memory chip manufacturer.

A few electronic makers have chosen to pay a premium to lock themselves into longer-term contracts. Others are placing their orders earlier than expected to tide over dangerously low inventory levels.

“After the supply shortages emerged we brought forward our procurement decisions … to ensure a stable supply,” said LG Electronics Inc in a statement, while adding that it had pushed up quarterly purchase decisions by nearly a month.

According to a few analysts, device manufacturers could potentially be forced to slash the amount of DRAM chips, which speeds up multi-tasking in devices, or NAND chips, used for long-term data storage, on new products if they cannot get enough chips.

“The problem will be more acute for the NAND market, where the iPhone remains a critical source of demand given the huge sales volumes and recent moves to increase storage capacity on the device,” said a source on the condition of anonymity since he was not authorized to speak to the media.

Consumers have pulled up China-based Huawei Technologies Ltd for incorporating less powerful and advanced chips in its flagship P10, which led to significant variations in its performance.

Huawei did not respond to requests for comment on its memory procurement plans.

According to industry analysts, Apple consumes around 18% of the global supply of NAND chips. In recent years, electronics manufacturers have typically boosted inventory levels during the first half of the year to avoid being squeezed by Apple, which typically launches its iPhones near the holiday season. However the shortage of chips in the first half of the year has left many electronic makers scrambling.

“For the iPhone 8 launch there have been specific references to this by customers and distributors as a reason for longer delivery times and shortages,” said Tobey Gonnerman, executive vice president of Fusion Worldwide, a component distributor.

“Buying buffer stock and holding product in hubs to protect against anticipated delivery interruptions has certainly become more common in recent months.”

Apple declined to comment on its memory chip purchasing plans.

($1 = 1,122.6500 won)

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