Nokia Injury "core" Global mobile phone chip supply chain pattern change

With Nokia gradually in trouble, and emerging companies such as Apple and Samsung have adopted a self-sufficient strategy, leading important chip suppliers such as STMicroelectronics and Texas Instruments to survive, and may reshape the global smart phone supply chain.

The latest crisis faced by chip suppliers who hit the upstream chip suppliers further demonstrated that the position of traditional technology giants is being subverted in the process of shifting consumer interest from functional phones to smart phones, and the area of ​​influence is not limited to terminals. Equipment manufacturing industry.

For example, when chip makers struggled to withdraw from this rapidly declining European mobile phone giant, they found that the market outside of Nokia was more competitive. This is because Apple and Samsung, the world’s two largest smart phone manufacturers, have adopted a self-sufficient chip supply model and have completely mastered the design and manufacturing process of their own chips.

Philipp Lambnight, senior executive vice president and head of corporate strategy at STMicroelectronics, said when talking about Nokia: “We knew that they were going downhill, but they didn’t expect it to be so bad.”

Through ST Ericsson, a joint venture with Ericsson, STMicroelectronics has become Nokia's mobile phone chip supplier. STMicroelectronics said at the end of July this year that as part of the joint venture company, its wireless division achieved sales of US$347 million in the second quarter, down 34% year-on-year, and achieved an operating loss of US$102 million.

Texas Instruments also has a difficult situation with Nokia. According to the US market research firm Strategy Analytics, the company had 85% of its application processor shipments shipped to Nokia last year, which accounted for about 92.7% of all Symbian phones. The company downgraded its sales guidance for the second quarter in a conference call and attributed the blame to Nokia. Its second-quarter profit also fell by 13%.

It is not just Nokia's suppliers that have shaken the current pattern of the industry. The rise of Apple's iPhone and Google's Android has caused Canadian RIM and other mobile phone manufacturers to get into trouble. The company laid off 2,000 employees this July and restructured management. According to Strategy Analytics, Marvell Technology sold more than 73% of its application processors to RIM in the first quarter of this year. However, the company said in August this year that its second-quarter profit fell 12.7% year-on-year.

Hewlett-Packard spent $1.2 billion last year to buy handset maker Palm and its operating system webOS. However, the company announced last month that it will stop producing webOS devices. This means that Texas Instruments and Qualcomm will lose a business because the webOS device's chips have been supplied by both companies.

The frenzy of smartphones has led to the increase of investment in application processors and other electronic components by most large suppliers such as Qualcomm and Intel. Application processors can help smartphones run operating systems and other applications.

Strategy Analytics data shows that, as the market leader in application processors, Texas Instruments’ revenue share in this market was only 19.2% in the first quarter of this year, which is much lower than last year's 34.5%. This is mainly due to the excessive dependence on Nokia. . In contrast, Qualcomm, which supplies application processors for a number of Android handset makers, is now topped with a 46.9% revenue share in the first quarter, up from 34.1% in the same period last year.

Finding New Opportunities to Seek Breakthroughs Due to the declining performance of mature customers and the limited availability of chips for Apple and Samsung, these chip suppliers have begun to seek growth through emerging companies such as HTC.

Nokia's switch to the Microsoft Windows Phone operating system is also expected to bring new opportunities for these companies, the company will release the first batch of Windows Phone phones later this year. Nokia once stated that the first batch of Windows Phone handsets will use Qualcomm chips, but the company is still in negotiations with other suppliers on future handsets.

Companies increasingly want to apply the same chip design to different devices, such as televisions, media players, set-top boxes, and notebooks, but this will make the competition even fiercer and further suppress prices. This pressure has triggered some mergers and acquisitions, including Intel’s $1.4 billion acquisition of Infineon’s wireless business last year.

Texas Instruments executive Greg Drudge said at a conference last month that the current predicament indicates that the company’s huge investment in the Android operating system is correct. The company is also looking at new devices and applications beyond smartphones, including video players, e-readers, and business devices.

STMicroelectronics said that due to Nokia's influence, the company has temporarily shut down some European factories. This will reduce the company's gross profit margin. The company is also working hard to use a variety of products to make up for the loss caused by Nokia, including wireless products and other products. At the same time, its joint venture company, ST-Ericsson, also announced in June this year that it will lay off 500 people globally and reduce the cost of 120 million US dollars by the end of 2012.