Why is the little guy getting rinsed for hardware? Because top OEMs had to spend 25% more on chips in 2021

Vendors shipped more but demand outstripped supply, says Gartner


Semiconductor supply shortages last year led to the world's top original equipment manufacturers (OEMs) spending 25.2 per cent more on chips than the previous year, with Apple and Samsung heading up the list.

The figures from research firm Gartner point out that the semiconductor manufacturing industry actually increased chip production in 2021, but demand outstripped supply in many cases.

"Semiconductor vendors shipped more chips in 2021, but the OEMs' demand was far stronger than the vendors' production capacity," Gartner research director Masatsune Yamaji said.

Gartner says that this shortfall in the semiconductor supply chain prevented manufacturers from ramping up production not just of vehicles, but also electronic equipment such as smartphones and video game consoles.

It also had the knock-on effect of bumping up selling prices, which meant OEMs were obliged to spend more on semiconductor procurement in 2021 than in previous years.

Gartner's list ranks the top 10 OEMs in terms of their respective outlay on semiconductors.

Apple was the biggest spender in 2021, accounting for nearly 12 per cent of the market and spending some $68.269bn on semiconductors. Samsung took second place at $45.775bn, but as a percentage increased its spending by more than Apple, a jump of 28.5 per cent over 2020.

According to Gartner, Apple increased its spending on memory components by 36.8 per cent and on other chips by 20.2 per cent during 2021. However, it decreased spending on processors thanks to the shift to its own in-house application processors.

Samsung increased its memory spending by 34.1 per cent and non-memory chip spending by 23.9 per cent. The increase for memory was not just because of a rise in prices, but Samsung also growing its share of target markets such as smartphones and solid-state drives (SSDs).

IT vendors also feature in the list, with Lenovo in third place at $25.283m, representing a 32.9 per cent bump in spending on chips for the PC and server maker during 2021. Dell Technologies was in fifth, seeing its spending increase by 25.4 per cent to $21.092bn.

HP Inc and HPE also feature in Gartner's top 10, with an increase in spending of 28.3 per cent to $13.789bn and 24.8 per cent to $6.736bn respectively.

Gartner notes that the average selling prices (ASPs) of chips such as microcontroller units, general-purpose logic chips, and a wide variety of application-specific semiconductors increased by 15 per cent or more during 2021.

"The semiconductor shortage also accelerated OEMs' double booking and panic buying, causing a huge spike in their semiconductor spending," noted Yamaji.

One of the reasons behind this is that parts such as microcontrollers, power management chips, and automotive components are typically manufactured using older processes, and there has been less investment in production lines for these process nodes, with semiconductor firms giving priority to the more profitable cutting-edge manufacturing processes used for components like new high-performance processor chips. ®


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