While the summer of 2010 has seen an above-average crop of smartphones, it’s also seen more than its share of smartphone shortages. From the Droid Incredible to the iPhone 4, consumers are becoming accustomed to waiting weeks to get their shiny new gadget. Are smartphones simply more popular, creating unprecedented demand? Or are there other reasons that OEMs are having a hard time keeping their devices on shelves?
The Coveted AMOLED
iSuppli recently published a report that projected short supplies of small-sized Active Matrix Organic Light Emitting Diode (AMOLED) displays, like the one used in HTC’s Droid Incredible and a lot of other Android devices. The report said that those shortages could slow the technology's bid to challenge the dominance of the incumbent Active Matrix Liquid Crystal Display (AMLCD).
The source of those shortages is that the AMOLED has only one major manufacturer behind it: Samsung. Quite conveniently, or inconveniently depending on which side of the fence you’re on, Samsung has just released its Galaxy S line of smartphones, which holds a Super AMOLED screen as its crown jewel. It’s Samsung’s monopoly over AMOLED that might stunt not only adoption of the technology but sales of those Android devices that have been built around it.
Shipments of small-sized AMOLEDs used in cell phones and other applications are projected to reach 184.5 million units by 2014, up from 20.4 million units in 2009, for a compound annual growth rate (CAGR) of 55.1 percent during the period, according to iSuppli.
While those numbers represent impressive growth, the AMOLED shipments pale next to small-sized AMLCDs, which are forecasted to rise to 1.75 billion units by 2014 from 1.3 billion in 2009.
Samsung declined to comment for this article.
The Case of the HTC Incredible
HTC recently announced that it would be switching display strategies for some of its phones, namely the Desire and global Nexus One devices, from AMOLED to Super Liquid Crystal Displays (SLCD). And while that may seem a reactionary move by the Taiwanese OEM, the company insists it’s a way to bring more choices to its carrier customers.
Martin Fichter, vice president of portfolio and planning for HTC, said that recent shortages like what was seen with the Droid Incredible have little to do with display technology and more to do with an industry that is only now ramping up after a major global recession.
“Our display change and the shortages are not quite as connected as they might seem in the first place. The broad story is that we’ve just come out of a recession and in recessions usually everybody pulls back on their capacity, we’ve seen this over and over again, and it hits again right now as an industry…Especially we’re seeing it in the silicon foundries, which drives shortages in all kinds of silicon and chips, memories, processors, and that drives shortages across the industry and everybody is suffering from it in one way or another,” he said.
Regarding HTC's decision to broaden its palette of display technologies, Fichter reiterated that it’s all about choice. “We have seen the demand increase a lot on our high-end smartphones and because of that, we have decided to diversify our supply base and bring in a second technology that is almost indistinguishable from AMOLED in the use and how you look at it,” he said.
Fichter said it would be wrong to say that the company will ration out AMOLED screens to its marquee devices. “I wouldn’t call it a prioritization,” he said. “I would say it really depends on decisions that we make with our carrier customers.”
So will HTC eventually see supply problems with a relatively new technology like SLCDs? Fichter was dismissive. “Always when you deploy a new technology, you have a hardware ramp up and you have a yield curve that points up. Right now, the numbers look very good, in the normal range, so we are not concerned at all about the yield with SLCD.”
Asked whether HTC would ever consider developing a display technology of its own, Fichter laughed. “We’re a phone manufacturer… that’s complicated enough.”
Still Ramping Up
Vinita Jakhanwal, principal analyst of small and medium displays for iSuppli, said that HTC’s claim that the recession is the key cause of the company’s shortages can be backed up, but she said in the end, display shortages must play some part in decreased production.
“I do believe that for AMOLED, the single-supplier situation has resulted in current capacity being fully booked out with the Samsung, Nokia, Sony Ericsson and HTC orders that they have,” she said, adding that it could be that Samsung might have had to back out of some of the orders if it couldn’t fulfill them.
But Jakhanwal is quick to add that Samsung Mobile has put in place major expansion plans, including a new factory that will be online in the near future. “Some of that will start kicking in, and the expansion plans should be fully in place by the end of the year,” she said.
Jakhanwal believes the impact of LG Display, which is currently counted as a minor supplier of AMOLED displays, will be negligible in the near future, adding that LG has made announcements that it plans to start making more AMOLED in the future.
iPhone 4 Demand a Surprise
Apple’s been at it a long time and the company has undoubtedly come to expect the long lines and unbelievable hype. So why does it seem like there’s simply not enough iPads and iPhone 4s to meet demand?
Jakhanwal said that the combination of a new display technology, combined with unanticipated demand, left prospective iPhone 4 buyers on a long wait list.
“It is a new technology, a very high-resolution display that they’re using, and there is going to be some yield ramp-up issues,” Jakhanwal said, adding that not all display makers are qualified to produce Apple’s new “retina” display.
Jakhanwal said Apple could have seen shortages in IC drivers used in SLCDs, like Apple’s retina display. She said that a lack of IC drivers resulted from silicon foundries that were still ramping up in the early part of the year.
While LG Display may have long-term plans to tackle the AMOLED market, its current plan is centered around filling Apple’s orders for SLCD, she said.
In the end, the shortages seem to be the result of a number of factors depending on the manufacturer. At the root of many components is silicon, and to be sure, there was a slowdown as foundries and semiconductor manufacturers slowed their production to weather the economic storm.
Semiconductor Industry Association Global (SIA) reported that chip sales rose 47.2 percent in January as global economies began to recover. The SIA said worldwide semiconductor sales in January were $22.5 billion, a significant increase over 2009’s $15.3 billion.
Whether it’s silicon, displays or just plain unanticipated demand, shortages are a mixed blessing. Would the Droid Incredible have sold better if it weren’t for shortages? HTC's Fichter sums it up this way: “If we would have been able to build more phones, we would have been able to sell more phones, and we would have been even happier than we are right now,” he said on the same day that HTC reported record second-quarter earnings. He added that because the industry is coming out of a recession, “everyone is selling more than they had planned.”