Chinese OEMs may cause global component shortages in 2017 as they're increasing their production volumes and refocusing their manufacturing efforts on mid-range and flagship smartphones, industry sources said on Monday. Insiders from Taiwanese suppliers believe that the phone industry is currently preparing for a shortage of key components such as displays, optical sensors, and memory chips. Chinese consumer electronics manufacturers like Huawei, OPPO, and Vivo are already in the process of scaling up their production volumes, consequently increasing the demand for smartphone components. This trend indicates that supply chains won't be able to fulfill global demand in 2017.
While Xiaomi recently said it was growing too fast in the last few years, other Chinese manufacturers aren't following suit and are increasing their shipment and revenue targets for 2017. Huawei may ship over 150 million devices over the course of this year after shipping 139 million units in 2016. Likewise, Vivo could reportedly ship more than 100 million phones in 2017. While not all vendors in China are looking to ramp up their production operations, most of them are shifting their focus on mid-range and flagship Android devices which they see as a method of increasing the average selling price of their offerings, consequently boosting their revenues.
This trend will likely cause a shortage of premium phone camera modules and other types of optical sensing devices that are even starting to get integrated into mid-range smartphones. Furthermore, sources said that shortages in supplies of OLED panels are almost a given following recent rumors of the iPhone 8 boasting an OLED display which prompted Chinese companies to secure additional production capacity for small OLED panels. As this type of display panels were already in short supply last year, it will likely go out of stock at some point over the next 12 months. On the other hand, the supply of TFT LCD panels is expected to barely deliver on the demand in 2017. A higher demand for components may lead to increased prices and manufacturing costs that are traditionally passed on to consumers, though no major pricing increases have yet been predicted. On the contrary, Chinese OEMs will likely continue with their strategy of making devices that offer excellent value for money.