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Global Chip Shortage and Xiaomi's decisive action to competition.

Ever since the global chip shortage has begun, smartphones being released every quarter are decreasing in number or either housing 4-year-old chipsets to new smartphones. When the pandemic struck the global manufacturing industry, slowing down the production of mobile chipsets. While on the other hand, the demand for smartphone shipments is increasing. Thus, the reason why OEMs are bringing back older processors in the market.

The question is why are we bringing back 4-year-old processors?

The answer to that? As 5G smartphones are closing to be the new normal, manufacturers like TSMC switches their production line to 5G-based equipment. Thus leaving 4G chipsets to be slowly manufactured and having price hikes. For example, instances like the Poco M3 5G is much cheaper than the Redmi Note 10. Why? the Dimensity 700 is clearly more powerful than the Snapdragon 675 and is 4G in fabrication? The answer to that is clearly the statement above.

The demand for the newer 5G chipsets are high that it is forcing the manufacturers to shift their production in favor of larger brands leading the market. Now the problem here is the smaller OEMs operating in certain regions across the globe. They have smaller procurement capability, smaller demand, and is small scale in general. That’s not it, it gets tricky after these large OEM companies will fight over the supply chain of processors leaving the chipset manufacturers no choice but to divide the product equally to these brands.

Now our analysis starts here. Xiaomi is one of those giant companies competing in the global market for one goal, to become number 1 in the supply chain of smartphones. Unlike other competing brands, Xiaomi is a company that is based on outsourcing products to various licensed OEM and ODM providers across China. Now we discussed earlier that every client gets a fair share of the manufactured chipsets. Xiaomi being an outsourcing company can manufacture the same phone to three OEM providers. As we know there are no slimey copyright issues in China, leaving brands free to acquire licensed and manufactured products. Now when you manufacture the same phone on 3 different production lines, you will have the edge against other brands. Why? because you manufactured 3 times more than theirs and you an adjust your profiting which can end being cheaper than most counterparts. The source of the hardware materials is a factor too, you can buy more parts at a lower price thus benefiting once again on the market.

We all knew already that these things seem to work or actually work. We saw Realme using the same Snapdragon 720G on three of their Pro Smartphones. We saw Samsung bring back the legendary old Snapdragon 450. We also saw Vivo and Oppo utilizing older MediaTek processors. We noticed smaller brands utilizing the Helio P60 once again and selling them as well for a very unreasonable price.

These brands seem to feel the shortage thus giving way to Xiaomi being the number 1 brand in the 2nd quarter of 2021. As these things continue to progress, we might see other competitors in the market exit. You know LG already gave up and Elephone of CNOEMS had been silent for a year, having not enough funds to fund their new lineup and also the effect of the chip shortage itself.

This is our own analysis of the current situation. Hope you like our content and don’t forget to subscribe and share the blog. Gracias!