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Components shortage a hiccup for mobile broadband growth?

27 июля 2010

The entire mobile industry is struggling with a worldwide shortage of components necessary to build base stations and mobile devices. Could the shortage put a serious dent in the demand for mobile broadband services?

Last week both Ericsson and Nokia Siemens Networks said their sales in the second quarter were impacted by this shortage. Alcatel-Lucent , when it reports results on July 30, likely will suffer from the same problem since it already had issues fulfilling orders in the first quarter because of the shortage.

Since May, the problem has grown more and more acute for nearly all vendors and operators in the industry. Verizon Wireless has run low on HTC Incredible supplies because of a components shortage. Sprint Nextel also has suffered similar difficulties with the HTC Evo 4G. LG Display has admitted that it can't keep up with the demand for the Apple iPad, while AT&T is struggling to upgrade its network because vendors can't get products to the operator.

Thanks to the recession, semiconductor companies in late 2008 and throughout 2009 significantly reduced their capacity, but the consumer electronics business ramped up quickly early this year. As a result, semiconductor companies have been unable to match their inventories with the strong demand for mobile phones and infrastructure. Moreover, smaller components businesses in China went out of business during the worst of the recession, offering fewer sources for vendors.

"We will continue to be impacted throughout this year, although we're working hard to improve," said Ericsson CFO Jan Frykhammer in an interview with FierceWireless.

iSuppli's Rick Pierson, senior semiconductor analyst, said this shortage likely won't go away soon, predicting the problem will linger into the second quarter of 2011.

Certainly vendors will continue taking hits on their balance sheets if they can't fill orders. And if they fill orders, they will also be impacted by the higher prices they are paying for components.

Reports have indicated that Alcatel-Lucent, for instance, is bloating its orders to create surplus stocks of components while also looking for new suppliers and paying higher prices. Ericsson too is searching for new suppliers.

Likewise, operators have a difficult time meeting demand. For operators, smartphones have become the key tool for luring new customers and upgrading existing subscribers. A shortage of some of the hottest new smartphones hurts operators in a number of ways both in financial terms and market positioning--especially as they continue to compete against the iPhone.

Shortages of the HTC Evo 4G phone are wreaking havoc on Sprint's plans to jump past its competitors with a 4G handset. Sprint had hoped the HTC Evo would help it snatch customers away from rivals such Verizon Wireless, which will have its LTE network up and running in late 2010.

Meanwhile, the components problem hitting Verizon's HTC Incredible, mainly a shortage of LCD screens, may have prevented the device from setting a sales record for the operator in the first quarter.

It's a frustrating place the industry finds itself in. Demand for mobile broadband services is ever increasing, but these small but key pieces of equipment could very well hamper the industry's ability to capitalize on that growth--at least within the next year.

It's not a good position for the industry to be in as it heads toward the critical holiday selling season in about three months. And certainly consumer frustration over not getting the latest innovative smartphone isn't good either.

By Lynette Luna

Источник: FierceWireless

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