Managing Android Hardware Supply Chain Instability

Impact of supply chain problems

From the front lines of Custom Android hardware manufacturing Hatch is seeing rising material prices across the board.  IC chips, metals (used in wires), and plastics have all risen.  In parallel with rising prices sourcing is becoming more difficult.  Many materials now have longer and unpredictable lead times.  Sometimes a buyer will wait for material prices to come down.  Over the past 18 months waiting only resulted in higher prices and delays since they have continued to rise.

Some parts, especially older IC chips, have less supply and longer lead times now.  IC chip companies prioritize stable supply of newer chips. With limited production capacity available, production of the old ones get sacrificed.  Normally when an IC goes out of production the chip manufacturer gives customers advance warning.  That way customers have time to redesign the products using a newer chip.  If the transition to a new IC takes too long, customers are usually still able to find stocks of the old IC to ensure a stable product supply.  In today’s market stocks are becoming scarce as buyers snatch them up.  Production schedules remain unpredictable, yet the older chips haven’t officially gone out of production yet.  This pushes companies like Hatch and our customers to redesign products in a hurry, using more readily available IC chips.  The sudden nature of this shortage resulted in delayed shipments due to the time necessary to properly redesign the product using new components.

Global shipping delays create another challenge to today’s interconnected world of global trade.  Sea freight prices from China to many parts of the world are 3-4 times higher than a year ago.  But just like with materials, delivery times are longer now as well.  Before shipping, goods wait to board ships for longer amounts of time.  Before arrival, ships wait on the water for longer amounts of time to unload.

Cause of problems

Material prices have gone up for several reasons.  At the pandemic’s onset commodity prices declined steeply because of a negative global economic sentiment.  Manufacturers lowered their forecasts, but product demand increased because people working and studying from home suddenly needed new electronics.  This created a stark imbalance between supply and demand.

In 2020 Huawei’s orders consumed all available capacity at IC chip foundries in anticipation of the US’s ban on selling components to them.  This alone impacted almost all aspects of chip production.  Other large brands, seeing diminishing production capacity, placed large orders as well leaving very little supply for smaller customers.  This year even large companies like Apple can’t maintain reliable supply, having issued warnings that chip shortages will reduce their profitability.

Shipping companies can’t move empty containers back to Asia fast enough.  Many ports have limited staff and companies receiving the containers don’t have enough manpower to offload the goods fast enough.  Limited access to containers has created a constraint on shipments.  In a global economy parts come from all over the world to the location of assembly.  Missing one component usually paralyzes all finished product output.

The world continues to demand digital products and many mechanical products are becoming digital.  This further exacerbates demand for ICs.  Household appliances have mostly become digital.  Cars are packed with increasingly complex electronics.  Both these important and large industries face production shortages.  Statista predicts IoT devices using Bluetooth and other wireless technologies will grow from 8.74 billion units in 2020 to 25.4 in 2030, nearly a 3 times increase.  This segment alone is generating massive demand.

How it’s affecting brands

Popular Android ICs, from brands like Rockchip, face shortages.  Hatch uses Rockchip Android CPUs in multiple Custom Android devices.  We’ve experienced this shortage first hand.  Rockchip is moving customers from older chips to newer chips.  This way volume is consolidated and manufacturing becomes more efficient.  However as more customers migrate to a smaller number of chips the demand for those chips may soon start to outweigh supply.

For complex products, like Android, the CPU represents just one of the multiple IC chips on the board.  Even when a company finds stocks of an older Android CPU they need to find the peripheral IC chips that also go into the electronics; a WiFi chip for example.  Like with finished products, a PCBA (the assembled PCB board) of an Android device, has many components.  Missing any one of them delays production of the PCBA.

For one of our products Hatch used to buy a chip from Nordic Semiconductor, a leading supplier of Bluetooth chips, for $1.70.  Goods consistently arrived 2 weeks after placing the order.  Now, to maintain the same price, the lead time has increased to 1 year.  Available stocks are selling for $4.80 to clients who can’t wait or find other options.  Luckily we checked about this before needing to place an order, giving Hatch a head start on transitioning to another chip.  Unfortunately making that change requires additional development cost and more time to redevelop.  It’s possible we’ll have to do another production with the original, high cost, Nordic chip before the new electronics are ready for mass production (if it’s even available).

What brands can do to avoid problems

Forecast shipments more in advance.  Businesses are always trying to reduce lead time as much as possible in order to have better control over inventory and expedite cash flow.  As production of parts has become faster over time, the more forecasting requirements have gotten shorter.  Now the inverse is happening.  Companies now need to plan 6 months further in advance than before.  This means more inventory risk and capital requirements for companies that sell finished products.

Reviewing your products BOM to identify risky components allows you to act early.  Screens and CPUs are the hardest hit components in custom Android devices.  Screen costs have more than doubled in some cases and many CPUs are experiencing shortages. Go through your BOM as early as possible to identify which components face sourcing challenges or price increases.  Look for alternatives.  Start to redevelop your product.  In Hatch’s case we’ve taken an approach of finding available stocks for production today and redesigning products for stability tomorrow.

Like with all challenges in life and business, some companies can get out of this situation ahead and some fall behind.  Hatch’s clients benefit from our connection to the pulse of this market.  Problems can’t always be avoided, but they sometimes can be taken advantage of!

Mature vs Immature Supply Chains in Custom Android Device Manufacturing


What supply chain means

In this article ‘supply chain’ refers to all the contributors of components or services that go into manufacturing a finished product.  More specifically, in the case of custom Android manufacturing, that means suppliers of hardware such as screens, PCBA, cameras, cases, etc.  Also different specialized service providers such as electronics, mechanics, software, and assembly engineers.  General services, such as logistics, which aren’t specific to Android hardware are not covered in this article.

What’s a mature supply chain?

Supply chains become mature when multiple suppliers gain expertise and compete on individual pieces of the supply chain.  A supply chain consists of many different elements so when there are many companies competing in one niche of the supply chain, over time that creates optimal service and price (theoretically).  For example there are hundreds of companies that design and produce plastic cases for electronics around Shenzhen.  Several of them are particularly focused on designing cases specifically for Android tablets or smartphones.  There are so many case suppliers and so much demand for Android device cases, some case suppliers carve a niche by specializing in tablet or smartphone cases.

This creates teams of engineers with specific retained knowledge that apply directly to making Android devices.  Each case company has engineers with experience designing cases for optimal performance and manufacturing efficiency.  For example an experienced mechanical engineer designs the camera slot in a way to ensure the camera easily snaps into place, blocks light from the flash, and doesn’t overheat.  They know what works, and have seen many things which don’t, creating a reliable and efficient supply chain.  More experienced component manufacturers working in a supply chain makes that supply chain more mature.

What’s an immature supply chain?

Supply chains are immature when there are limited suppliers with deep (or any) expertise in bringing a finished product to life.  For example when developing a new product, especially taking that product from prototype to mass production, countless surprises and mistakes happen due to inexperience.  It could be that the product was designed by non-Chinese engineers who choose components that are difficult to get in China, necessitating a design modification.  Even for products fully designed in China, components don’t always work well together.  Some materials don’t mix well together for chemical or electrical reasons.  Some components come with different calibrations that require tweaking for consistency during mass production.  Immature supply chains result in surprises that take time to resolve.

Production line staff at factories don’t usually understand the point of the custom modifications as it pertains to the product’s use case.  Because of this sometimes small variations in workmanship have a bigger impact on product performance than the staff realize.  Over time mistakes become lessons, but until that happens the supply chain is immature.

How does a supply chain become mature?

Immature supply chains become mature over time as orders of the finished product increase.  For example when Android tablets first started shipping from local Shenzhen supply chains around the end of 2010 the product quality was low and unit cost was high.  As demand exploded new suppliers entered the supply chain.  Even with these new entrants it took a while to meet demand and have prices start to come down.  Over time the profit margins decreased and maturity of the supply chain evolved.  Once supply caught up with demand they needed to improve product quality and price in order to compete.  Sales volume and, in turn, competition are the key forces that drive a supply chain to maturity.


The more orders suppliers produce the more opportunity they have to learn from mistakes.  This drives improvement of their components and, ultimately, the finished Android tablet.  As volumes of Android tablets and smartphones exploded a massive supply ecosystem came into existence.  The same events take place in the creation of supply chains for lower volume products, albeit with relatively fewer participants, as demand is lower.  A large company producing high volumes of a unique product will also create a mature supply chain.  This happens somewhat through brute force rather than purely organic capitalism.  In this case entering the supply chain is more restrictive than with a product anyone can buy since there’s only one customer who chooses the individual suppliers.

How to work with an immature supply chain

It’s necessary to work with an immature supply chain whenever creating a new product or modifying an existing one.  Getting from idea to mass production means going through a learning curve.  Over time production runs become more efficient by identifying and fixing problems. That’s why initial production runs should start with smaller quantities.  Problems are easier and less costly to fix with lower volume.  

In addition to extensive testing with low volumes, having multiple suppliers for high risk parts is also useful to hedge risk.  High risk parts refers to parts that have a higher tendency to go out of production or become difficult to source.  Often a component’s future availability is tough to predict.  From experience, cameras and screens seem to have the highest risk in custom Android devices.

Supplier value in a mature supply chain

Once a supply chain becomes mature so do the buyers.  Experienced retail buyers know what’s important to look for in a supplier.  The supplier traits which matter most in a mature supply chain are quality, speed, price, and reliability.  Because finished products coming from a mature supply chain are so similar to each other there’s rarely room for significant product differentiation.  Strides in innovation are made in small, manufacturing related, baby steps.  Any big technological innovation will not likely come from a manufacturer, at least not for Android products.

How an immature supply chain is helped by a mature supply chain

If you want to make a custom Android product your development and manufacturing partner, such as Hatch, plays a big role in leveraging mature supply chains to create custom products. Some suppliers in a mature supply chain are willing to support smaller production runs at a higher margin.  By working with them Hatch leverages the experience and efficiency of the mature supply chain to reliably produce what is needed for the lower volume custom product.


Anytime a new commodity product or product category kicks off a supply chain must be created from scratch.  The initial entrants do what they can to provide a ‘good enough’ early stage product, but as demand for a product grows and more companies enter into the supply chain the quality gets better.  When making something custom leverage mature supply chains to gain a head start.

Whenever working with a new and immature supply chain, go slowly to find problems early.  Reduce risk by thoroughly testing multiple rounds of a trial production and making clear requirements, sometimes even SOPs, for the suppliers to follow.  All mature supply chains start as new and immature ones.  They’re both important at different stages of a product’s lifecycle and through constant intersection help each other to grow.