There's been an awful lot of talk recently about a global shortage of semiconductors that has impacted a broad swath of sectors. In today's modern world where technology is infused into everything, chips are found in just about every imaginable product you can think of. Here's just a sample of recent commentary from companies who will take a hit due to supply constraints:

  • General Motors (GM -1.33%) confirmed last week that it would have to idle three of its manufacturing plants in North America due to chip shortages. The lower production levels are expected to dent 2021 earnings by $1.5 billion to $2 billion.
  • Corsair Gaming (CRSR -3.89%) reported fourth-quarter results earlier this week and said that semiconductor shortages limited its ability to sell its most expensive products that carry the highest margins, leading to its gaming peripheral segment to underperform expectations.
  • Qualcomm (QCOM 2.15%) acknowledged on its earnings call that its outlook was adversely impacted by the chip scarcity, with incoming CEO Cristiano Amon adding that even older manufacturing nodes were facing shortages. It's not just state-of-the-art production that's being limited.
  • Sony (SONY 1.84%) has been struggling to keep up with soaring demand for its newest PlayStation 5 gaming console, and management similarly attributed the challenges to constraints within the semiconductor industry. The Japanese tech conglomerate might not even be able to fully meet demand for the PS5 this year.

However, there's one chip company that appears to be proceeding relatively unscathed: Skyworks Solutions (SWKS 2.02%).

Hand holding a smartphone with "5G" hovering above it

Image source: Getty Images.

Do it yourself

Over the past several decades, the vast majority of chipmakers have transitioned to a fabless model, outsourcing chip production to a handful of enormous foundry companies predominantly located in Asia. This has yielded considerable benefits by reducing capital expenditures for many companies, effectively consolidating that part of the value chain for greater capital efficiency, which leads to lower costs for consumers.

But it can become a double-edged sword under certain circumstances. Chipmakers now rely extensively on third-party manufacturers, which can create a mad rush when the foundry industry is scrambling to keep up with demand. It's times like these when having in-house manufacturing operations can pay off and mitigate supply chain risk.

Skyworks uses a hybrid manufacturing model, vertically integrating the core production while entering into strategic partnerships for certain technologies. That gives the company greater control over its manufacturing capacity, better positioning it to adapt to challenging conditions. The company reported blockbuster fiscal first-quarter results last month, thanks in large part to the launch of Apple's 5G-equipped iPhone 12 lineup.

That's not to say that Skyworks is completely immune to the rest of the industry's woes. Since products in any category require many components, shortages for other parts can still hold back overall production. But Skyworks has done a good job in executing on its end. On the conference call, CEO Liam Griffin said:

It's actually bringing new technology to the market. So it was a culmination of supply chain execution, largely within Skyworks. And then we had a couple of hiccups outside. We don't make everything in-house, but most of it is done in-house. So owning our own factories, delivering within our facilities, being efficient there, managing the constraints, but then also bringing that technology up.