NEW YORK -- An inventory glut of cellphones will swamp China in 2017, with potential repercussions for the electronics supply chain, Morgan Stanley is asserting in a new research note.

Suppliers of key components including memory chips and OLEDs are under pressure to increase production to meet bullish forecasts by OEMs. Analysts, however, are seeing growing overinventory issues and warning of revenue pressure.

Major Chinese vendors including Huawei, Oppo and Vivo have forecast increases in volume ranging from 30 to more than 120% for the year, and are predicting nearly identical gains for 2017. Their market expectations come in part from government moves that are seen as restrictions on Apple and Samsung coupled with rapid deployment of new phone models.

"[S]hort product cycles -- less than three months -- in the face of severe competition, and limited differentiation among OEMs’ flagship models raises uncertainty for component suppliers, which expanded capacities aggressively in the first half," says Morgan Stanley.

Supply chain companies such as Fingerprint Cards of Sweden, which makes biometrics for smartphone identification systems, are cutting their revenue guidance, a move Morgan Stanley says hints at the larger inventory problem. 

"What this means is that smartphone OEMs may not need to build as many phones next year, thereby putting pressure on component suppliers," said Dow Jones columnist Shuli Ren.