According to the market research company International Data Corp., semiconductors are Bloomberg a $ 442 billion industry
The global shortage of chips has handicapped automakers around the world. Now other industries are feeling the pressure.
It has hit home appliance, heavy equipment, servers, and sex toys manufacturers. It confuses multinational companies with startups. Even businesses like freight companies and retailers that don’t use chips as their core business are affected.
The scarcity means higher prices for consumers, longer waiting times for goods, empty store shelves, and swaths of the business world struggling to secure the supplies they can.
The chip famine first hit automakers late last year after underestimating demand during the pandemic. But as automakers increased their orders, other industries saw the component queue lengthen and their own purchases increase.
The demand for consumer electronics remained hot. Now, chipmakers can no longer keep up, raise parts prices, thin supplies, and panic buying.
The tight supply for many chips is likely to continue this year, companies say. The deficits lead to missed business opportunities, just as the global economic recovery is gaining momentum after a pandemic-triggered slowdown.
They have also contributed to an escalation in raw material costs for electronic goods in recent months.
According to a market researcher IHS Markit, an index that measures the price of inputs for electronics companies rose to its highest level in more than two decades of tracking in March.
The chip crisis spared few companies, even some tech giants that have bulk-bought to protect themselves from the US-China trade war.
According to Microsoft Corp. Hardware sales were affected by the shortage. According to Luca Maestri, Apple’s chief financial officer, Apple Inc. is likely to see an above-average decline in sales in the current quarter, especially for tablets and laptops.
Many semiconductors cost less than a can of soda. However, according to a recent report from Goldman Sachs Group Inc., they are a key production component for 12% of US gross domestic product, and lower supply can increase prices for some categories of products by up to 3%.
The company estimates 169 US industries are directly affected. This list includes boat building, breweries and textile factories.
The chip shortage hits even corners of the economy with no direct links to semiconductors.
Kansas City Southern, a freight company, said the semiconductor crisis had forced some auto factories in Mexico to shut down. Demand for vehicles and auto parts dried up, causing freight volume to decline 18% year over year in the first quarter.
Big box retailer Costco Wholesale Corp. reported having problems securing televisions, computers, and other Internet-connected home devices.
According to the market research company International Data Corp. Semiconductors is a $ 442 billion industry. That makes semiconductors bigger than Ireland’s GDP or the market capitalization of Walmart Inc.
Semiconductor market researcher IC Insights Inc. said the total number of semiconductor unit shipments is projected to increase 13% this year to a record 1.13 trillion units. Deliveries rose 3% in 2020.
The types of semiconductors that are the most limited in supply are the lower-priced chips common in electronics and home appliances that consumers avoided during the pandemic, although even more cutting-edge chips are increasingly in short supply, according to chipmakers .
The strained chip shipments have brought Whirlpool Corp. urged to switch production lines frequently, the company said to produce different products based on what components are available that day.
CEO Marc Bitzer told investors last month that the Michigan-based manufacturer is raising prices in various countries by 5% to 12% due to “rapidly rising inflationary pressures” due to the shortage of chips and other raw materials.
LG Electronics Inc., one of the world’s largest device manufacturers, has no manufacturing problems.
“But it is currently reviewing production plans and believes the semiconductor shortage will persist through the end of the year,” said Don Kwack, director of the company’s home appliances and air solutions business.
“In total, all of our home appliances require 1,000 different types of chips,” he said.
Recently, in Shenzhen, China, Petoneer was forced to stop selling some pet gadgets, including a cat toy, after running out of chips.
Sales director Karl Peng said the company’s research and development team is currently reviewing whether it can swap out types of chips that are more readily available.
However, numerous types of other semiconductors, particularly microcontrollers – an inexpensive chip that is widely used in electronic devices – are almost nowhere to be found.
“If we don’t switch to a different solution for some products, we won’t know when we can have the chips to make them,” said Peng.
San Francisco-based sex toy company Crave Inc. is redesigning half of its product range this year to protect against chip shortages and implement planned product upgrades.
With a typical product containing 30 different electronic parts, including semiconductors, Crave began stocking up chips late last year as lead times increased, said managing director Michael Topolovac.
“We are on the road for at least a year and theoretically more than two years,” he said.
South Korean data server manufacturer DS & G Co. has more than doubled its lead time for the chips it buys from around 10 weeks this year to 22 weeks.
According to Seo Joung-youl, the managing director of DS & G, DS & G may no longer be able to fulfill customer orders by May.
Chicago-based Bartesian Inc., which makes countertop machines that make cocktails from Keurig-like capsules, began ordering chips in February that will meet manufacturing needs for tens of thousands more products than planned this year.
Despite this foresight, managing director Ryan Close fears that he will not receive enough components for his product.
“We’re not one of the big boys,” he said. “We are a small startup.”
Indiana-based LHP Telematics LLC, which sells to heavy industrial vehicles, remains profitable despite being unable to fulfill thousands of customer orders because some of its contract manufacturers cannot get enough chips to build equipment.
“Instead of making a fair bit of profit now, we’re squeezed, and it all just depends on whether [things] Get worse, “said Travis Jones, company CEO.
During the pandemic, the Californian company Vinotemp, which mainly makes wine fridges and coolers, experienced a sales boom for its new line of dishwashers, stoves and microwaves. This happened despite freight problems and other rising raw material prices.
But now the availability of chips is a headache. On April 26, the company received an email from its contract manufacturer in China that it had stopped manufacturing some models of wine coolers because it could not secure the chips it needed, said India Hynes, CEO of Vinotemp.
“I don’t know how deep it will go,” said Ms. Hynes.