Global chip shortage spreads to toasters and washing machines

The growing global chip crisis is spreading to manufacturers of smartphones, TVs and home appliances, suppliers in Asia say, as companies increase stocks of in-demand semiconductors.

Chip supplies have tightened due to exploding demand for electronics during the Covid-19 pandemic and breakdowns in large production facilities.

But the shortage was compounded by hoarding by Chinese groups hit by sanctions, which has made it more difficult for some companies to secure components for everyday electronics such as washing machines and toasters.

South Korean companies Samsung Electronics and LG Electronics are among the groups feeling the effects of manufacturing delays that are expected to last until 2022.

Samsung started cutting orders for some smartphone components this month, said two of its major parts makers, after the world’s largest computer chip maker. warned in march a “serious imbalance between supply and demand” of semiconductors.

“Application processors, display drivers, and camera sensors are all scarce. As a result, we are seeing a decline in orders from Samsung in the current quarter, ”a major supplier of smartphone parts to the Korean company said. “Temporary declines in sales are inevitable, but we expect the situation to improve from June as backlogged orders are expected to increase in volume in the second half of the year.”

Koh Dong-jin, Samsung’s co-managing director and head of mobile business, warned of possible problems in the second quarter due to the chip shortage. He said last month that the company may have to postpone the launch of its premium smartphone until next year. Samsung is also a major chip maker through its foundry business.

LG, a major home appliance maker, said the chip shortage had yet to disrupt production, but admitted it was a risk. “We are monitoring the situation closely because no manufacturer can be immune to the problem if it continues,” the company said.

A small Seoul TV maker said, “It’s getting harder and harder to secure key components unless you pay higher prices. We need to increase television prices, reflecting rising material costs. “

The production of low-margin processors that perform simple tasks like weighing clothes in a washing machine or crusting bread in a smart toaster has been affected.

“Microcontrollers are in short supply, which could impact general household appliances,” said Randy Abrams, head of Asian semiconductor research at Credit Suisse.

The production of these chips used in appliances ended up at the bottom of the queue, with manufacturers allocating capacity to high margin products, said an industry insider.

Foundries in South Korea said they were unable to meet rising orders even when operating at full capacity.

“Customer orders for chips used in smartphones, televisions and other home appliances are beyond our capacity,” said an official from DB HiTek, which manufactures chips used in Apple iPads. “Display driver chips, power management chips, and image sensors are particularly rare.”

The shortages have prompted companies to place orders with several chipmakers, a phenomenon known as “double bookings,” an industry official said.

The official added that the chip tightening has been made worse by aggressive stockpiling by Chinese companies, which brace for further sanctions as Washington seeks to hamper Beijing’s 5G ambitions.

Taiwan Semiconductor Manufacturing Company, which has been operating at over full capacity, expects the chip shortage to last until 2022. The company will invest $ 100 billion over three years to expand its capacity.

Taiwan’s leading memory chip maker Nanya Technology on Tuesday announced plans to build a $ 10 billion factory in the country to alleviate the shortage and meet growing demand for 5G-related components.

However, analysts believe the shortage could end as quickly as it started if electronics spending declines as the pandemic recedes.

Investors will then “find out how real the demand profile is and how ghostly,” Stacy Rasgon, semiconductor analyst at Bernstein, wrote in a note.

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