TVs, laptops and tablets were in high demand during the Covid-19 pandemic, as people worked and learned through Zoom, socialized on Skype, and leaned over Netflix to ease the lockdown blues. But all that extra screen time has also helped spark a semiconductor supply crunch that is pushing up the prices of some gadgets, starting with televisions.
In recent months, the price of larger TV models has climbed about 30% from last summer, according to market research firm NPD. This jump is a direct result of the current chip crisis and highlights that a solution is more complicated than simply increasing production. It may only be a matter of time before other gadgets using the same circuit (laptops, tablets, and VR headsets among them) experience a similar sticker shock.
Some manufacturers have already reported potential price hikes. Asus, a Taiwanese computer maker, said on a quarterly earnings call in March that a component shortage would mean “price hikes further upstream,” which would likely affect consumers.“Prices are certainly – unfortunately – on the rise” for these components, says Michael Hurlston, CEO of Synaptics, a company that sells integrated circuits to control touch screens to consumer electronics manufacturers. “In some cases, we pass these prices on to our customers, and we’ve heard that they pass these increases on to their customers.”
Although supply squeeze has been felt in the semiconductor industry, these display-related integrated circuits pose specific challenges. Since they are not particularly advanced, circuits are usually manufactured in chip factories which are several generations behind on the tip. With chipmakers focusing on building more advanced manufacturing plants that produce more valuable components, there has been little incentive to invest in the capacity of older facilities. It is simply not possible to produce more, even when demand increases.
All kinds of devices have already been affected by the chip shortage. Sony told analysts this week that the PlayStation 5 will remain in short supply until 2022 due to the crisis. Companies that act as electronic component brokers claim that some components have seen prices jump by orders of magnitude; The voltage regulators used in countless products that normally cost 50 cents sell for up to $ 70. But at the consumer level, products that require display integrated circuits feel the impact first, and harder, because of these factory limitations.
“The word I heard recently is that stocks have run out,” says Peggy Carrieres, vice president of AVNet, an electronics component supplier. “These new prices will therefore affect retail outlets and consumer consumption.”
Although this is a type of integrated circuit, the impact is vast. “Anything that has a built-in display will be affected by these price increases,” says Paul Gagnon, senior research director for consumer devices at analytics firm Omdia. This includes PC makers, he says, who have been able to avoid the increases by selling devices at the same price but with, say, less memory.
Electronics retailer Monoprice has been hit by the component drought, says Paul Collas, the company’s vice president of product. He says Monoprice will not increase prices but may have to cancel sales and other promotions. “In some cases, we also see the need to invest more in up-front payments to partners to ensure long lead parts are secure to meet our sourcing needs.”
A confluence of factors has contributed to the unprecedented dryness of the chips. The pandemic has sparked an explosion in demand for home electronics and cloud services, and the economic downturn has also caused some industries to misjudge how demand will decline.
The impacts have also been felt beyond traditional consumer technology. Automakers, in particular, have been left behind after expecting fewer sales. After preemptively canceling orders for semiconductor components, many automakers have had to shut down production pending the arrival of supply reinforcements. Wider supply chain disruptions have also hurt, including a fire in March that shut down a plant in Japan that makes a range of different semiconductor components, including display integrated circuits.
Geopolitical tensions between the United States and China have also contributed. In recent years, the U.S. government has imposed sanctions on major Chinese consumer tech companies, including Huawei and ZTE, blocking their access to the most advanced chips and urging them to stock up as much as possible.
Many experts expect the semiconductor crisis to last more than a year and may help reshape the global chip manufacturing landscape. The shortage has highlighted the importance of chip manufacturing for many industries, and the most advanced chips will be essential for advancing in key areas such as artificial intelligence, 5G and military technology.
The main US chipmaker, Intel, has lagged behind rivals like TSMC in Taiwan and Samsung in South Korea in recent years, but the company plans to invest heavily in an effort to regain a leadership position. The US government has also offered a $ 50 billion stimulus for the US chip industry to boost US chip manufacturing capabilities.
But that won’t help the current situation at all, according to Hurlston of Synaptics, the circuit maker. “It’s just a simple saving,” he says. “The supply is limited, we are all fighting for it.”
This story originally appeared on wired.com.