After hitting carmakers like Tesla and Sony’s PlayStation 5, chip shortages have now spread to China’s vast home appliances industry
- A global shortage in semiconductors had already disrupted manufacturing at carmakers like Tesla and production of Sony’s PlayStation 5 game consoles
- The country produces about two-thirds of the world’s air conditioners, televisions and microwave ovens, and about half of refrigerators and washing machines
A global shortage in semiconductors, which has already disrupted manufacturing at carmakers like Tesla and production of Sony’s PlayStation 5 game consoles, has now spread to China’s vast home appliances sector, according to industry giant Midea Group.
Manufacturers’ supply of chips is “under pressure in the home appliances industry”, said Midea in a statement to the South China Morning Post on Thursday. Midea, with a market cap of about 600 billion yuan (US$91.7 billion), is the world’s largest manufacturer of consumer appliances, including refrigerators, washing machines and air conditioners.
Headquartered in Foshan, a city in southern Guangdong province, Midea said the prices of chips used for home appliances, which are generally less sophisticated than those used in smartphones and laptop computers, are poised to increase as the global shortfall of chips persists.
Disruptions in production at China’s home appliances industry could potentially have a negative impact on the global market for these products. China produces about two-thirds of the world’s air conditioners, televisions and microwave ovens, and about half of refrigerators and washing machines, according to data from the China Household Electrical Appliances Association.
While the impact of chip shortages in China’s home appliances sector is currently hard to quantify, manufacturers’ plans are likely to change so they can adapt to rising costs or decreased availability of these components, which are used to make products “smarter”, typically requiring an internet connection.
The global chip shortage “isn’t just affecting high-end chips”, said Stewart Randall, the head of electronics and embedded software at Intralink, an international business development consultancy. Ensuring sufficient chip supply, he indicated, has also become a major challenge to many electrical appliance makers.
Jason Ai, the president and chief executive at home appliance maker Whirlpool China, last week said chip deliveries fell short of its orders by about 10 per cent in March, according to a Reuters report. It also cited the situation at white goods maker Hangzhou Robam Appliances Co, which delayed the release of a new high-end stove vent by four months because it could not source enough microcontrollers.
Other analysts expected the tight chip supply to continue having an adverse impact on China’s home appliances sector in the coming months, if not years.
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“We expect the shortage to continue in 2022,” said Ivan Platonov, an analyst at research firm EqualOcean. “White goods producers will suffer significantly, as the industry is mature and has been operating at very low margins for years.”
The global chip shortage is “a challenge second only to the limited real manufacturing capacity”, Platonov said. He indicated that semiconductor companies have been moving into higher-end silicon for fatter profits. That has resulted in a tight supply of large-size wafers, such as 200-milimetres, since 2019 – a situation that has become worse this year, he added.
Midea, however, said that its own operations remain “relatively smooth”, thanks to its long-term pacts with suppliers. The company, which ranked 307th in the 2020 Fortune Global 500 List, also said chip unit MR Semiconductor, which was set up in 2018, has helped provide a steady supply of components, including microcontrollers and power management chips, for its own use.
Platonov said Midea’s own chip operation is helping offset some of the impact of the current supply squeeze. He said most of the microelectronic devices used by Midea can now be manufactured in chip foundries on the mainland.
