Televisions, laptops and tablets were in high demand during the COVID-19 pandemic as people worked and learned via Zoom, socialized via Skype and binged on Netflix to ease the lockdown blues. But all that extra screen time also kicked off semiconductor supplies, pushing the prices of some gadgets up, starting with TVs.
According to market research firm NPD, the price of larger TV models has risen by about 30 percent in recent months compared to last summer. The jump is a direct result of the current chip crisis and underlines that a solution is more complicated than just ramping up production. It could also only be a matter of time before other gadgets that use the same circuitry, including laptops, tablets and VR headsets, experience a similar sticker shock.
Some manufacturers are already signaling possible price increases. Asus, a Taiwanese computer maker, said in a quarterly call in March that component shortages would lead to “price increases further upstream,” likely affecting consumers.
“Unfortunately, prices are going up,” said Michael Hurlston, CEO of Synaptics, a company that sells integrated circuits for driving touchscreen displays to consumer electronics manufacturers. “In some cases, we pass those prices on to our customers, and we’ve heard they pass those increases on to their customers.”
While the supply shortage is palpable in the semiconductor industry, those display-bound integrated circuits pose specific challenges. Not being particularly sophisticated, the circuits are usually made in chip factories several generations behind the forefront. With chipmakers focused on building more advanced manufacturing facilities that yield more valuable components, there has been little incentive to invest in capacity at older facilities. It is simply not possible to produce more of them even when demand peaks.
All kinds of devices have already been affected by the chip shortage. Sony told analysts this week that the PlayStation 5 would remain scarce until 2022 due to the crisis. Companies acting as electronic component brokers say that prices for certain components have risen by orders of magnitude; Voltage regulators used in countless products that normally cost 50 cents have sold for as much as $70. But at the consumer level, products that require integrated circuits for displays feel the impact first, and hardest, because of those factory restrictions.
“The word I’ve heard recently is that supplies are exhausted,” said Peggy Carrieres, vice president at AVNet, an electronic components supplier. “So those new prices will hit the stores and consumer consumption.”
Although it is one type of integrated circuit, the impact is huge. “Anything that has a display built into it will be affected by these price increases,” said Paul Gagnon, senior research director for consumer devices at analyst firm Omdia. That includes PC makers, he says, who have managed to avoid increases by selling devices at the same price, but with less memory, for example.
Electronics retailer Monoprice has been hit by the component drought, said Paul Collas, the company’s vice president of product. He claims that Monoprice will not increase prices, but that it may have to cancel sales and other promotions. “In some cases, we also see the need to invest more in partner prepayments to ensure long lead parts are secured to meet our delivery requirements.”
A confluence of factors contributed to the unprecedented chip drought. The pandemic sparked massive demand for home electronics and cloud services, and the economic slowdown also caused certain industries to misjudge how demand would fall.
The effects have also been felt outside of traditional consumer technology. Automakers in particular remained flat-footed after expecting lower sales. After preemptively canceling orders for semiconductor components, many automakers had to stop production while waiting for reinforcements to arrive. Wider supply chain disruptions have also hurt, including a fire in March that closed a factory in Japan that makes a range of different semiconductor components, including integrated circuits for displays.
Geopolitical tensions between the US and China have also contributed. In recent years, the US government has imposed sanctions on major Chinese consumer technology companies, including Huawei and ZTE, blocking their access to the most advanced chips and encouraging them to stock up on as many as possible.
Many experts expect the semiconductor crisis to last for more than a year and could help reshape the global chip manufacturing landscape. The shortage has underlined the importance of chip manufacturing to many industries, and the most advanced chips will be vital to advances in key areas such as artificial intelligence, 5G and military technology.
Leading US chipmaker Intel has fallen behind competitors like TSMC in Taiwan and Samsung in South Korea in recent years, but the company plans to invest heavily to regain a leading position. The US government has also proposed a $50 billion stimulus to the US chip industry in an effort to bolster US chip manufacturing capacity.
But this won’t help the current situation, according to Hurlston of Synaptics, the circuit maker. “It’s just simple economics,” he says. “There is a finite amount of supply, we are all fighting for it.”
This story originally appeared on wired.com.