Are there still component shortages? Like most things in life, it depends on whom you talk to.
Just about everyone complained about shortages in the spring and summer of 2010, and some (mainly mobile phone makers) blamed their third-quarter performance on parts shortages. Some of Europe’s largest distributors experienced parts shortages into late October, at one point issuing “extreme” component shortfalls in sales channels.
The shortage of chips was even slowing production and raising costs at factories in China. But most consumer electronics vendors managed to play catch-up with their suppliers and reported virtually no shortages as they approached the recent holiday selling season.
Problems continued even beyond third-quarter financial reports when companies like Sony Ericsson said component shortages led to falling handset shipments and sales in that period. Sony Ericsson shipped 10.4 million handsets in the third quarter of 2010, missing all 27 analyst estimates in a Reuters poll. The analysts’ figures ranged from 10.5 million to 13.9 million.
Even television components weren’t in short supply toward the end of the year, according to the Consumer Electronics Association (CEA). But sales were slow globally, and TV manufacturers cut their capacity.
In October, Texas Instruments reported a slowing of demand for chips used in TVs and computers—enough to impact the company’s profits. TI said it even anticipated a slowing of growth in industrial chips after a year of fairly strong growth. This was at about the same time that iSuppli Corp. predicted global PC shipments would continue to rise in the fourth quarter.
“There’s naturally going to be constraints in the supply chain,” Shawn DuBravac, the CEA’s chief economist and director of research, said in mid-November, especially in some component categories. “To see constraints in the supply chain for touch panels when we first saw success in the iPad doesn’t surprise me. That’s not alarming to me. That’s just a function of the supply chain catching up with unrealized demand. Once they catch up, they’re good to go.”
Then there was the buildup of demand for chips by the auto and major appliance industries. (Audi, Ford, GM OnStar, and Toyota were major exhibitors at the International Consumer Electronics Show in Las Vegas earlier this month, as were several major appliance (majap) manufacturers—for the first time.)
DuBravac says the market seems to have returned to its normal supply and demand functionality. But one possible exception was key flash memory chips that could have an impact on MP3 players. Craig McHugh, president of Creative Labs, the U.S. unit of Singapore-based Creative Technology, told a conference of financial analysts in late October that he anticipated an industry-wide shortage of flash chips, at least through the remainder of 2010.
“Industry demand for high-capacity flash memory currently outstrips supply and this will impact availability of our 1-Gbyte flash MP3 players for the holiday quarter,” said McHugh. The shortage, he noted, was primarily due to a special deal that Apple Computer secured from a key supplier for the holiday season. Apple was widely reported to have signed a supply agreement with Samsung Electronics for flash memory for its music players, mainly Apple’s iPod nano.
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