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Global Chip Shortage Bears Down on the Video Biz

Semiconductor
(Image credit: Intel)

We’re in the middle of a busy few weeks for video streaming product launches, with Roku announcing a flurry of new gadgets alongside its latest OS upgrade, and Apple set to possibly unveil a long-awaited update to Apple TV, among other devices, next week. 

Demand for electronics, already accentuated amid a pandemic that had all of us relying on IP gadgetry even more, is set to further explode. On Friday, equity research company Cowen released results of a survey finding that 43% of U.S. consumers plan to purchase a new smart phone this year, up from 30% in 2020. 

As for connected TV devices, they’re already coming off a record fourth quarter, during which shipments increased by 7.6% to 305.3 million.

Looming over all of this prosperity is a global shortage in the supply of semiconductors that has already brought the auto industry to its knees, and has drawn a 100-day review by the Biden Administration. 

Hamstrung by a shortage of chips that control everything from in-car entertainment systems to power steering sensors, U.S. automakers General Motors and Ford said in February that the semiconductor scarcity could cut into their full-2021 earnings by as much as $2 billion and $2.5 billion, respectively. 

That led President Joe Biden to order a 100-day review of the global semiconductor supply chain, which has been disrupted by a variety of factors, including not just the pandemic, but the overall, vast, all-encompassing spike in the number of products worldwide that require silicon. 

Global semiconductor sales totaled $439 billion in 2020, up 5% over 2019, according to the Semiconductor Industry Association. Sales for December alone were up 8.3% to over $39 billion.

And manufacturing hasn’t been able to keep up with demand. 

Taiwan-based chipmaker TSMC warned investors this week that the global chip shortage could persist into 2022. U.S.-based semiconductor companies Intel and Nvidia say the problem could persist past 2022

For the streaming video industry, the global chip shortage is somewhat akin to news about a strange “coronavirus” emerging out of Wuhan, China in January 2020. The impact hasn’t hit Peoria ... yet—perusing the Q4 earnings reports of Apple, Alphabet, Amazon, Roku and Xperi didn’t yield one reference to a scarcity of semiconductors. 

But as these publicly traded companies get ready to queue up their Q1 earnings reports, the check’s probably in the mail. 

On Friday, Donald McGarva, CEO of UK-based pay TV set-top tech company Amino Technologies, said lead times for chipset orders have grown by as much as six months recently. 

“Of course, fluctuations in the chipset market have happened before, and Amino always works hard to mitigate customer impact,” McGarva said in a statement. “This time we took early management action to secure stock, increase inventory holdings, build buffer stock and forecast additional kitting and assemblies, all to ensure that our supply chain is operating with the best possible lead times.

“We are not only in constant communication across our supply chain, but also with our distribution partners and customers to anticipate requirements, set expectations and ensure that product is available as needed,” McGarva added. “But there’s plenty more that we can also do to help pay TV operators stay agile and deal with the unexpected.”

Earlier, as Biden convened his review of the shortage, the cable and telecom industry already weighed in.

“As the White House considers executive action on this and other important supply chain issues, we urge you to include broadband providers in measures to address the chip shortage, support initiatives that will expand domestic innovation and investment in semiconductor development and manufacturing facilities for all industries and ensure coordination across government and with industry partners on supply chain matters,” reads a joint letter sent to the Biden Administration from cable and telecom trade groups NCTA, ACA, CTIA and USTelecom.