Chip crunch spreads to world’s top industrial computer maker

Bill Mount

TAIPEI — The crunch in the global chip supply chain has spread to makers of industrial computers after Advantech, the world’s largest maker of the devices, said its revenues would be held back by a shortage of components. The Taiwanese company said revenue in the June quarter would be affected […]

TAIPEI — The crunch in the global chip supply chain has spread to makers of industrial computers after Advantech, the world’s largest maker of the devices, said its revenues would be held back by a shortage of components.

The Taiwanese company said revenue in the June quarter would be affected by 5-10% at a time when it is otherwise enjoying its strongest ever demand on the back of global economic recovery.

“Our orders for the first quarter surged as much as 50% on the year. We’ve never seen such a strong first quarter in the past. … But it seems that the component shortage issue is not alleviating at all, which is a real uncertainty for us,” Advantech Chairman K.C. Liu told an investors conference on Wednesday.

Revenue this quarter will grow by a double-digit percentage year-on-year, extending to next quarter, but the intensifying component and chips shortage will drag down its growth momentum in the June quarter, Advantech said.

“It’s a bit like everyone is crazily buying and hoarding toilet papers in a crisis. Everyone is fighting for resources at the same time, and I don’t see a turning point coming yet,” Liu said.

Advantech is the latest company to complain of the impact of a global chip and component shortage that has also hit swaths of the car industry and consumer electronics makers, blamed on a swift economic rebound that has led to surprisingly strong demand.

Taiwan-based Advantech provides customized computer solutions, embedded systems and industrial automation platforms for a wide range of industries — from manufacturing and transportation through gambling machines and retail, including self-service ordering machines and palm-sized point-of-sale devices at fast-food restaurants.

Its clients include IBM, General Electric, Cisco Systems, Amazon and Taiwan Semiconductor Manufacturing Co.

Advantech said it has mobilized hundreds of people across its 50 business departments to try to mitigate the worsening component and chip constraints.

“Around 500 components used in all of our product portfolios are impacted by the supply shortage issue,” said Miller Chang, Advantech president of Embedded IoT business, on Wednesday. “The whole company is basically working on this since January to [find] second sources of new components and talk to our customers to see if they are willing to change components.”

Chang said the procurement team has booked components ahead of time for the company’s products that have to ship within the next 12 months.

Some lead times have gone beyond 50 weeks for components including audio codec chips, which decode audio signals, and microcontroller chips, the company said. Lead times are longer than 20 weeks for graphic cards, power management chips, Wi-Fi, Bluetooth and liquid crystal diode displays, while central processing units and memory chips have a waiting time of more than 12 weeks, according to Adventech’s discussions with its suppliers.

As carmakers, PC makers and smartphone companies rush to buy components and chips, other buyers are being squeezed. Acer’s chairman and CEO has also warned that the chip shortage is worsening and could stifle PC makers’ growing momentum.

Some clients whose computers will be used in production lines have even asked Advantech to ship products without audio codec chips, as the clients said they could put up with computers without sound during such a serious shortage, Chang said.

“For some clients whose computers are used in critical medical equipment, it’s very challenging because every component needs a very long period of time to undergo qualification works,” the executive said.

Advantech has also started discussions to increase its prices by 5% from April to reflect the supply crunch and to deter customers from overbooking. The company said it was difficult to tell which customers were accelerating their orders to secure their resources and which were overbooking.

“We’ve started to tell our sales in the front line to be more cautious and not to accept every order,” Liu, the chairman, said.

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