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Taiwan's Acer says component shortage squeezes PC makers

Display maker Innolux warns supply chain imbalances will last through 2021

Taiwanese PC maker Acer says demand for computers is robust but warns that supply shortages could curtail growth this year.   © Getty Images

TAIPEI -- Computer maker Acer and key tech suppliers are warning that the global shortage of electronic components is worsening, potentially hampering the PC industry's growth this year despite strong demand.

"We are continuously facing a condition that demand always exceeds supply," Acer Chairman and CEO Jason Chen said on Wednesday. "We feel growing pressure because of the component shortages, and our staff are working with additional efforts to chase all the components needed every day."

Global tech supply chains have been grappling with shortages of semiconductors and other components since last year, when the "stay-at-home economy" of the coronavirus pandemic began fueling demand for computers, servers, gaming consoles and other devices. The problem is particularly acute for automakers, which failed to anticipate a rebound in demand at the end of last year.

"You see the auto industry now cry for more chips, and you see the game console makers also ask for more chips . . . That all happened together, as all the industries are recovering. That will definitely cause a crowding-out effect," Chen added.

Chen said the situation is still a "happy problem" for Acer, as the PC industry is expected to continue growing in 2021. However, he declined to provide a specific growth forecast given the supply uncertainties.

"It's really a phenomenon that the industry has never seen in the past. The shortages are not about core chips such as central processing units [CPUs] and graphic processors, which are worth $100 or $200, but mainly about companion chips that are only worth 80 cents or even 50 cents per unit," Chen said. "But devices and computers still need these companion chips to be complete."

Chen added that the component shortage is likely to last until at least the last quarter of this year. "It's not only about chips, either. The tightness is also in logistics and transportation, including fighting for containers and fleets," he said.

Taiwan's Acer, the world's fifth-largest PC maker, commands just under 7% of the global market and logged 23% growth in shipments last year. The overall PC industry grew 13%, its best performance since 2010, according to data from IDC.

The PC industry began to suffer shortages of a wide range of components late last year, ranging from WiFi and power management chips to image sensors, audio-related components and displays. Demand from the auto industry at the beginning of this year for more chips has tightened supplies further.

Other major PC makers, including top U.S. players HP and Dell, are also fighting to secure more chips to maintain their growth momentum.

"We also see that gap between supply and demand," an industry manager with knowledge of Dell's production told Nikkei Asia. "The company has to decide wisely on the allocation of the chips that it has, and it does need to adjust some of the business plans and forecasts." 

Local Taiwanese media, meanwhile, reported that HP CEO Enrique Lores and the company's top procurement director Kee K. Chang will visit Taiwan this week as part of an effort to secure HP's supplies. HP did not respond to Nikkei Asia's request for comment as of publication time.

The CEO of chipmaker Xilinx previously told Nikkei Asia that the component shortage has already gone beyond semiconductors to encompass substrate materials such as ajinomoto build-up film, known as ABF. These are essential for packaging high-end chips used in cars, servers and base stations.

Taiwanese display maker Innolux, a supplier to HP, Dell and Acer, estimates the constraint on display supplies will last until at least the end of this year, driven by solid demand for notebook computers. Components for making displays also remain in short supply, the company said.

"Key components such as polarizers, ICs [integrated circuits], glass and even water in Taiwan are in short supply," Innolux President James Yang told an investors conference in Taipei on Wednesday. "There is a firm demand for displays [used in PCs] because of the stay-at-home economy, but there are uncertainties clouded on the outlook as 5G, electric vehicles and automobiles are all fighting over chip resources."

The president said Innolux has no time to build up display inventories, as clients are picking up their finished products soon after production.

Yang said Innolux has been reallocating its stocks of large sizes of glass to cut it into smaller sizes to meet demand, and optimizing the company's "buffer component inventories" to ensure its production remains unaffected. The display supplier, which ranks No. 4 in the market for monitor displays, recently expanded its water storage facility and signed a contract with rental water tank operators to secure its water supply amid Taiwan's worsening drought, the president said.

The chip supply, however, is still the biggest issue. "In the past, the lead time for driver ICs was around four months, but now even with six months some of our suppliers still cannot give us a solid, confirmed yes for shipment," Yang said, referring to chips that serve as an interface between displays and other processors.

Clark Tseng, industry research director with SEMI, an industry association, said he expects all segments of the chip industry to grow this year but the widespread component shortage raises questions over how quickly.

"The shortage and tightness also extend to various chip packaging materials, and even the waiting time for the production equipment to make these materials has become much longer. It's a chain reaction," Tseng said. "Even if many companies are thinking about expanding production capacity, it's not fast enough for them to solve the shortage issue right in front of them."

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