Chip Shortage Squeezing Appliance Biz, Says China’s Midea

By Alan Wolf, YSN

Midea Group, one of the world’s largest appliance manufacturers, has added its voice to the industry’s concern over the global chip shortage and its impact on production.

In a statement to the South China Morning Post, the multinational appliance giant warned that supplies of semiconductors are  “under pressure in the home appliances industry,” and that chip prices are poised to rise as availability remains tight.

Midea, which operates a U.S. subsidiary, Midea America, and had once expressed an interest in acquiring Whirlpool, is the second major Chinese appliance producer to sound the chip alarm in as many weeks. Whirlpool China CEO Jason Ai recently reported a 10 percent shortfall in his semiconductor deliveries in March, and described the pan-industry shortage as “a perfect storm.”

Similarly, Joe McGuire, the head of the Association of Home Appliance Manufacturers (AHAM), called the chip situation “urgent” in an open letter to President Joe Biden.

Disruptions in Chinese appliance production could have a ripple effect across the globe. According to data from the China Household Electrical Appliances Association cited by the Morning Post, the country produces about half of the world’s refrigerators and washers and about two-thirds of all air conditioners and microwave ovens.

While Midea’s operations remain “relatively smooth” due to long-term contracts with suppliers and the creation of an in-house semiconductor business in 2018, the scramble for silicon could create havoc for the greater industry, which is already under margin and supply chain pressure. “White-goods producers will suffer significantly,” observed Ivan Platonov, an analyst with the international research firm EqualOcean. The shortage, which was created by the convergence of COVID-related plant shutdowns, increased demand for home electronics and appliances, and the auto industry’s initial miscalculation of its own chip needs, could continue into 2022, he told the newspaper.

Exacerbating the problem: Chipmakers are reallocating production toward the more sophisticated — and profitable — semiconductors used in smartphones and laptop computers, rather than the large-size wafers used for power management in appliances, Platonov said.

In his letter to Biden, AHAM’s McGuire urged the president to avoid diverting chips away from appliance manufacturers, as white goods “are critical to life at home.” For his part, the President ordered a comprehensive review of the crisis to help craft policies that would strengthen supply chains, and today will be holding a virtual White House summit with chip producers and top tech executives to help address the problem.