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The impact of the chip shortage crisis continues to spread: even the performance of paint manufacturers has been affected

  • November 2, 2021
  • 1249

In the eyes of many people, chips and paint are undoubtedly two unrelated items. However, the global "core shortage" crisis that has been fermenting since the beginning of the year has gradually begun to affect the performance of companies that do not directly rely on semiconductor products like the "butterfly effect". The recent financial report data disclosed by many US companies shows that The sales of paint, glass and industrial sandpaper have all been affected!


Large users of chips, including manufacturers of cars, smartphones and home appliances, are often major buyers of production materials such as paint and glass. According to the executives of the above-mentioned related suppliers, these companies have cut the purchase of many parts due to the decline in the output of final products due to the shortage of chips.


3M, Axalta Coating Systems Ltd. and Corning Inc. all said last week that their sales have been affected due to reduced production of automobiles, washing machines and electronic equipment from their major customers.


  


Lack of core affects "everywhere"


The multinational integrated manufacturing company 3M recently stated that the chip shortage has spread to its broad customer base, including those auto and smartphone manufacturers. 3M's business includes the production of grinding wheels for grinding metals and films for improving the brightness of electronic displays.


"These areas are key markets for us," said Mike Roman, CEO of 3M. "We have noticed a shortage of semiconductors."


Corning, a global leader in specialty glass and ceramic materials, said the semiconductor shortage cost the company about $40 million in sales in the most recent quarter due to a sharp drop in automotive production for its major customers. The company said that TV sales fell by about 10% year-on-year, and revenue was also reduced as a result. Corning Chief Financial Officer Tony Tripeny said when talking about the impact of auto production, "The decline in production began to affect us in the third fiscal quarter, and we expect it will continue in the fourth fiscal quarter."



Some companies also said that the current situation is worse than they originally expected. Dana Inc., a supplier of automotive powertrain products, lowered its full-year revenue forecast by US$100 million last Tuesday to approximately US$8.9 billion due to a shortage of chips. Dana’s Chief Financial Officer Jonathan Collins said, “We had expected that the supply chain situation would moderately improve and the chip shortage would gradually ease. Unfortunately, none of this has been achieved.”


Ecolab is a well-known company that helps manufacturers manage water use, operate automobile paint booths, and produce cleaning products. The company also recently stated that its performance has been affected by the decline in demand. Ecolab CEO Christophe Beck said, "The chip shortage that occurred outside has nothing to do with our own operations, but it is leading to a decrease in demand for our products. This is clearly something beyond our control."



PPG Industries Inc., which produces paints and coatings, also said earlier this month that the semiconductor shortage has spread beyond its main automotive customers and has also affected the production of heavy construction equipment and electrical appliances. The Pittsburgh-based company does not expect the situation to gradually return to normal until the second half of next year. The company's CEO Michael McGarry said, "In electrical appliances and other products, the number of chips used is much greater than people think."


  


When will the chip supply take a turn for the better?


In fact, with the shortage of computer chips affecting factory output, General Motors Co. (GM) and Ford Motor Co. (F) announced their third-quarter profits last week also fell sharply. Both companies said that they believe the semiconductor supply situation will gradually ease next year.


Since the end of last year, world-renowned automakers have begun to cut production. According to data previously released by US officials, the annual rate of assembly volume of US automakers in September has dropped from 8.82 million in August to 7.78 million, which is the lowest since April 2020. In addition, the output of household appliances has continued to decline in recent months.


Ambrose Conroy, the founder of Seraph, a supply chain consulting company, said: "No one thought that the situation would become as challenging as it is now." Conroy said: "For a long time, we may not be able to get on this issue. progress."


The waiting time for global chip delivery is currently continuing to extend, far exceeding the normal range of 9-12 weeks in the past. According to data from Susquehanna Financial Group, in the summer, the waiting time is extended to an average of 19 weeks. However, starting in October, the waiting time has stretched to 22 weeks. Among them, the waiting time for the most scarce components is longer, 25 weeks for power management components, and 38 weeks for automotive-grade microcontrollers.


The latest statement by the United States Steel Corp. on Friday may be one of the few good news in the entire supply chain surrounding chip derivatives. The company said on Friday that some of its automotive customers are planning to increase productivity in the next six months, starting in November at the earliest. "We are very pleased to hear from multiple automotive customers who herald the trough of chip shortages may have passed," said David Burritt, the company's chief executive officer.

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