Suppliers in Asia said that as companies expand their inventory of required semiconductors, the growing global chip crisis is spreading to smartphone, TV and home appliance manufacturers.

At the same time, Volkswagen has warned managers that due to global chip shortages, the company's production in the second quarter will be hit harder than in the first quarter. Wayne Griffiths, President of Volkswagen’s Spanish brand Seat, said: “The suppliers and the Volkswagen Group have been told that we need to face considerable challenges in the second quarter, which may be more challenging than the first quarter.”

Epidemic delays production

Due to the surge in demand for electronic products and the disruption of large-scale production facilities during the COVID-19 pandemic, chip supply has tightened. The home appliance industry is being affected, and it is difficult for companies to obtain parts for everyday electronic products such as washing machines and toasters.

Companies such as South Korea's Samsung Electronics and LG Electronics are feeling the pressure of production delays, and this delay is expected to continue until 2022.

Samsung warned in March of this year that semiconductors were "severely out of balance between supply and demand." This month, the company began to reduce orders for some smartphone parts.

“Application processors, display drivers, and camera sensors are in short supply. Samsung’s orders fell this quarter,” said one of Samsung’s large smartphone parts suppliers. “A temporary decline in sales is inevitable, but we expect the situation to increase. It started to improve in June because the number of delayed orders may increase in the second half of the year."

Household appliances affected

A small TV manufacturer in Seoul said: “Unless you pay higher prices, it will become increasingly difficult to obtain key components. Because of rising raw material costs, we have to raise TV prices.”

Credit Suisse Asia Semiconductor Research Director Randy Abrams said: "The supply of microcontrollers is tight, which may affect home appliances."

An industry insider said that because manufacturers allocate capacity to high-margin products, the production demand for those chips used in home appliances ranks last.

South Korean factories said that even if they are operating at full capacity, they cannot meet the surge in orders.

"Double reservation" increases factory load

A DB HiTek manager said: "Customers' orders for smartphones, TVs and other home appliances have exceeded our capacity. Display driver chips, power management chips and image sensors are especially in short supply."

An industry insider said that supply shortages have prompted companies to place orders with multiple chip manufacturers, a phenomenon known as "double ordering."

TSMC, which has been operating at full capacity, predicts that the chip shortage will continue until 2022. The company will invest 100 billion US dollars in three years to expand production capacity.

However, analysts believe that if spending on electronic products recedes as the new coronavirus subsides, the chip shortage may end as soon as possible.

Bernstein Semiconductor analyst Stacy Rasgon wrote in a report that investors will "discover how much demand is real and how much is illusory."