Our recent interview on steel prices with Jon Odom at Productivity Fabricators created a good deal of feedback including updates on other components and raw material shortages from manufacturers serving OOH. Formetco noted that most digital devices use chips and that the chip shortage is impacting digital billboards. Insider spoke with Formetco’s VP of Digital Products, Todd Heller, to find out more about the shortage and how it will impact operators in the Out of Home industry.
What sort of a shortage is there?
Semiconductors are in short supply around the world. The shortage started with a surge in demand for personal computers and other electronic devices for work and school during the pandemic. As the economy improved, there was an even bigger increase in demand for electronics that use semiconductors. Experts believe the chip shortage will continue through 2021 and into 2022. The shortage is causing semiconductor supply constraints, production delays and cost increases that will affect every company that supplies any type of electronic device.
What sort of out of home products does the chip shortage impact?
The semiconductor shortage will affect all companies that supply electronic devices to the out of home industry. This includes lighting, timers, digital billboards, computers, and controllers.
What’s the impact on cost?
Costs are going up for everyone. Demand is outpacing supply which is causing the price of the chips to rise. Often times, the supplier will break with normal demand allocation and award supply to the highest bidder. In addition to increased pricing, the overall chip shortage also causes production delays.
Semiconductors are not the only manufacturing component that is in high demand and in short supply. The following commodities have also seen significant price increases this year:
Commodity Price Increase in the last year
Aluminum 68%
Copper 99%
Silver 66%
Steel 256%
How is Formetco navigating the chip shortage?
The Chip shortage is a major challenge for all companies that use Semiconductors. Fortunately for Formetco, we utilize many of the same components across our LED family of products. This not only increases our purchasing power for our products but limits our exposure by having fewer inventory SKUs to manage. It would be very difficult to navigate through these times if we did not have the buying power we have and had to manage a large variety of SKUs.
Does this chip shortage affect spare parts for my digital billboard?
Formetco keeps a 10 year supply of spare parts for each FTX sold in inventory so there is no effect on spare parts availability.
How are you addressing customer concerns?
At the beginning of 2021 it appeared the economy was on the fast track to recovery, but as we have seen in the past, the “slack” from a rebound can cause significant challenges to a supply chain. It’s imperative to set real expectations. Formetco has focused on ensuring strong and stable relationships with our suppliers, customers, and personnel. As a result, we have been able to continue to acquire the materials needed to carry us through 2021 and forward.
We are hopeful that supply will catch up with demand, where prices and production lead times can stabilize to normal levels, providing reliable supply and pricing stability for products used in the out of home industry. We’re all in this together. As an industry we are incredibly resilient. We weathered a pandemic where we were all told to stay at home, if that doesn’t prove the resiliency of the Out of Home industry, nothing will.
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