Retail Observer

RETAILOBSERVER.COM MAY 2021 56 A dd another industry to the list of those impacted by the worldwide semiconductor shortage: home appliances. According to white-goods manufacturers, the scarcity of chips threatens to further hamper production for an industry that's just beginning to recover from supply-chain challenges and months- long backorders. In an open letter to President Biden, Joe McGuire, president/CEO of the Association of Home Appliance Manufacturers (AHAM), warned that further industry disruptions "will severely impact appliance availability" and jeopardize vendors' ability to reduce COVID-related backlogs. Also sounding the chip alarm was Jason Ai, president/CEO of Whirlpool China. In an interview with Reuters, Ai said his chip deliveries were shorted by 10 percent in March, leaving his division scrambling for semiconductors. The chips are used to power- manage over half its products, including refrigerators, washers and microwave ovens, he said. Industry observers say the scarcity was triggered when automakers cut their chip orders in anticipation of reduced demand for new cars during the pandemic. Meanwhile, sales of computers, mobile phones, TVs and other chip-based consumer electronics continued to soar as quarantined populations worked, schooled and entertained at home. The shortage was further exasperated by panic purchases of semiconductors by nearly every business that uses them. "It's a perfect storm," Whirlpool's Ai said. "On the one hand we have to satisfy domestic demand for appliances; on the other hand, we're facing an explosion of export orders." In his letter to Biden, AHAM's McGuire described the situation as "urgent," and implored the president to avoid reallocating chips away from appliance makers, as white goods "are critical to life at home." "Now more than ever, families are depending on home appliances to ensure homes are safe and sanitary, to prepare and preserve food, and to ensure access to clean and safe water," McGuire wrote. He also called for an immediate increase in global chip production. Following bipartisan calls for action by congressional and business leaders, President Biden ordered a comprehensive review of the chip shortage in order to craft policies that will strengthen supply chains. The U.S. accounts for only about 12.5 percent of the world's chip capacity, according to the Semiconductor Industry Association, with the balance largely located in China and Taiwan. Unfortunately, the chip challenge came as appliance vendors were successfully chipping away at backorders. According to Chad Evans, merchandising VP at AVB/BrandSource – the buying group for independent appliance, furniture and consumer tech dealers – wholesale and sell-through statistics for late 2020 and early 2021 showed factory shipments exceeding retail sales, suggesting a steady improvement in deliveries. But despite the encouraging statistics, hiccups remain, particularly in refrigeration. Besides possible semiconductor setbacks, the category was also feeling the impact of the run on foam (used for insulation), stemming from February's deep freeze in Texas that halted petroleum processing. Evans said tightness in fridge inventory could continue through much of the year, although laundry and certain dishwasher and cooking categories will likely recover more quickly. Evans' advice to BrandSource dealers: Plan ahead and "adjust as necessary," a skillset that members readily demonstrated during the pandemic through their nimbleness and ability to adapt to a changing marketplace. Alan Wolf is Senior Communications Specialist for AVB/ BrandSource, the nation's leading merchandising and marketing co-op for independent appliance, and consumer tech dealers. Alan Wolf Appliance Trends RO APPLIANCE VENDORS ALARMED BY CHIP SHORTAGE

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