Major A/V manufacturers said they expect to meet their often-aggressive sales projections this year despite tight supplies of critical components used to build home, car and portable audio products, and select video products such as VCRs.
These companies contend that they've secured commitments from their own components factories or from outside producers to deliver the quantities needed to meet their sales goals. Some home and car audio companies are even flying in products at additional cost to make up for delays in the production of promised new products.
Nonetheless, at least one company, car audio supplier Blaupunkt, blamed tight component supplies for a delay of about a month in the shipment of new head units.
Later in the year, some major companies warn, product shortages are likely if demand unexpectedly exceeds their aggressive forecasts, particularly in the fourth quarter.
For some smaller vendors, however, particularly in the portable CD market, the situation is already critical because they lack the financial clout to secure adequate parts commitments. At least one small portable audio importer has already lost hundreds of thousands of dollars in business because its headphone CDs and CD boomboxes are "on strict allocation," a company executive said.
Major audio suppliers also report spot shortages of select products in their lines, but they attribute them mainly to normal line transitions and unanticipated consumer demand for select models.
The components in tight supply include CD-laser mechanisms, ICs for low-priced products such as portable audio, and surface-mount devices (SMDs) such as resistors and capacitors for home and car audio products and VCRs, major vendors said. Component suppliers have diverted much of their SMD production to support skyrocketing worldwide demand for wireless phones, the suppliers said.
The SMD situation forced Blaupunkt to push back shipments of new head units by a month and forced Kenwood to fly in select home and car audio products.
"We said most of our new head units would be due in early April, but now we're planning late April to early May," said Blaupunkt's John Whitacre, senior product manager for head units. To meet the revised timetable and expected demand, Blaupunkt will air-freight products into the U.S. and eat the additional cost, he said.
"We know the demand from the wireless side is creating our problems," Whitacre noted. Other car audio suppliers who source their head units could be affected more dramatically, he said, because they have less control over component supplies.
Kenwood is also suffering from slower-than-planned production and is air-freighting in some home and car audio products to ensure adequate supplies. "We don't believe it will delay any of our introductions," sales and marketing VP Bob Law said. "We're delivering what retailers need. There are some spot shortages, but they won't be long-lasting."
Car audio supplier Alpine "experienced some [SMD] supply problems in November and December," but for the company's 2000 lineup, "we worked around them by getting alternate supplies," said marketing VP Steve Witt. "Now we're getting 100% deliveries on projected quantities."
Although SMD supplies remain tight, he said, "we'll be fine across all business units."
At Thomson, a spokesman acknowledged "pretty tight" SMD supplies. "The biggest impact on us is in VCRs," he said. "The suppliers we buy from are running very tight, but it hasn't affected shipments to us yet." Component supplies "have been an issue for awhile, and we have been doing our best to manage around it by having multiple vendors."
In portable audio, Thomson's spokesman said, "we have some concerns about ICs and microprocessors," but the company "is not having any audio issues yet because we have multiple suppliers for components, including our own factories. If I were a small company, however, I could see it being a big problem."
For its part, Sharp's factories don't expect component supplies to create problems for their audio or video products, said associate marketing VP Bob Scaglione. In fact, he said, "we launched a lot of or minisystems early this year."
Philips is also confident that it will meet its audio sales forecasts despite tight industrywide supplies of components such as CD mechanisms for portable CD products and shelf systems, said Andy Mintz, Philips's senior VP for audio. "We're building to our projected plan, but any growth above that could be hindered. I doubt any manufacturer will have very much excess unless there's a [downward] change in the economy."
Smaller audio suppliers, Mintz contended, "will be hurt because of their buying strength."
One of those small suppliers agreed. "We are on strict allocation" for headphone CDs and CD boomboxes, said the supplier, who requested anonymity. "We don't have a feel for when it will be resolved."
Major IC manufacturers, he said, have cut back or eliminated production of ICs for low-cost products. That in turn created "quite a delay in some [headphone CD] models so we could redesign them for alternative IC packs." In addition, he said, Sony cut back production of CD mechanisms to devote more production capacity to PlayStation.
For its part, another small portable audio supplier, Coby, is meeting demand and expects a turnaround in the component-supply situation in the next couple of months, said regional sales manager Alberto Didia.
Aiwa, JVC and Panasonic also minimized the impact of component supplies on their audio and video products.
Aiwa senior marketing VP Akio Imanishi said he supplied his factories with his audio and video sales estimates earlier than usual to ensure adequate supplies for this year's introductions. "There was some trouble for us [in CD mechanisms] in September and October," he said, creating "a little delay" for CD-equipped products. For the new lines, the company is on target to ship as planned between March and May, he contended.
Imanishi said supplies of some Aiwa products are usually tight around this time of year as the company closes out last year's line and makes way for this year's.
The same is true of JVC audio products, said JVC audio general manager Karl Bearnarth. "We always have some back-orders this time of year."
Panasonic audio group general manager Gene Kelsey also discounted the impact of tight component supplies on his audio production and said, "With the exception of some items we may have underestimated up front, we have no supply problems."
In audio, he said, the company hasn't been affected by component shortages, particularly not in SMDs. In fact, Kelsey noted, "We make surface-mount devices and the machines that make them."
On the video side at Panasonic, said Brian Hoffman, assistant general manager for consumer video, "it has been a challenge for our factories to achieve our purchase requirements [in products such as VCRs and camcorders], but for the most part, we've been OK. Availability issues in these categories result from extremely strong consumer demand rather than tight component supplies, he said, noting that sales of VCRs went from 18 million to 23 million in one year.
Likewise, although Denon and Onkyo report back-orders on select products, the reasons were unexpected demand of select products, not component shortages, company executives said.