“Anything with a printed circuit board in it is likely looking at similar market dynamics.” Tim Shoulders, Grass Valley CEO and President.
TV equipment manufacturers are doing what broadcasters do best: Creatively helping each other work through a difficult technical challenge.
A current top world TV news story is often the shortage of electronic chips and components affecting the automotive industry. A scarcity of electronic components that power and control everything from engine management to in-car entertainment has cut the production of new motor vehicles. CNBC recently reported shortages are expected to cost the global auto industry $110 billion in 2021 revenue.
The Taiwan Semiconductor Manufacturing Company (TSMC) controls more than half the market for made-to-order chips, which TSMC calls ‘foundry services.’ The TSMC Taiwan factory cost more than $17 billion, making it the most expensive factory ever built. Right now, Taiwanese officials are concerned that a new pandemic outbreak and the worst drought in 50 years could threaten its leadership position in the global semiconductor supply chain.
The pandemic outbreak in Taiwan began about one month ago. TSMC uses about 156,000 tons of water per day manufacturing semiconductors. The reservoir that supplies water to TSMC and other regional chip manufacturers is at about 30% of normal level. TMSC recently announced plans to increase capital spending to meet growing demand and ensure the shortage doesn’t happen again.
Trouble in the TV Environment
Broadcast equipment manufacturers are wrestling with supply shortages, production and delivery delays and increased costs. More than half of 130 companies polled in a recent survey for a media industry trade association, the International Association of Broadcast Manufacturers (IABM) reported shortages across most or all component categories. If you needed to purchase new equipment lately you may have heard a similar story. Supply chain issues caused mainly by the pandemic are forcing some companies to raise prices and lengthen lead times on some products.
Grass Valley CEO and President Tim Shoulders had an idea that became the genesis of the Broadcast and Media (BaM) Stock Exchange. It enables IABM member companies to list their excess stock on the IABM website using internationally accepted parts codes and descriptions. Companies who are experiencing shortages can check the BaM Stock Exchange and potentially find the components they need. The Stock Exchange is fully searchable and filterable, making it simple to quickly find required components. The two parties are put in contact to complete the transaction as a value-added service.
The Broadcast Bridge recently had the opportunity to ask Tim Shoulders about supply chain challenges at Grass Valley.
When did shortages start affecting GV?
“We first encountered shortages of concern as the market started to recover in the back half of last year. In the middle of the pandemic demand was down. When demand started to pick back up, around December and January, we started to experience longer lead times from our suppliers and more demands by them for visibility into our future purchases, more onerous terms, and cancelled orders in some cases from those suppliers, so it really ramped up in January and February. We’ve been dealing with it ever since,” Shoulders shared.
“Inevitably, we ended up with longer lead times on some products. Normal lead times were 4-6 weeks, now they are 8-10 weeks. We haven’t been in a situation where we couldn’t service a customer. We have been very creative internally in trying to obtain supply, and we’ve been aggressive with our vendors, in some cases paying expedite fees, and paying to be first in line so we can ensure we have supply and can serve customers. That creates some complications but we’re here to provide technology.” CEO and President Shoulders emphasized “We’re doing everything we can to mitigate the effects of supply shortages.”
Effects on R&D?
Are parts shortages affecting R&D for future products your might possibly introduce at NAB? Shoulders responded, “I don’t think it has had a significant effect on R&D but I would be lying if I said it has no effect. Just like we build products to ship to customers, we also build prototypes that require parts, and use a lot of the same parts that are required in products we would ship or newer versions of those parts. I’m sure my R&D teams would say ‘yes, their planning and effectiveness has been affected’ because it takes longer to build new products and to get prototypes going. I don’t think it is going to have a significant impact on our innovation. We’ve leaned really hard into innovating virtualized solutions that don’t require as much specialized hardware.”
When do you think NAB will become a software show?
Shoulders said, “I would argue that it already kind of is. In 2018 we did an analysis of where our revenues come from and roughly 25% of it comes from software. About 50% of R&D dollars go into software development, and some of that software sits on bespoke hardware. I think the features customers care about are generally software features within the hardware platforms, so we’ve probably been a software show for a long time.”
Future of Parts?
What are you hearing about foreseeable parts availability trends? Shoulders said “Because we’ve had 6 months to react to it, we’re in a better place than we were a few months ago because we’ve been able to take actions. The core pressures driving supply chain issues and increased demand from other segments like automotive, telecom and consumer electronics are not changing, and they can’t ramp up new fabrications or capacity very fast, that’s a multi-year process. There is no change in capacity and the demand is still there. Fundamentally, the economic situation is the same. It’s still a high-pressure situation on the capacity side.
In the short term, I don’t think the pressure is going to relieve and I think we’re looking at least 12 months until things start to sort themselves out. Some of the disruption in the supply is logistics related. The pandemic has really disrupted a lot of the transportation networks, and there are back-ups at ports around the world. Some of that will go away or get better, but the core supply demand situation won’t be resolved in the near-term because demand is not expected to drop, and the supply can’t move up that fast.”
The Broadcast Bridge also asked NewTek about parts shortage challenges. Barbara Spicek, President of NewTek responded. “Technology companies worldwide are facing industrywide component shortages. We, of course, are a part of the total industry and work closely with our supplying partners to weather challenges. Toward the end of 2020, we felt pressure in sourcing graphics cards and working through supply chain squeezes as ports and transport centers closed due to the pandemic. We do expect constraints in the broader industry to last at least through the end of 2021.”
She continued, “We are already speaking and seeing our suppliers making adjustments and investments in increasing capacity. It will require time before those investments come online. At the moment, the multiple shortages are driving higher prices and constrained logistics. Fortunately, NewTek has a fantastic operations team that so far has met with the challenges by increasing lead times to our distribution and reselling channel.”
“NewTek also has what we see as a real advantage in the video industry. We have believed from our original days that professional video production could be created on computers, networks, and software. While the entire industry is suffering from the tightening supply, NewTek can operate through supply changes quickly with the agile development skills we already have in place. To date, the challenges have not affected our roadmap significantly nor put any of our current products at risk.”
Spicek concluded, “We look forward to the future where demand most likely returns to recognizable levels. As the wider computing industry is building toward overcapacity, this creates plenty of supply to deliver innovative products to our customers.”
Competing with 5G and Cars
Chris Sjerven, General Manager Networking at Imagine Communications shared what changes he anticipates will affect the broadcast solutions manufacturing future. He told The Broadcast Bridge “The semiconductor market is cyclical. Lead times have always lengthened and shortened, and through a close relationship with suppliers, we have been able to buffer the variations as we need."
"What has made this a much more significant challenge is that while cyclical variations in the past have been driven by demand in one specific industry, this time, every part of the electronics world is ramping up production at the same time, as we all seek to return to normality. On top of this, we have two industries which are in a phase of very high growth: 5G communications and electric vehicles. These demands are adding to the challenge."
He added, "Our vendors are telling us that semiconductor shipments are already at historical highs. Many suppliers are saying that instability will last until early in 2022 while some larger companies, like Intel, are saying demand imbalance could last into 2023.”
Sjerven also revealed that “Imagine made a business decision some time ago to outsource manufacture of our products to contract manufacturing. This means by working with manufacturing partners, we are able to leverage their larger purchasing power from the semiconductor vendors."
"We have been able to stay ahead of most of the shortages by planning and forecasting further in advance. Many of our infrastructure products are part of large-scale projects with inherent long timescales – if you are building a new sports stadium you will know a year or two in advance when the media technology will be required. So, working with our system integrator partners is as critical as with our semiconductor vendors to stay on top of the situation.”
Broadcast Bridge Survey
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