Console shortages ‘will get worse before they get better’ due to ongoing parts shortages, report claims

The current global shortage of semiconductors could see games console stock struggles last until Christmas.

That’s according to a new Bloomberg report, which cites anonymous sources within supply chains, who claim that “smaller-volume” buyers of semiconductors such as video game companies are currently losing out to tech giants in the race to secure parts.

“The game hardware industry is bracing for supply to get worse before it gets better in 2021, potentially even affecting the next holiday season,” it said, citing people familiar with the matter.

Console manufacturers have struggled with stock shortages for a year now, after the pandemic shut down essential supply chains and saw demand for gaming devices increase significantly, as countries implemented social distancing measures.

In particular, the recently-released next-gen consoles from Sony and Microsoft, as well as new RTX graphics cards from Nvidia, have been incredibly difficult to secure, with most restocks selling out within minutes.

Last week Sony executives confirmed that the global semiconductor shortage could affect PlayStation 5 shipments during its next financial year. AMD, which makes the chips inside PS5 and Xbox Series X/S consoles, recently forecast supply issues through the first half of 2021. Nvidia has said that supplies of its RTX GPUs are likely to remain “lean” until at least April.

According to Bloomberg report, the games console supply issues stem from several factors, including Asian companies responsible for the world’s supply of advanced semiconductors struggling to meet increased demand caused by the pandemic.

TSMC and Samsung Electronics Co. are increasingly the only recourse for producing the parts, it said, but their capacity takes years to plan and billions of dollars to build in tandem with customers.

It’s also claimed that excessive stockpiling by major companies is affecting supply. Smartphone giants Huawei and Apple began hoarding components in response to harsh US sanctions last year, Bloomberg claims.

TSMC executives confirmed on its most recent earnings calls that customers had been accumulating more inventory than usual to hedge against uncertainties, which they said could persist for some time.

All of this happened as stay-at-home orders increased sales of electronic devices which all require smart, customised chips.

During Sony’s quarterly earnings call last week, CFO Hiroki Totoki said the company hoped PS5 shipments in its FY2021 (April 2021 to March 2022) would surpass the 14.8 million PS4s shipped during the same stage of that console’s lifecycle, but warned that parts shortages could prevent it from hitting the target.

Further reading

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Microsoft spokesperson says Xbox Series X/S supply issues will continue ‘until the second half of 2021’

Company backs up recent comments by AMD

“For next fiscal year, we believe that there will be strong demand to continue,” Totoki said of PS5 through an interpreter. “Compared to the original plan, we try to procure components at the level of the second year of the launch of the PS4 at 14.8 million – we would like to exceed that level of PS4 when it comes to PS5.

“However, the level of demand by customers [is] so high for PS5. Therefore, for various devices, we try to procure larger volume.

“However, we have to look at the global shortage of semiconductors. When we try to increase our capacity, we face difficulties because of this global situation. However, we are doing our best to exceed the original plan in terms of shipments.”

Last week Nintendo president Shuntaro Furukawa told investors that the company has sufficient components supply for now despite industry-wide shortages.