Chip shortage could persist for another 2-3 years: Hisense President

QINGDAO, China — The president of Hisense, one of China’s largest TV and home goods makers, told CNBC that the global chip shortage could last another two to three years before it ends.

Industries from consumer electronics companies to automakers are dealing with a shortage of semiconductors. This has resulted in shortages of products such as game consoles and manufacturers struggling to keep up with demand.

Chinese companies, including electric car makers, are also upset.

Hisense Holdings Group, a Chinese state-backed manufacturer of TVs and home appliances, saw some impact as well. Jia Shaoxian, president of the Qingdao-based company, said the production cost of its products has gone up, but the business is still normal.

“Hisense manufactures home appliances and consumer goods, and this requires relatively simple chips. Although supplies are limited and the cost is higher, our business is still normal,” Jia said in Mandarin, according to a CNBC translation.

People visit the Hisense Pavilion during the World Hardware and Electronics Show (AWE) 2021 at the National Exhibition and Convention Center (Shanghai) on March 23, 2021 in Shanghai, China.

Chen Youyou | China Optical Group | Getty Images

Jia said most of the chips are imported to China and finished products are made there before they are exported. The United States and China have been in a trade war since the Trump presidency and these trade tensions continue to this day.

Semiconductors have become a flashpoint between the two countries. The United States has sought to isolate SMIC, China’s largest chip maker, from American technology.

A number of factors have led to chip shortages, including increased demand for consumer electronics amid worldwide lockdowns after the pandemic began. The US trade war with China has also led to companies hoarding supplies.

If there are no “big issues” with global trade disputes, Jia said, the chip shortage “can be settled within two to three years.”

“Otherwise, if the trade and economic sanctions between countries continue, it is really difficult to estimate,” Jia said.

Top executives globally expect the chip shortage to continue into 2022. Some even think it could extend far beyond that.

The expansion of the United States and Europe

Hisense may not be well known to many consumers, but over the past few years, the company has sought to strengthen its brand in some of its key markets.

The company is a sponsor of the Euro 2020 football tournaments and the World Cup. It has ambitions to expand further outside China.

So far, Hisense is looking to expand globally through acquisitions of foreign brands and licensing deals. The company also expanded manufacturing abroad and opened research and development offices around the world.

Currently, about 40% of Hisense’s revenue comes from abroad. Jia said he hopes 50% of the company’s business will come from outside China in the next three to five years.

The next part of the consumer electronics giant’s international push will focus on developing its own Hisense-branded products, according to Jia.

“It’s the parent brand … In areas where existing brands are dwindling and a gap is being revealed, we will bridge the gap with the Hisense brand,” Jia said. “In this way, we will develop our brand well, and follow the model to develop from the lower scale to the mid scale so that we can produce high quality products.”

As long as we produce value at low cost, lead in technology, and increase our service and quality, consumers will continue to love us – in China or globally.

Jia Shuqian

Hisense Group Holding Company

There have been a few Chinese brands that have managed to penetrate the European market, but to a lesser extent than the US in the smartphone arena, companies like Xiaomi, Oppo, Vivo and Huawei have done well.

But the success of Chinese brands has also come with scrutiny from governments. The US government has accused Huawei of being a threat to national security, a claim the company has repeatedly denied.

Jia said he believes negative sentiment toward Chinese brands will not stop Hisense’s push for global growth.

“There is some misunderstanding on the part of consumers with Chinese brands, but these are usually not related industries in which Hisense operates. We make home appliances. As long as we create value at low cost, drive technology, and increase our service and quality, consumers will still love ‘We – in China or globally,” Jia said.

“We’ve had rapid growth in the US and European market in recent years without being affected, and it shows that consumers are going to pick their pockets.”

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