Chip shortage can persist for another 2-3 years: Hisense president

QINGDAO, China – The global chip shortage could last another two to three years before it ends, President Hansen, one of China’s largest manufacturers of TV and household goods, told CNBC.

Industries from consumer electronics companies to car manufacturers are deal with semiconductor shortages. This has led to shortage of products as game consoles and manufacturers struggling to keep pace with demand.

Chinese companies, including electric car manufacturers, also feel the pinch.

Hisense Group Holding Co., a Chinese state-owned manufacturer of televisions and household appliances, has also had some impact. Jia Shaoqian, CEO of the Qingdao-based company, said that production costs for its products have risen but that operations remain normal.

“Hisense manufactures household appliances and consumer goods, and this requires relatively simple chips. Although supply is tight and costs have risen, our business remains normal,” Jia said in Mandarin, according to a CNBC translation.

People visit the Hisense booth during the Appliance & Electronics World Expo (AWE) 2021 at the National Exhibition and Convention Center (Shanghai) on March 23, 2021 in Shanghai, China.

Chen Yuyu | Visual China Group | Getty Images

Jia said that most chips are imported to China and end products are manufactured there before they are exported. The United States and China have been embroiled in a trade war since the Trump presidency, and these trade tensions continue today.

Semiconductors have become a point of tension between the two nations. The United States has tried to shut down China’s largest chipmaker SMIC from US technology.

A number of factors has led to the chip shortage including a strong demand for consumer electronics among barriers around the world after the pandemic began. The US trade war with China also led to companies storing supplies.

Jia said that if there are no “major problems” with global trade disputes, the chip shortage can be “sorted within two to three years.”

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

Major executives globally expect that the chip shortage will last until 2022. Some even believe that it can extend beyond that.

USA, Europe expansion

Hisense may not be so well known to many consumers, but in recent years the company has tried to increase its brand in some of its key markets.

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

So far, Hisense has sought to expand globally through acquisitions of foreign brands and licensing agreements. The company has also expanded its production abroad and opened research and development offices around the world.

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

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

“It’s the parent brand … In regions where existing brands are shrinking and it reveals a gap, we will fill the gap with the Hisense brand,” said Jia. “In this way, we will develop our brand well, follow the model to develop from the lower end, to the middle range until we can produce advanced products.”

As long as we produce value at low cost, lead in technology, increase our services and quality, consumers will still like us – in China or globally.

Jia Shaoqian

Hisense Group Holding Co.

There have been a handful of Chinese brands that have managed to crack the European market, but less so 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 national security threat, a claim that the company has repeatedly denied.

Jia said he believes that negative feelings towards Chinese brands will not stop Hisense’s drive to grow globally.

“There are some misunderstandings from consumers with Chinese brands, but it is not normally related industries that Hisense works in. We manufacture household appliances. As long as we produce value at low cost, lead in technology, increase our services and quality, consumers will still like us – in China or globally, says Jia.

“We have grown rapidly in America and in the European market in recent years without being affected, and it shows that consumers will make choices with their pockets.”

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