A big Chinese language client items producer warns that the chip scarcity might final 2 to three years

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QINGDAO, China – The global chip shortage could last two to three years before it ends, the president of Hisense, one of China’s largest television and household goods manufacturers, told CNBC.

Industries from consumer electronics companies to automobile manufacturers are struggling with a shortage of semiconductors. This has resulted in a shortage of products like game consoles and manufacturers struggling to keep up with demand.

Chinese companies, including electric car manufacturers, are also feeling the need.

Hisense Group Holding Co., a government-backed Chinese manufacturer of televisions and home appliances, is also having some implications. Jia Shaoqian, president of the Qingdao-based company, said the cost of producing its products has increased, but business is normal.

“Hisense makes home appliances and consumer goods, and it requires relatively simple chips. Although supplies are scarce and costs have gotten higher, our business remains normal,” Jia said, according to a CNBC translation in Mandarin.

People visit the Hisense booth during 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 most of the chips are imported to China and the end products are made there before they are exported. The US and China have been in a trade war since the Trump presidency, and those trade tensions persist today.

Semiconductors have become a point of tension between the two nations. The US has tried to cut off China’s largest chip maker, SMIC, from US technology.

A number of factors have contributed to the chip shortage, including a surge in consumer electronics demand amid lockdowns around the world following the onset of the pandemic. The US trade war with China also resulted in companies stockpiling supplies.

Jia said that if there were “no major issues” with global trade disputes, the chip shortage could “be resolved in two to three years.”

“Otherwise it’s really hard to tell whether the trade and economic sanctions between nations will continue,” Jia said.

Leading executives around the world expect the chip shortage to persist through 2022. Some even believe it could extend beyond that.

Expansion in the USA and Europe

Hisense may not be familiar to many consumers, but over the past few years the company has tried to bolster its brand in some of its key markets.

The company is a sponsor of the 2020 European Football Championship and the World Football Championship. And it has ambitions to continue expanding outside of China.

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

Currently, around 40% of Hisense’s sales come from abroad. Jia said he hopes 50% of the company’s business will come from outside of 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 regions where existing brands are shrinking and there is a gap, we’ll fill the gap with Hisense branding,” Jia said. “In this way we will develop our brand well, follow the model of moving from the low end to the middle end until we can produce high-end products.”

As long as we are producing value at low cost, leading the way in technology, improving our service and quality, consumers will still like us – in China or around the world.

Jia Shaoqian

Hisense Group Holding Co.

There were a handful of Chinese brands that managed to crack the European market, but less so did the US. In the smartphone sector, companies like Xiaomi, Oppo, Vivo and Huawei did well.

But the success of Chinese brands has also been scrutinized by the governments. The U.S. government has accused Huawei of posing a threat to national security, a claim the company has repeatedly denied.

Jia said he believes the negative sentiment towards Chinese brands will not stop Hisense’s pursuit of global growth.

“There is some misunderstanding from consumers about Chinese brands, but these are usually not related industries that Hisense is in. We manufacture household appliances. As long as we produce value at low cost, lead the way in technology, improve our service and quality, consumers will still like us – in China or around the world, “Jia said.

“We have grown rapidly in the US and European markets in recent years without being affected, and this shows that consumers will make decisions with their wallets.”

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