OCTOBER 01, 14:32 EDT

Shortages May Affect Holiday Season

By ADAM GELLER AP Business Writer

NEW YORK (AP)  Some are barely the size of a sesame seed and cost only a few pennies.

But severe shortages of tiny, often overlooked electronic components are taking a big toll on makers of video games, handheld computers and other devices popular with consumers.

And the frenzied demand of the holiday season is visible on the horizon.

Latest evidence of the shortage came this week when Sony Corp. announced that a lack of components will force the company to halve initial shipments of its new PlayStation 2 video game consoles, likely to be one of this year's most sought-after gifts.

The paucity of obscure parts like capacitors and flash-memory chips has been a nagging problem for months, reaching across a broad range of electronics products. Just how much this will effect what consumers see on store shelves in coming months remains to be seen.

Parts makers say they're struggling to meet demand, but that they remain far behind with no hope of catching up by the holiday season.

Many component makers ``almost don't want to take calls from some of their main accounts,'' said Bob Willis, president of the Electronic Components Assemblies and Materials Association, an industry group based in Arlington, Va.

Companies that rely on components to make the finished products sought by consumers are thrilled by strong demand, but troubled by the continuing parts shortage that leaves them unable to meet it.

``Given that the market for Palm handhelds is substantial  it's like twice what anybody forecast a year or two ago  it's monumentally difficult to get your hands on all the components necessary to ship a completed product in volumes to match demand,'' said Marlene Somsak, a spokeswoman for Palm Inc., based in Santa Clara, Calif.

The company shipped 1.5 million handhelds in the quarter that ended Sept. 1. But some analysts have estimated the figure could have been up to 40 percent higher had components been available.

Sony says it will try to meet demand by shipping out its PlayStation 2 in smaller batches, as soon as parts become available.

``We will be able to supply a flow of products, instead of a huge initial spike,'' said Kaz Hirai, chief operating officer for the Tokyo-based electronics giant.

Industry observers say the parts shortage is rooted in the booming economy, which has loaded consumers with cash. The good times coincide with the rapid spread of computer technology to a whole range of products, from in-car systems to wireless phones.

All that has lead to rocketing demand for parts like liquid crystal display screens, semiconductor chips and tiny capacitors and resistors, all vital to most computerized devices.

-- Carl Jenkins (Somewherepress@aol.com), October 02, 2000

Answers

nd here's the rest of the story and the link :But parts manufacturers have been wary of increasing production. Just two years ago there was a glut of some parts and prices were so low that most were barely breaking even, Willis said. Most now believe demand won't soon fade, but it is taking time to get new factories up and running, he said.

That lag does not seem to trouble major retailers, who say they expect brief shortages of certain items, but no serious problems.

``There will always be spot shortages at any given time,'' said Bill Cimino, a spokesman for the 618-store Circuit City chain. ``But our buyers have been working with the suppliers over the past months, as you might imagine, and we are told that key suppliers will provide us with products for the holiday season.''

Smaller retailers, however, expect problems getting all of the hottest items because electronics manufacturers often reserve scarce shipments for the big chains, said Elly Valas, executive director of the North American Retail Dealers Association, which represent independent stores.

But Valas said that is a constant every year and is not a major concern.

``Some of our dealers are getting smarter about it and they're ordering more up front intentionally,'' said Valas.

Cimino said Circuit City employees will be encouraged to talk with consumers about the features they're looking for. The hope is that when certain products are not available, shoppers may buy a similar item that is in stock.

Industry analysts agreed that shortages won't be a major problem.

Best Buy will initially lose about $20 million to $25 million in sales, while Circuit City will lose about $10 million in revenues because of Sony's problems, said Doug Gordon of Banc of America Securities. But they will be able to make up the business after the holidays, once the games are delivered, he said.

Some companies are even trying to take advantage of the shortage.

Handspring Inc.'s Visor handheld devices don't contain the flash- memory chips that are slowing output of many of Palm's products.

Not having the chip means Handspring's devices cannot be upgraded, but company spokesman Brian Jacquet said it hopes consumers will be happy just to see its products on the shelves.

``It's definitely the type of game where you have to take advantage of the opportunities that are out there,'' he said.

cross posted from TB2000

http://pub5.ezboard.com/fyourdontimebomb2000.showMessage? topicID=12288.topic

-- Carl Jenkins (Somewherepress@aol.com), October 02, 2000.

This sounds just like all the warnings we had last year about coming y2k-related supply chain problems.

-- Uncle Fred (dogboy45@bigfoot.com), October 02, 2000.