The new COVID-19 lockdown in Shanghai is shutting factories and causing containers to pile up at the city’s shipping port — the world’s largest — portending more supply chain havoc for many industries. With that, the recent cautionary words of several LED and lighting industry CEOs are ringing true.
Even before Shanghai fully curtailed the activities of its 25 million residents in April, the bosses of LED lighting companies Acuity Brands and Zumtobel Group, and of LED chip supplier Smart Global Holdings (Cree LED) had all prepared remarks delivered during their companies’ quarterly result presentations warning that the end was not in sight for long-running supply chain difficulties.
While Acuity boss Neil Ashe might not have had the Shanghai lockdown specifically in mind — it started the day that the Atlanta company presented second-quarter results on April 5 — he rightly noted that there is still plenty of uncertainty in global logistics, which have been hammered by factory stoppages and subsequent shipping difficulties ever since the beginning of the COVID-19 pandemic more than two years ago.
“I can’t think of a different analogy other than Whac-A-Mole,” Ashe said, after a financial analyst asked him on a web conference call to describe the current supply chain situation. “It just seems to be something different each time. You see that flowing through in — pick your commodity, pick your component. The big picture trends are pretty obvious. There is more demand than supply for global chips. So working through allocations and demand planning is a challenge, trying to get our share of those. Transportation has been a problem.”
The difficulties have pushed up prices of materials and commodities, including steel and aluminum, compounded by the war in Ukraine, Ashe added. “So we’re kind of playing Whac-A-Mole.”
Likewise, on the same day, the CEO of Cree LED parent SGH noted that supply issues had not generally improved.
“As many of our peers have also reported, supply chain challenges remain with us, and if anything, have heightened from a few months ago,” said Mark Adams in reporting on the company’s second-quarter results. In addition to Cree LED, Milpitas, CA–based SGH also operates a high-performance computing services and products business and a memory modules business. All continue to be affected by the logjams, Adams noted.
Their remarks came about a month after Zumtobel CEO Alfred Felder gave a stark assessment of the supply chain in comments he issued when reporting on the Dornbirn, Austria company’s third-quarter results.
“There are still no signs that would justify an all-clear signal,” Felder said. “Rising raw material prices and, above all, the semiconductor shortage will potentially have a stronger impact in the fourth quarter. From the company’s viewpoint, the current market environment is almost more challenging than at the beginning of the corona pandemic. Our current priority is, therefore, to protect the delivery capability for our products and the high service quality for our customers.”
Despite the difficulties — which could soon worsen with the Shanghai shutdowns and slowdowns and the lag time for those to be felt around the world — all three companies reported increases in sales and in two cases profits, citing measures they have taken to help cope with the difficulties.
For the three months ended Feb. 28, Acuity sales rose 17.1% to $909.1 million compared to the same quarter a year earlier. Net income jumped 19.7% to $75.3 million. In SGH’s second quarter, which ended on Feb. 25, sales rose 48% to $449 million compared to the same quarter a year ago prior to SGH’s acquisition of Cree. Net income declined to $2.5 million from $5.8 million. For Zumtobel, revenues for the third quarter ended Jan. 31 rose 14.7% to €279.2 million compared to the year earlier quarter, while net profit leaped by over 500% to €9.7 million.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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