The Intricate Reality of AV Supply

By Peter Hansen
AVIXA
Economic Analyst

AVIXA’s latest Macroeconomic Trends Analysis takes a deep look at the state of supply issues 

The economy right now is a swirling mix of rebounding demand, continuing COVID-19, economic recovery, and uncertainty. Where once the primary economic problem was the diminished demand and adjusted patterns resulting from the pandemic, the current conditions are bringing a new problem to the fore: supply. Throughout the economy, people and businesses alike are seeing reduced availability, longer lead times, and rising prices, all a product of underlying difficulties with supply. 

In our most recent Macroeconomic Trends Analysis (META) report series, exclusively available to AVIXA members, we looked at how the supply issues are affecting pro AV and how companies can best respond. The first question we asked was about cause. We have seen the chip shortage cited as the cause, but our data shows otherwise—with important implications for businesses. Our next question was about degrees.  Anecdotes from the media and pro AV community have utility, but they can miss the whole picture in favor of the interesting story; we turned to our global AV Insights Community for a better, more objective gauge.  Lastly, we studied what works in responding to supply difficulties. A big surprise there was about the success companies have had in passing through price increases. 

The microchip shortage is a significant economic problem, and it certainly affects pro AV. But it is a misconception that chip shortage is the main source of difficulty for supply acquisition.  The importance of other causes is well illustrated by the comparison of control systems and infrastructure equipment.  Our Insights Community identified control systems as most affected by the chip shortage, but when they were later asked which products had the most significant supply issues, almost twice as many respondents identified chip-free infrastructure products as most affected (13% for infrastructure vs 7% for control systems). Clearly, there are forces in play beyond the chip shortage. 

If not the chip shortage, what is causing supply difficulties? We see three major issues: the pace of recovering demand, continuing pandemic issues, and uncertainty.  Understanding the true causes is important because it has direct implications for how your company should respond.  We detail all the causes and their implications in the full report, but we’ll give one illustrative example here: If you are focused on the chip shortage rather than COVID-19, then you’re probably not monitoring pandemic conditions along your supply chain and could be caught flat-footed when a country’s lockdown strikes a key supplier. Knowing the true causes tells you where to focus your attention and helps you stay ahead of the curve. 

The scale of supply issues is another area where the most common narrative can be misleading.  While certain products have loud problems—major delays, price increases, etc.—many others quietly remain readily available at the same price month after month. On net, our data confirms there is a real issue here: supply is harder to come by now than pre-pandemic and prices are rising. But things are not so dramatic as they seem in the headlines. The Insights Community reports price increases firmly in the mid-single digit range. By comparing our data to the U.S. inflation numbers, we see that pro AV faces issues slightly beyond those in the wider economy.  Still though, they are comfortably in the moderate and manageable range. 

Timeframe is one of the interesting aspects of supply issues. From the perspective of manufacturers, supply problems have been even since the onset of the pandemic (underscoring again that the issues run much deeper than microchips, whose shortage started in late 2020). From the perspective of integrators and end users, issues have peaked in recent months. Why the discrepancy? Demand.  Yes, it was difficult to get hands on web cameras last spring and summer, but by far the bigger issue was the dearth of demand.  Now demand is back, surging, and the microscope now focuses on how to meet it. Our data gives clear reason to believe that we are not yet at the peak of supply issues (though we are likely close). We cover a lot of important nuances in the main report, but one takeaway is that things are likely to get a little worse before they get better, with an upward trajectory taking hold by the start of 2022. 

We close the full report with a study of how companies are and should be responding to the supply issues. That section starts with data, including both what strategies companies have been deploying so far and which of them have yielded the most success. It was not surprising to see that passing price increases along was common, but what was surprising was how often respondents identified this response as most effective. After the data section follows a descriptive section, with ten responses described in full. The smartest companies will be using multiple as they tailor approaches to specific conditions; for example, working with multiple suppliers where redundancy has value and buying in bulk from a single supplier when being a big, priority purchaser is best. 

We are lucky to see the economy digging out of the pandemic’s hole, but the growth comes with pain.  Right now, supply is the thorn in the side.  Supply is an economy-wide issue, and pro AV is struggling more than the economy on average.  But there are good responses for pro AV companies, especially when you can tailor your approach to fit the true underlying causes and the specific needs of your case.  It will not be easy, but with good information and a proactive approach, pro AV companies stand to make big gains throughout the recovery process. 


Download the complete Macroeconomic Trends Analysis (META) report here.

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Peter Hansen
AVIXA, Economic Analyst

As AVIXA’s Economic Analyst, Peter Hansen’s job is to understand how the professional AV sector interacts with the wider economy.  Peter relishes the challenge of this task, to which he brings a data-focused skillset and a passion for critical analysis.  In the past, he has worked for the Federal Reserve Board and been published in RealClearMarkets, Finance and Economics Discussion Series, and The Atlantic.