The media and tech sectors are feeling the wrath of the ongoing global supply chain crisis.
While some economies have begun their recovery following the worst of the COVID pandemic, others are still playing catch-up. This imbalance in the economic recovery has created a crisis in which supply is unable to meet growing demand.
During the crucial holiday season, auto and tech companies are seeing continued impact by the global chip shortage, while consumer products companies are facing rising input costs.
The semiconductor chip shortage has been particularly difficult for most of 2021, as the heavy demand for chips is outstripping supply. With the rapid advancement of technology, countless companies in various industries rely on semiconductors to power their products and services.
iPhone maker Apple and video game maker Nintendo are among the big consumer-facing tech companies to face headwinds from the chip shortage. Apple’s CFO revealed in the company’s recent quarterly results that Apple took a $6 billion hit to sales as a result of the chip shortage and sees more negative impact ahead. Nintendo recently warned that it would see a hit to its Switch console sales as a result of the chip shortage. Nintendo said it now expects to sell 24 million units this year, down from the previously forecast 25.5 million.
The supply chain crisis has caused another painful side effect. Because companies can’t ramp up supply to meet demand, a slew of multinational corporations are also being forced to pull back on advertising and marketing of their products and services. And less money spent on ads spells trouble for media companies, for which ad revenue is a sizable portion of their toplines.
After getting slammed in 2020, advertising spend across the board was booming this year with every single major category seeing exponential growth over 2020. However, estimates from advertising agencies are signaling trouble ahead in Q4 and the first half of 2022. According to Magna's latest U.S. ad forecast, all major industries will likely see a deceleration in ad spend in 2022 versus 2021.
And media advertising is no exception. Both traditional TV and digital advertising were on a strong path to recovery. While the growth is still estimated to be solid through yearend, Magna predicts a slowdown coming in 2022.
While advertising across both digital and TV will likely be affected, digital will feel the pain much sooner than TV. TV ads are purchased further out than digital, and thus last-minute ad cancellations are somewhat easier for digital ads.
After a sharp ad slowdown in Q3, tech companies Facebook and Snap warned of further impact from supply-chain disruptions on their upcoming Q4 financial results. The social giants attributed the impending slowdown to Apple software updates as well as persisting supply-chain issues.
And though the impacts haven’t materialized as quickly on the media side, Disney, ViacomCBS, Roku and Discovery are among the companies that mentioned “limited visibility” on recent earnings calls caused by supply-chain constraints experienced by clients.
The supply-chain issues are worrisome, but it’s too soon to assess the full impact on the media and tech landscape. Many view the disruptions as short-term turbulence amid the broader global economic recovery, and any slowdown in growth will likely be offset by the increasing demand in the long term.