Product Redesigns, Price Hikes -- Vendors Coping With Chip, Shipping Woes

LAS VEGAS – Home technology vendors, squeezed by chip shortages and shipping logjams, are battling to meet continued dealer demand for home audio, networking gear and other products they need to finish custom projects, several told us at the ProSource spring Summit this week.

Lenbrook didn’t cut back on production over the past few years, and it benefited as a “reliable source” for products, but “the shortages and the complexities of the supply chain” are “affecting us now like everybody else,” Lenbrook’s Stephen Baker, senior director-sales, Americas, told us. The manufacturer of Bluesound, NAD and PSB brands is working to provide “as much continuity and sustained production as we possibly can.”

Lenbrook has been a “responsive supplier,” Baker said, acknowledging some dealers “may differ,” due to backorders on key products that have long lead times. He cited a “high loyalty factor” for the company’s BluOS products due to performance, saying, “I don’t think we’re seeing any migration from our brands on the basis of supply. That may not be true for other brands, but not for ours.”

Some dealers wondered aloud whether manufacturers are so mired in shortages of current-generation products that they will let orders go unfilled, skipping ahead to the next generation, while building in price increases to cover higher component and shipping costs. Baker said Lenbrook is “doing everything we can to bring out new products, but we have definitely prioritized current production. ... That doesn’t mean that we won’t be selectively bringing out new stuff.” Lenbrook expects to have a “very good year,” he said.

Origin Acoustics is “working diligently” to maintain “high-velocity SKUs,” CEO Nick Berry told us. “We’re changing the way we manufacture products to eliminate delays,” he said, describing a more modular approach. Homeowners can't close on a new house without a completed speaker installation since “you can’t move into a house with holes in the ceiling,” Berry said. When the speakers arrive, installers remove a filler, then snap the speakers into the holes. The modular approach will stick after the COVID-19 pandemic era because it’s more cost-effective and “better on the dealer,” who can get a job done “and know that they can go back later and fill the holes," Berry said.

Similarly, with its acoustical panels, Origin changed the mounting system so the same design works with all its panels. When a panel's finish -- the portion of the project that takes the longest time -- has been completed, “you can just snap it in place,” he said. The impact of shortages has been minimized at Origin by a bracket design that crosses models, allowing it to order the “highest-selling” models and “upgrade customers to those SKUs,” Berry said. Amplifier chips have been the toughest components to get, he said: The company changed product design to use fewer chips and is now able to manufacture six times as many amplifiers, he said.

Despite having had to air-freight products due to port congestion, Origin hasn’t had to bump prices, “nor do we intend to,” Berry said. Historically, when Origin has raised prices, it has been only for an affected product or rising cost of materials, he said. "We don’t raise everything," he said: "Why charge somebody more money for something that we didn’t really need to raise the price on?”

At Sound United, an “incredible February and March” resulted in shipping more AV receivers this year than the company did in 2021, Kevin Zarow, vice president-sales, the Americas-distribution, AV specialty and custom integration, told us. Shipments haven't kept up with demand, “but we’re doing everything we can to keep this stuff in stock,” he said, calling dealers “our lifeblood.” Inventory is continuing to improve, he said.

Sound United isn’t talking about new product lines, Zarow said, except for new sound bars from Bowers & Wilkins and Polk Audio launching this month. It's planning to bring out new products, "but we’re not talking about new AVRs” at this point, he said: “We’re filling current orders with current products.” Electronics have felt the chip shortages the most, he said. He declined to comment on the potential impact of the proposed acquisition of Sound United by medical technology company Masimo (see 2202150076).

Shipping is currently the biggest issue for Sound United, Zarow said, saying the company used to be able to tell a dealer within a day when a product would arrive in its warehouse. Now, “the ports are backed up, there’s stuff sitting on ships,” he said. A shipping manifest gives an arrival date and time to the warehouse, but if the ship doesn’t come in, the information is completely wrong," he said.

Sound United used air freight to meet holiday season deadlines, Zarow said. Air freight is expensive, and shipping costs in general “are through the roof,” Zarow said. A $2,500 container in the past could be up to $25,000 now. Though rates have come down some, “it’s so far off what it used to be,” he said. In response, the company raised prices in January, varying by model. Marantz prices increased in August, he said. He hoped there wouldn’t be more but noted the various global uncertainties at play.

Shipping woes affected Premium Audio Co. in a very local way at the Summit, with several of its products destined for Las Vegas held up in Kansas City, Jim Kozicki, regional sales manager, told us, estimating the gear would likely arrive as they were tearing down the booth. Aside from Klipsch speakers, which have a healthy supply of inventory, the company -- whose brands include Integra, Onkyo and Pioneer -- transitioned product lines for other brands at the Summit, Kozicki said, allowing it to “close out of the older stuff and into the new stuff. We’ll have enough product to get us through until May," he said.

The Voxx subsidiary has manufacturing in China and recently began production in a new facility in Vietnam that Voxx moved to so it could diversify manufacturing and reduce exposure to the Section 301 tariffs. “We made a sizable investment in that factory, just to have it completed just in time for COVID to shut everything down,” Kozicki said. The Vietnam factory “sat idle” for about 18 months, he said.

On the status of Premium Audio’s Wireless Speaker and Audio Association (WiSA) strategy, Kozicki cited several issues that disrupted the company's plans for the wireless audio technology, including limitations around one iteration that was designed to be used with "LG TVs specifically and select gaming consoles.” When WiSA came out with the SoundSend transmitter last year to widen compatibility, “we couldn’t manufacture products because of chip shortages,” he said.

Kozicki referenced the November 2020 AKM factory fire in Nobeoka City, Japan (see 2011270006), that “limited our ability to build that WiSA product.” The company has been “playing catch-up on that ever since” and is now “investigating what the new SoundSend will mean for the line and evaluating where that’s going to go moving forward," Kozicki said. "I do believe we will remain committed to being a developmental partner for WiSA,” he said.

Long lead times for lighting products and controllable shades have been a pain point for custom installation dealers. Hunter Douglas narrowed its motorized shades product backlog in 2022, Maren Gehling, national sales manager-CI channel, told us. Though lead times are improving for the company's motorized shades, in some cases they're still "months,” vs. a 10-day turnaround time pre-COVID-19, she said. Even fabric is in short supply, Gehling said, saying the company has had issues getting woven-wood fabric in particular and having it meet specifications. Demand fueled by stay-at-home trends has been “significantly higher than historically,” she said; when it normalizes, lead times are expected to follow suit.

Hunter Douglas raised prices several times over the course of the pandemic, Gehling said. Increases are typically tied to new product launches, with the next due in May. The company previewed the PowerView Gen 3 at the Summit, which transitioned from RF to Bluetooth Low Energy control. Bluetooth increases range and reliability; it also extends motorized shade control to customers outside of the custom channel who can control shades with their phones, Gehling said.