What's causing the world wide chip shortage?

Oct 13, 2000 - 02:54 PM

Chip Shortage, Lack of Blockbuster Film, Spell Trouble for Toy Makers By Anne D'innocenzio The Associated Press

NEW YORK (AP) - There's trouble in toyland. Computer chip shortages are forcing manufacturers to delay introduction of some interactive toys until next year, meaning they will miss the crucial holiday season.

Meanwhile, the lack of a blockbuster movie this year is creating headaches for toy executives, given that 45 percent of all toys are tie-ins to films, TV shows or other forms of entertainment. Higher fuel prices have increased production costs for many companies as well.

All of these elements make for a disquieting combination as the holidays approach.

"This has been a difficult business for everybody," said Dean Gianoukos, a toy analyst at J.P. Morgan, pointing out that with the exception of scooters, no hot product has emerged.

Gianoukos and other analysts also pointed out that "age compression"- the industry's term for the shrinking of the traditional age for toys - is an increasingly nagging problem. Toy makers are finding they have to compete with fashion, music and electronic retailers for kids' dollars.

Companies are already starting to see an effect on their bottom line. Hasbro Inc., the nation's second-largest toy maker, warned this week it will eliminate 550 jobs, in part for these reasons as well as slowing demand for "Star Wars" products and Pokemon toys.

Overall, sales of traditional toys from the January-through-August period are down 0.3 percent compared with a year ago, according to the NPD Group Inc., a Port Washington, N.Y., market research firm.

David Miller, president of the Toy Manufacturers Association, said he is uncertain about the holidays this year - a marked change from 1999, when the industry had a blockbuster year because of the Pokemon craze.

Because of the worldwide chip shortage, Sony earlier this month said it can deliver only half of its planned initial shipment of 1 million PlayStation2 game consoles by the Oct. 26 launch date, reducing the impact of what is expected to be one of the season's hottest sellers.

Hasbro will be able to deliver only a limited number of I-Cybe, a $150 robotic dog.

Mattel, the world's largest toy maker, is on a campaign to bolster its traditional brands, such as Barbie and Hot Wheels. Last month, it managed to unload its money-losing Learning Co. unit, a maker of educational software.

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On the Net:

http://www.hasbro.com

http://www.mattel.com

-- Carl Jenkins (Somewherepress@aol.com), October 13, 2000