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The Chip Shortage Affects Everything, Short of Advertising

The Chip Shortage Affects Everything, Short of Advertising

We’ve been hearing a lot about the chip shortage lately. 

And though the conversation mostly surrounds cars, the lack of semiconductors affects a range of industries.

From construction to smartphones, much of our economy depends on these materials.

Though Big Tech companies have been bringing in huge earnings, tech companies are facing headwinds with a limited supply of chips. But are supply chain issues enough to disrupt advertising budgets? It doesn’t appear so.

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Our electronic-dependent economy relies on chips

It’s clear that the chip industry is experiencing a major roller coaster ride. 

With people buying more electronic products for work and play at home, the demand for chips surged last year. At the same time, automakers cancelled orders, allowing other industries to move up in line for their purchases. On top of these changes, factories were forced to close (and a major one was even damaged by fire.)

This is sending ripple effects throughout the economy—not just the auto industry.

“Every aspect of human existence is going online, and every aspect of that is running on semiconductors,” said Pat Gelsinger, the new chief executive of the chip maker Intel, per the New York Times. “People are begging us for more.”

Almost every industry ranging from healthcare to streaming to shipping uses computing and communication products. And any company that offers communications or computing products needs chips.

“It’s going to affect pretty much everything,” said Parks Associates Senior Analyst Paul Erickson to Protocol. Who knew such a small product would have such a large economic impact?

With continued supply chain disruptions, the chip shortage isn’t expected to calm down until the end of this year, or potentially through 2022. 

But the shortage might become worse before it gets better. As part prices increase, businesses are slashing production efforts and deciding how much of the burden to put on consumers

In order to maintain profits amid rising part prices, have tech and electronic companies reduced their advertising budgets? Our data suggests that the answer is no. 

MediaRadar Insights

Many tech companies rely on chips to make their computing systems and other electronic devices function. 

Here we first take a look at B2B Technology spending overall, and then dive into Networking, Hardware and Communications sub-category data.

B2B Technology Spend by Format

The Overall B2B Tech Advertising Landscape

In 2021 to date there have been 11.8 thousand tech companies spending $242.6mm in the B2B space. This is up just 7% from 2020, where 10.8k companies spent $225.8mm.

In year-over-year comparisons by format, we see an increase in digital ad spend from 2019 to 2021. There is consistent growth, and digital ad spend now accounts for 67% of all tech advertising.

In 2021, the top advertising Tech companies in the B2B space have been: 

  • Primis
  • SAP
  • VMWare
  • Verizon
  • Cisco

The spending from these brands is almost exclusively invested into digital advertising.

Of these top brands, only Verizon is a returning top spender from 2020. This indicates that software and wireless networking is the focus of the tech category this year, rather than the focus on cyber and digital security we saw in 2020.

Networking, Hardware and Telecommunications

Networking, Hardware and Telecommunications B2B Ad Spend, Jan-July 2020 vs 2021 Chart

In the hardware, telecommunications, and networking category, we’ve seen a 9% increase in spend year-over-year. 

In 2020 these subcategories spent $18.8 million between January and July. This has increased to $20.4mm in 2021 (over the same seven months).

Top advertisers in these subcategories include: 

  • Dell
  • Dish Networks
  • Cox Business
  • Intel
  • Verizon

Their spend is driving the upward trend from hardware, telecommunications, and networking companies. Together their spend accounts for 30% of all spend in this group ($6.1mm).

Even though the chip shortage is a legitimate issue, it is just one piece of the overall picture right now. Some of the largest tech companies are seeing amazing profits. Dell sales of PCs, for example, were surging at the beginning of the year.

Right now companies aren’t letting rising part prices affect their advertising budgets. Tech companies, even those focused on hardware, telecommunications and networking, are spending more on advertising right now. 

But as company leaders warned, supply chain constraints may become tighter as the year progresses and it’s unclear how that will impact inflation, the overall economy and media buying. 

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.