A global shortage of computing microchips is currently the biggest challenge for gaming machine manufacturers, says businessman Jay Chun (pictured in a file photo), president of the Macau Gaming Equipment Manufacturers Association (MGEMA), in comments to GGRAsia.
Disruption to regional logistics due to the Covid-19 pandemic was another hurdle for the supply chain, he noted. Mr Chun’s trade association currently has 100 entities as members. They range from slot machine and casino equipment manufacturers and suppliers, to providers of casino resort furniture and accessories.
For slot makers, “the biggest problem comes from delay in component supply, due to a global chip shortage,” said the MGEMA president. He also chairs Hong Kong-listed casino equipment maker and gaming management services firm, Paradise Entertainment Ltd. It produces gaming technology under the LT Game brand.
Slot machine components such as the logic unit and bill validator, depend on microchips. There were now months of delay in order to build a slot machine, Mr Chun noted.
“Various sectors are competing for chips from a limited [supply] capacity. Many sectors – not only us – need chips for their production. The automotive industry, for instance, is a sector that has a very robust demand for chips,” said Mr Chun.
The regulatory constraints on the gaming industry, made it difficult to source components more quickly by using an alternative supplier – a route that might be open to some other sectors.
“A big problem” for the slot sector, is that “after you gather every component, you need to have it certified; and after it is certified, you cannot change [the components], which means, you cannot use one type of chip today and another the next day.” Mr Chun noted.
Some improvement in logistics had been seen recently, as Covid-19 associated lockdowns had been lifted or eased in many places around the world, the MGEMA president said.
Referring first to a mainland China export hub, Mr Chun stated: “After Shanghai was in lockdown [from March], ships and many deliveries got stuck there.” He added “Then, the logistics flow was directed to elsewhere in East Asia, such as Taiwan, as everyone has been trying to fight for the [logistics business] pie. That’s how the logistics cost has come down and started to normalise.”
Betting on Macau
In Macau, the demand among the city’s six casino licensees for new gaming equipment was currently low, noted Mr Chun. Some MGEMA members that had been engaged in producing game software and betting platforms, had either “transitioned to a new business”, or “quit” the market, Mr Chun told GGRAsia.
As well as the recent stop-start nature of Macau’s tourism industry amid Covid-19 precautions, “we also have the issue of waiting for new gaming concessions to start,” Mr Chun said, referring to a new round of 10-year concessions likely to be awarded in time to begin operation early next year.
He added: “For the whole of this year, the [Macau] gaming operators are not really purchasing new [gaming] machines, except for upgrading some of their old ones.” A main reason was the operators were facing the expiry of their current concession rights at the end of this year. Gaming assets – including equipment – were technically “revertible to the government by that date,” were any of the operators not to have their present rights refreshed, and “so the operators do not want to commit too much by way of costs,” stated Mr Chun.
On the consumer-demand side, “the gaming business is really bad in Macau as social distancing rules are still in effect”.
“That means not all slots installed on a gaming floor are allowed to work, which will continue to impact the gaming floor layout,” Mr Chun explained.
Nevertheless, Mr Chun said many in his trade group were still “toughing out” the situation, hoping for better trading conditions next year. “Overall, we are still confident in Macau. Once the new concessions start, the operators will definitely want to purchase new equipment and machines because they have not done it for two years: they will need to replace their old ones,” said Mr Chun.
The MGEMA president added: “So we will watch out for next year. China’s policy on Covid-19 restrictions will also ease at some point.”
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