Slot Machines Deliveries Hit Supply Chain Rocks

Dozens of casinos, including expansions and new properties, are threatened by a supply chain issue. The issue centers around chips that are vital to the manufacture of bill validators, which all modern slot machines have. The chips are held up in Asia by Covid lockdowns.

Slot Machines Deliveries Hit Supply Chain Rocks

The deliveries of slot machines to about 30 casinos, some of them expansions or new properties in North America, are maneuvering through shoals of supply chain issues that occasionally spill out onto the rocks.

According to a report in the Nevada Independent, as many as 13,700 new slot machines are in danger of not being delivered to the casinos that need them.

The main issue are high tech components, the same kind of components that are forcing some car manufacturers to leave their automobiles sitting unfinished in factories. The most attention is being paid to bill validators, which are attached to slots and accept cash or ticket vouchers—and convert them into credits.

The manufacturers are largely in Asia, and many of them are in China, which is experiencing problems due to its extended Covid-19 epidemic lockdowns.

Eilers & Krejcik Gaming partner Todd Eilers told the Nevada Independent, “Everyone is trying to figure out a workaround.”

International Game Technology’s Chief Financial Officer Max Chiara, said in May his company lost $30 million in profits in the first quarter due to supply chain issues. He told the Independent: “This is the biggest challenge we have right now.”

JCM Global, a Japanese company that makes most of the bill validators used in the gaming industry, “has seen sizable chip shortages impact its business, which we think could have wider implications for the manufacturer’s pipeline this year,” says Truist Securities gaming analyst Barry Jonas.

JCM has its U.S. HQ in Las Vegas. Its Senior Vice President David Kubajak admitted that it “is being affected by supply chain challenges.”

“JCM has established a global strategic sourcing team specifically focused on identifying and sourcing materials and components from suppliers around the world,” he said. “Even during these challenging times, JCM continues to ship out products daily and remains focused on meeting their gaming and casino customers’ record demand for their products.”

In recent years, the gaming sector has become more tech dependent and tech driven. Gaming equipment supplies have developed multiple sub-suppliers that procure materials and components well in advance of them being needed.

Daron Dorsey, executive director of the Association of Gaming Equipment Manufacturers, told the Independent, “All of the different companies are trying to figure out alternate solutions to find the different pieces, and that’s what made it difficult.” He added, “Someone might have had a historical provider of some type of component in their supply chain. If that provider is no longer available or delayed, the companies are having to go to three, four or five (component providers) instead of just one or two.”

Jonas added that this supply chain issue has risen to become one of the biggest concerns for a gaming industry trying to recover from the pandemic. “They have been using the term ‘whack-a-mole’ to describe operating in today’s environment,” he said. “Today, the risk is bill validators. But what’s the problem tomorrow? That is the real concern when you combine that with inflation and higher gas prices, and rising costs.”