Chip deliveries to Europe delayed as Iran war hits air freight
European companies that import semiconductors from Asia are tapping into spare warehouses and paying more for deliveries as the Iran war causes disruptions to air transportation routes in the Middle East, industry insiders told CNBC.
The Iran war has caused mayhem on cargo routes as shipping and airports have been targeted since the war began on February 28. Global air freight capacity carrying cargo such as semiconductors and other high-value electronics is down about 9% from pre-war levels, according to data from logistics firm DSV.
This has led to increased costs and delivery delays for European companies importing semiconductors from Asia; Additionally, some manufacturers are importing fewer chips from the region due to these capacity constraints.
Chips are an important component of all electronics. Many companies, from industrial giants to data centers to automakers, import certain chips from places like China and Taiwan.
“What you’ll see in the coming weeks is hopefully inventory levels will trend downward.” [logistics costs] It will normalize,” said Stefan Krikken, head of air transport at DSV., He pointed to European automakers using semiconductors for various electronic systems in vehicles, he told CNBC.
Chip imports from other European companies offset rising air shipping costs, Krikken said. He added that DSV had not seen a “significant” drop in chip imports overall as a result of the dispute, but that many buyers were paying premium costs to ensure continued deliveries.
A European chip company Some semiconductor deliveries are experiencing delays of several days, a person with direct knowledge of the matter told CNBC, requesting anonymity discussing private business matters. The source said that air transportation costs have increased, adding that the company does not have visibility on whether prices will drop again in the coming months.
chip import
Iran’s attacks on infrastructure, including airports, in the Middle East have resulted in a hit to global air transport capacity. Many cargo planes flying from Asia to Europe previously passed through airspace in the Middle East or refueled at hubs in the region.
That means more carriers are flying direct and are having to reduce the amount of cargo they hold to make room for extra fuel, which could mean disruptions in cargo, Krikken said. Krikken said jet fuel accounts for 50% of airline operating costs, and as the cost of oil increases, so do prices.
As a result, buyers who want to import goods from Asia to Europe are forced to pay high costs for delivery.
German auto supplier ZF is paying more to maintain supply chains as airfreight shipments of semiconductors continue, a spokesperson told CNBC.
Those importing higher-value products, including the most advanced chips and other technology products, absorb those costs, while companies buying lower-value products are more likely to turn to stock warehouses in the hope that the cost of shipping by air will drop in the near future, Krikken said.
“There’s such a broad spectrum in technology, from chips worth a penny to racks of data worth millions of dollars,” he told CNBC. “So the lower the value, the higher the impact.”
delays
Some European chip foundry companies, original automotive manufacturers and contract manufacturers are experiencing delays in semiconductor deliveries, Razat Gaurav, CEO of supply chain software platform Kinaxis, told CNBC.
He added that many customers who purchase these chips have restocks that can last anywhere from a week to months, depending on the job.
Supply chains and stockpiles have been supported since 2017. Chip shortage due to Covid.
“Many shippers have adjusted their supply chains to maintain higher inventory levels post-Covid,” Krikken said, adding that many companies have moved to diversify providers of these chips.
“We are not currently seeing any impact on our production,” a Volkswagen spokesperson told CNBC, adding that the company is “closely monitoring” its supply chain and does not currently see any signs of bottlenecks.
Companies are “actively stress-testing semiconductor flows as disruptions to critical routes such as the Strait of Hormuz and the airport in Dubai ripple through global supply chains,” Gaurav said.
“What emerges [are] “Fare cuts on flows from Asia to the Middle East and Europe, depletion of buffer inventory levels, and increased logistics costs as organizations assess risks from suppliers, reroute shipments, and rebalance inventory in real time.”
