The US and Israel launched strikes against Iran three weeks ago, and the end appears to be in sight. The conflict, which appears to be escalating and plunging the Middle East into a deeper military confrontation, has shaken several industries, including global energy markets, aviation and tourism.
Another industry that is experiencing an impact on the Middle East is the semiconductor industry. According to a CNBC report, European companies importing semiconductors from Asia are now paying more for supplies and using back-up deals as the conflict in the Middle East has disrupted air cargo routes across the region.
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Air transport capacity of the slide
Citing data from DSV, the report said the Iran war had caused disruption to cargo routes as both ships and airports were targeted since the war began in late February, with global air cargo capacity down around 9%, although the company does not release absolute baseline figures for capacity. Airlift capacity transports cargo such as semiconductors and other high-value electronics.
DSV’s head of air cargo Stefan Krikken told CNBC that over the next few weeks inventories will be reduced with the hope that logistics costs will return to normal. He made these remarks in connection with European automakers, which use chips for a number of electronic systems on board vehicles.
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This has led to increased costs and delivery delays for European companies that import semiconductors from Asia. Additionally, some manufacturers are now importing fewer chips from the region due to capacity constraints.
Semiconductors, or chips, are a significant part of all electronic items, and companies ranging from industrial giants and data centers to car manufacturers import certain chips from places like China and Taiwan.
How are European companies doing?
Krikken said some European companies have borne higher air freight costs when importing chips. He added that his logistics firm has yet to see a significant drop in overall chip imports due to the ongoing conflict, despite many buyers paying premium rates to ensure continued supplies.
Semiconductor airfreight for German automotive supplier ZF has continued, but the company is incurring higher costs to keep its supply chains running, the report added, citing a spokesman.
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Krikken said companies that import higher-value goods, such as high-end chips and other technology products, continue to bear these additional costs. In contrast, companies trading in lower-value commodities are more likely to rely on existing inventories in the hope that air freight rates will decrease in the near future.
The conflict in the Middle East is impacting air cargo capacity
Iran continues to attack infrastructure across the region. This includes airports in the Middle East and global air cargo capacity has taken a hit as a result. In the pre-conflict days, several cargo planes flying from Asia to Europe traveled through airspace in the region or stopped to refuel at their hubs in the region.
However, this is no longer the case. That means several carriers are now flying direct and are being forced to reduce the amount of cargo they hold just to make room for more fuel, a move that effectively reduces payload capacity, a DVS official said.
As a result, buyers in Europe who want to import goods from Asia to Europe are now forced to pay higher shipping costs.
