Fewer China flights may worsen chip shortage with port snarled

Congestion at the world’s biggest port in Shanghai is being compounded by reductions in air-cargo capacity at the city’s main airport, a situation that’s likely to raise costs further for the semiconductor industry.

It’s now taking more than two months for goods to get shipped by sea from Shanghai to the U.S., a wait time that’s too long for the crucial chips used in everything from cars to computers, according to Keelvar, a European-based supply-chain services provider whose customers include Samsung Electronics Co., Logitech International SA and Siemens AG.

But air cargo isn’t providing the back up it might. The U.S. and China suspended dozens of flights over Covid-19 testing protocols earlier this month, while the discovery of an infected worker at Pudong airport’s imported cargo handling facility on Jan. 24 sparked rounds of mass testing and sent hundreds of people into quarantine, although Chinese authorities said operations weren’t immediately affected. 

Air-freight prices could be inflated by around one-third if disruptions to airport capacity continue, according to Dylan Alperin, head of professional services at Keelvar.

“Businesses are looking to air to get goods out of congested ocean networks and locked down Chinese ports, but to no avail,” Alperin said. “With the current inflated market, an additional 30% would be very significant on imports to the U.S. like computers, cell phones and chips—the most common commodities coming out of Shanghai.”

The situation has echoes of an incident in Shanghai in August last year, when Shanghai Pudong International Airport shut its entire cargo zone after five workers at the terminal were found to be infected, prompting delays of electronic car parts out of China for Japanese automaker Mazda Motor Corp. 

This year, shipping lines diverting container vessels from Ningbo to Shanghai to avoid a trucking snarl in east China are also contributing to congestion at the mega port.

“The main challenge is the airport situation in Pudong and other China airports,” said Alex Hersham, CEO of digital freight forwarder Zencargo. Additional Covid-19 curbs in China may impact airports and pose additional challenges for already stretched supply chains, he said.