PC makers warn of battle for air freight capacity, will have to fight for cargo space with... the COVID-19 vaccine
- Reference: 1606737673
- News link: https://www.theregister.co.uk/2020/11/30/pc_makers_warn_of_battle/
- Source link:
The virus severely disrupted the computer supply chain, as lockdowns forced businesses to kit out their staff with new computers to work from home, and students who didn’t have their own machine bought one. This rapid rise in demand caught the industry off-guard.
[1]
Since April, components including CPUs, ICs and panels have been in hot demand. Lenovo said last month that it could only fulfil 60 to 70 per cent of its orders, and reckons the total available market for PCs will swell due to the dynamics caused by the pandemic.
The cost of air freight has been rising all year because, quite obviously, there have been very few planes in the sky. The arrival of the vaccine will mean that there is yet more competition for the very little air freight capacity that currently exists in the world...
Jeff Clarke, Dell vice chairman and chief operating officer, this week warned financial analysts, who are themselves advising corporate investors on what to expect in Dell’s final quarter of fiscal 2021 that ends February in terms of the rising costs around the sales of its computers.
“One would be LCDs and then particularly the components that go into the LCDs, most notably T-CONs and drivers, ICs. Those are in short supply driving up the cost of LCDs,” he said.
“And then likely, there is going to be challenges in the freight network towards the very end of the year as airplanes get filled up with vaccines and are all competing for a limited amount of space. So that’s how we look at the cost environment.”
Vendors do typically send a portion of their hardware by air, though these tend to be premium items or ones that customers have an urgent need for and may be prepared to pay more per box for air rather than sea logistics.
HP, which also released financial results for its Q4 of fiscal ’20, concurred there are “some headwinds and tailwinds on cost” that are facing the organisation in the run up to year-end, including components and shipping.
“And we do expect that there will be some higher logistics costs,” said Marie Myers, chief financial officer. “Particularly in, we're using a sort of a stronger mix of air. But we do have some one time related COVID supply chain costs that we expect will be lower going into Q1.”
As for component availability? CEO Enrique Lores said he was fearful of sounding “like a broken record” as he’d been discussing the “limitations” that HP faced in supply this year, but he warned thing aren’t getting better soon.
“The backlog that we have at the end of Q4 is the biggest we have ever had. So it’s not that the difference between supply and demand is being reduced, it has actually been increased, but it’s all been driven by increases of demand…. And we expect that this situation will continue at least through the first half of our fiscal 2021.”
Canalys boss Steve Brazier told us that in "normal times" around a fifth of notebooks would be sent to Europe by air freight. These would be higher-end models where there is more margin involved - retail devices tend to come by boat and as such need to be ordered many weeks in advance.
"But these are not normal times, because of Covid, as well as the worldwide shortage of components (especially panels) needed to build PCs. So currently around 30 per cent of notebooks are arriving by air freight as the PC vendors do all they can to fulfil what remains a very high level of demand.
"The cost of air freight has been rising all year because, quite obviously, there have been very few planes in the sky. The arrival of the vaccine will mean that there is yet more competition for the very little air freight capacity that currently exists in the world.
"In the old days, only fools bought new PCs for Christmas because they were always so much cheaper in January. That will not be the case this year, when prices could well rise in the New Year. Anyone looking to buy a notebook should buy one soon as long as they are lucky enough to find one!" ®
Get our [2]Tech Resources
[1] https://regmedia.co.uk/2020/11/27/shutterstock_airfreight.jpg
[2] https://whitepapers.theregister.com/
Re: Excuses, excuses
Who is going to remove these seats during lockdown? How much will that cost? How long will it take to put them back one air travel becomes a thing again? Would the cost of refitting twice be offset by the income from freight or would it make more economic sense for the airline to just not bother?
It's not as simple as "these planes don't have passengers so they can carry parcels instead."
Re: Excuses, excuses
Airliner seats are easily removed and replaced with simple hand tools. There are heavy duty channels on the cabin floor. The seats have matching clamps.
Re: Excuses, excuses
Yes, but hand tools require hands to operate - it still takes a significant amount of time to remove several hundred seats from an aircraft, even more if the seats have IFE screens and hardware embedded into them.
The seats then have to be offloaded and moved into storage, which also needs people to do, thus costing money.
Then after doing all this, you have space on an aircraft that is not accessible to containers, so any cargo going into this space has to be manually unpacked from the containers, placed into the cabin via the passenger doors, then secured by hand, all in a way that won't cause any weight distribution issues. At the other end you then need to unload it all in the same way.
The issue this all creates is that from a financial perspective, it's not as simple as "convert the planes to carry cargo", as the cost of moving cargo in the cabin of a converted aircraft is very different to that of cargo moved in the hold on a per-container basis.
Once this is all over, you then also have the cost and effort associated with refitting the aircraft, and if you have IFE ensuring that it all works properly again and that the hardware was not damaged during removal, transport, storage, transport and reinstallation.
Re: Excuses, excuses
Passengers do sort of subsidise the freight as they are the items transported with the highest cost to weight (and volume) ratio. Without the relatively high "shipping" charges paid by passengers you need to charge a lot more for freight to make the overall flight profitable.
Re: Excuses, excuses
The issue isn't really to do with seats, but with the number of planes actually flying.
Given the number of planes and flights is down, and that planes are standing idle, along with their crews. It is a really only a matter of resuming flights...
Longer-term we can worry about removing seats, short-term with no passengers, the entire hold is available for freight as is the seating areas. Yes, there is a small issue of cost recovery ie. making it commercially viable without the passengers, but thats a problem for the accountants.
Interestingly, I suspect because most of th computers are coming from China, whereas the vaccines aren't, there will actually be plenty of freight capacity on Chinese operated aircraft - does Huawei operate an airline?
Re: Excuses, excuses
"does Huawei operate an airline?"
You couldn't carry computers in a Huawei airline. They might be infected with back doors in transit and constitute a massive security risk the moment they were unloaded.
Re: Excuses, excuses
Taking the seats out doesn't transform a passenger plane into a cargo plane. Look at a standard aviation pallet. Those don't fit through a passenger door.
There are some efforts to use passenger space for small cargo. The one I just saw today uses FAA approved pouches secured to the seats along with smaller boxes in overhead bins. I suspect both are pretty labor intensive compared to palletized cargo.
I doubt it's a matter of passenger service subsidizing cargo service. Overly simplifed: in the before times, the top half of the plane was filled with people and the bottom half with cargo. Take away the top half's revenue and you're no longer profitable.
Re: Excuses, excuses
Still more money from passengers. But most of the vaccines have localised production and distribution strategies, so this is probably just more FUD.
I recently got some LED bulbs from China via air freight and there was certainly no premium for those.
"PC makers warn of battle for air freight capacity"
I hear that there are plenty of unwanted and unloved 737 Max planes waiting around and looking for something to do.
planes waiting around and looking for something to do
The RAF has a Voyager aircraft that with a £1 million bill for a paint scheme totally unsuited for use in active service - Blair Boris Force One white elephant may be available for hire at cheap rates
I was thinking more of all those 747's
that were retired early.
Those can carry an awful lof of cargo if you rip out the seats on the lower deck. There are trolleys in existence that can go through the messenger doors with pre-loaded freight especially the smallish packages that PC's and the like come in.
A bit of lateral thinking by the logistics people could solve this easily.
Re: I was thinking more of all those 747's
> A bit of lateral thinking by the logistics people could solve this easily.
Easy. Instead of shipping the vaccine to the people, simply ship the people to the vaccine. And planes are already designed to carry people. Simples.
Because ... $reasons
Anybody else notice that there is always the chance to increase price due to $reasons, but the same logic never applies in the other direction, that one just ends up as $profit.
I'm sure that there are lots of dedicated cargo planes out there and that with people ordering more on-line, then there must still be the same demand to keep those moving goods around.
Did they also forget that container ships and lorries are also very good at moving things around the world ?
Re: Because ... $reasons
Price and demand are interlinked. If more capacity is needed the higher prices will make it cost effective to fly cargo in the holds of passenger jets without any passengers. If demand for air freight is reduced prices will go down so only the most efficient carriers (dedicated cargo planes) will still be in the game.
Sure, it's difficult to manage a supply chain and suppliers are having to try extra hard right now. But once the vaccines start rolling, I hope this changes from "will have to fight for cargo space with... the COVID-19 vaccine" to "will have to give up cargo space to... the COVID-19 vaccine".
If there's a fight, I'd rather vaccine distribution wins over consumer electronics.
The item with the highest profit margin wins...
Global v Local
The article is on the worldwide situation which is not encouraging for suppliers or buyers.
Things could become even more challenging in the UK particularly for the price-sensitive 80% or so that arrives by sea. Already Felixstowe (which handles 40% of the UK container imports) is in trouble with its quays blocked by PPE & medical supply containers waiting for somewhere to go. Some incoming ships are being diverted via continental ports such as Rotterdam for imports to complete the final crossing by continental ferry. Many major techno companies supply the UK via warehouse hubs in the EU. Hence after January 1st it could be a problem getting them into the UK. As 'non-essential' they are going to be at the back of any queue involving food or medical supplies.
So when you get it and even how much you pay for it (who knows what tariffs may or may not apply?) makes planning a tad difficult at this time.
Seafreight takes 3 weeks
You can put 8000 laptops in a 40 ft container @ a cost of $5K or 60 cents ea.
The world needs more problem solvers
"The world needs more problem solvers"
And what we get is more MBAs.
>You can put 8000 laptops in a 40 ft container
You could, but then most people would allow for some packaging...
Lenovo are currently shipping 15.6" laptops in a padded box with external dimensions 48.4x8.0x32.7cm. According to [1]Calculator for Shipping you can theoretically fit 5,255 of these laptops. I suspect the actual number to be lower still as I expect the laptops to be on pallets and then containerized.
[1] https://www.omnicalculator.com/other/cbm-shipping
The time factor
If you are loading up the ship today for shipment. You should expect your package mid to late Jamuary.
After years of dealing with sea shipments the way I have always explained it to customers is that we use old Viking Longships. When they are not doing movies they are moving your packages.
Re: The time factor
>I have always explained it to customers is that we use old Viking Longships.
Might in the future be using modern longships...
[1]The futuristic cargo ship made of wood
[1] https://www.bbc.com/future/article/20201117-clean-shipping-the-carbon-negative-cargo-boats-made-of-wood?utm_source=pocket-newtab-global-en-GB
I'm quite impressed that a 5 inch by 5 inch parcel with 2 sticks of ram, along with 5,000 other same parcels, can find their way from China to this address at the best of times. here's hoping..
Fright or freight
Most airline handling companies wouldn't cope with -70c storage +/- 5c during transit. Imagine the carousel...
Re: Fright or freight
The big problem with -70C shipping is that it uses dry ice, and you really don't want cargo aircraft filling up with CO₂ in gaseous form. It's hard to leave a vent open at 30,000ft.
Priorities
Could someone hit them - hard - with a suitable cluebat? That airfreight capacity is needed for battling a *pandemic* FFS, so get out of that plane RIGHT NOW! In fact, if they had any decency they would sponsor the cost of flying the vaccine into a couple of 3rd world countries.
Excuses, excuses
"The cost of air freight has been rising all year because, quite obviously, there have been very few planes in the sky."
If there are fewer planes flying to carry passengers then taking the seats out provides more planes to carry freight. Or have the passengers been subsidising the freight?