Not So Short on Shortages: Electronics Industry Sees Rise of Container Shortage

Multiple industries are experiencing the impact of the container shortage.


Published February 16, 2021 - 8 Min Read

Spotlight:

  • How did the container shortage come about?
  • A multi-faceted issue that started in China
  • Increased freight rates for electronics and goods?
  • How to mitigate shortages and limited availability of parts

Wall Street shorts, component shortages, and now shipping container shortages. 2021 is underway, and it's not so short on shortages.

It all starts with China.

And a container shortage in China affects the electronics supply chain because it leads to decreased exports, increased prices, and increased delays for the electronic parts industry. In case there are any doubts the shortage impacts the electronics industry, take note of the graph below. China has an electronics market size as large as the next nine leading countries combined.

Leading countries in the electronics industry in 2016, based on market size (Source: Statista)
Leading countries in the electronics industry in 2016, based on market size (Source: Statista)

With the increase in the price of goods and delayed shipments from the polarizing, economic power, experts search for the root of the issue. And, following almost all other issues in these trying times, the shortage of containers has emerged due to the uneven global economic recovery caused by the pandemic as well as other factors—all of which are COVID related.

Causes of the Shipping Container Shortage

Hold-ups and delays for unloading processes are one cause of the container shortage. Global ports began quarantining shipments for up to two weeks back in March of 2020. The result of this is millions of tons of containers going unused for two weeks when they usually would be unloaded, restocked with other goods, and set onto a new course.

Another cause for the shortage stems from the fact that China produces exports more than they import. While this can be taken as arbitrary information, it is important for one key reason: China's economy has rebounded from the pandemic much quicker than other countries—such as the U.S. and Europe. Due to a slower global recovery from the pandemic, containers are getting stuck in countries not named China. For every container coming back to China, three are leaving. China's already significant surplus of goods is increasing because they can't get enough containers to ship out those goods.

The container shortage's impact on electronics supply ultimately results from reduced air traffic. Many key components that are typically transported through the air are now being shipped due to a plunge in international flight volumes. Airfreight companies like to use the excess capacity in the belly of the plane on passenger flights to ship parts and products. With the pandemic, passenger flights are occurring at a much lower rate.

Passenger flights decrease significantly in April 2020
Passenger flights decrease significantly in April 2020

Increased container demand from big electronics players who typically rely on airfreight—like Apple—has added extra fuel to the fire.

Freight Rates Increase as Container Shortage Continues

From 2019 to 2020, spot freight rates increased by 264% from Asia to North Europe, while rates from Asia to the U.S. increased by 145%. Comparing to November 2020, ocean freight rates have nearly quadrupled from Asia to North Europe.

And in case you didn't know, a spot rate for freight is the price offered by a shipper on the spot to move cargo from point A to point B. Spot rates have seen such a dramatic increase in price because they are typically used when a shipper has excess cargo that needs to be moved outside of a contract. With the current shortage of containers, a lot of shippers have excess cargo looking for freights. Thus, the rise in spot rates—particularly from Asia to Europe.

Source: FREIGHTOS
Source: FREIGHTOS

Some experts even believe cargo rates can nearly double from 2021-2022.

Another reason for the increased rates stems from China's aggressive approach to retrieve empty containers. This makes it difficult for U.S. and European exporters to aggregate containers for their own uses.

In the second half of 2020, container volumes saw a reverse surge of 30%. According to the Container Availability Index (CAx), 40-foot containers saw an index rating of 0.13 and hi-cube containers saw a rating of 0.08. To frame these numbers with some context, any CAx rating below 0.5 is considered a shortage. To add further context, the CAx ratings in the first quarter of 2020 were 75% and 83% higher, respectively.

Mitigating Impact

Electronics sourcing predicted in December 2020 that many electronic components would be difficult to source in 2021. Multi-layer ceramic capacitors, power MOSFETs, and chip resistors were all expected to experience shortages. What they did not predict, however, was that the freights carrying these components would be just as difficult to access.

Yet Z2Data's Part Risk Manager enables companies to see and manage lead times, compare prices, and find alternative components that match the form fit function of an unavailable component.

Let's use a real-time example.

There is a multi-layer ceramic capacitor commonly used in telecommunications, medical, aerospace, and military industries that is short in supply.

No available quantity from Z2Data's authorized distributors
No available quantity from Z2Data's authorized distributors

But from there, companies can navigate to a screen showing all of the part's cross components. Each cross is rated with a drop-in grade on a scale of A to C. A drop-in grade of A means the component matches the original's form fit function with minor parametric differences. Within the tool, companies can filter by the drop-in grades to reduce the number of crosses and narrow in on the ideal cross for the original component.

We can see the capacitor has 20 drop-in grade A crosses
We can see the capacitor has 20 drop-in grade A crosses

With the ideal crosses displayed, companies can view and compare each crosses' pricing, lead time, authorized sellers, part scores, packing, parametric differences, and more.

A snip shot of key comparisons for crosses
A snip shot of key comparisons for crosses

During a time afflicted with shortages and limited availability, it is crucial for companies to aggregate an abundance of options. Part Risk Manager provides those options.

How Z2Data Helps Electronics Companies Mitigate Shortages

Z2Data helps your company assess lead times and manage cross components to fill in for components that experience delays due to the current shipping container shortage. With over 1 billion components and access to critical supplier information, start a free trial with Z2Data to mitigate shipping and shortage risks.