News

Things are gonna get worse before they get better.

We work with 250+ manufacturers in different countries, this allows us to witness this issue very closely and anticipate its impact.

Before the pandemic slowed down shipping, the industry was already at its limit, with delivery times of 18 to 36 weeks:

Before the pandemic slowed down shipping, the industry was already at its limit, with delivery times ranging between 18 to 36 weeks. No manufacturer has inventory, they all work with just-in-time systems, where they only start ordering components once a company places an order.

The pandemic caused a significant increase in the demand for specialized components, such as the microchips for tablets and laptops, which shifted the manufacturers’ focus on such product lines that usually generate much higher profits. Unfortunately, the pandemic also caused crucial cities like Wuhan to close, which is home to many key manufacturers of electronic and mechanical components. Many factories and ports were affected as they had to reduce production capacity. We have seen some cases where a manufacturer’s production time that used to be only a few weeks increased to 9-10 months.

OK… I understand the component shortage. But why are prices increasing?

The prices of many high-demand components have increased by up to 1000%, which has led to a product price increase by around 5% and even 45% in some cases.

We have not even mentioned yet the shipping price surges from Asia to North America… Currently, the cost of a container from Asia has exceeded 25,000 USD (it used to be less than 3,000 USD in 2019). That means that a container with a value of $40,000 USD of equipment costs around $25,000 USD in freight without even including the ∼25% tariffs.

Additionally, because of the closing ports and lack of human labor due to closing cities, there’s a shortage of available containers in the whole world, which makes reserving a container take up to 2 months. So, adding the time to get a container, to the high production times due to shortage of components, and the time to ship the products across the world to North America, the total time to get a product from Asia to North America can take up to a year (sometimes even more).

No one has talked about copper…

The vast majority of the copper we use is recycled, but the extreme increase in demand meant that this is not enough and the current copper extraction capacity can simply not cover the demand.

All electronic equipment and cabling are made of copper, which has become 70% more expensive in recent months, in addition to its scarcity.

We started the article by saying that “This is going to get worse before it gets better”. But, when will it actually get better?

Equipment shortages and shipping delays are expected to continue through 2022. For the past few months, we have been monitoring the shipping costs and container availability with different manufacturers and shipping and freight companies. We are working closely with them to get the best prices possible so that we can pass on the savings to you.