Shipping Delays and Supply Shortages to Constrain Firms All Year
Companies worldwide expect supply-chain constraints resulting from logistics backlogs and the global semiconductor shortage to continue for much of this year.
In earnings calls this week, firms including Tesla, Sony and shoe company Crocs expressed concerns about the ability to meet demand given ongoing supply-chain bottlenecks. Some said they don’t expect the tight supply environment to be resolved until the end of the year.
While the pandemic continues to boost spending on products like gadgets, cars and comfortable apparel, meeting that demand is a different story. The comments from company leaders underscore the long-term impacts of the Suez Canal blockage, port congestion in the U.S. and the worldwide chip shortage on global trade.
“Our current expectation is we will face a tight supply environment for at least the remainder of 2021,” said Kurt Sievers, chief executive of NXP Semi, a leader in automotive chip production. At the same time, the company has “seen a significant increase in demand for our products.”
‘Most Difficult Challenges’
Tesla Chief Executive Officer Elon Musk said the first quarter presented “some of the most difficult supply-chain challenges that we have ever experienced in the life“ of the company, noting the chip shortage and production challenges in China because of Covid-19 quarantine restrictions.
At Apple, supply constraints will have a revenue impact of $3 billion to $4 billion in the June quarter, Chief Financial Officer Luca Maestri said.
Executives at Microsoft, Sony, Qualcomm and 3M also noted that the chip shortage is constraining production. For Ford, a March fire at a Japanese supplier plant exacerbated the dearth, and the auto company expects availability issues will worsen and bottom out in the second quarter, CFO John Lawler said.
Beyond semiconductors, companies are also being constrained by overwhelmed ports.
“We’re not immune to these challenges, with blockage of the Suez Canal and significant bottlenecks in West Coast ports leading to delays,” said Crocs CEO Andrew Rees. ”Global logistics are expected to remain congested and we’re being proactive as possible.”
Meantime, Steven Madden CEO Edward Rosenfeld said freight will be the shoe company’s most significant challenge in the coming months, with ocean rates more than doubling and air freight up close to 200%. He expects port-congestion problems to continue through at least the end of the second quarter.
Watching all of this unfold is Federal Reserve Chair Jerome Powell, who said Wednesday that while the supply blockages and bottlenecks are temporary, it’s harder for monetary-policy officials to predict how long it will take to resolve them, and what effect they’ll have on prices.
“The supply of various inputs to the goods part of the economy will have to be brought back up to speed,” Powell said. “That’ll happen over a period of time, you’ll see some of the bottlenecks resolved but the last one may not be resolved for some time.”
This article originally appeared on Bloomberg