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Tech Industry

Disaster to briefly affect tech shipments

Millions of dollars worth of tech products ship by air on a daily basis, but companies say the current ban on air traffic will likely have only a temporary impact.

Millions of dollars worth of tech products ship by air on a daily basis, but companies say the current ban on air traffic will likely have only a temporary impact.

On Wednesday, the Federal Aviation Administration extended its ban on commercial air traffic in the United States. The ban, which was due to expire at 9 a.m. PDT Wednesday, went into effect Tuesday morning after terrorists hijacked planes and crashed them into the World Trade Center and the Pentagon.

Despite the hiatus in flights, Hewlett-Packard, Micron Technology and other companies said they have adequate supplies of parts to satisfy pending customer orders. The chief difficulty these companies face right now is in redirecting air shipments of both components and finished products to ground transportation.

"Shipments that were due to go out by plane have obviously been affected, but what we are doing is rerouting them by land," said Geoffrey Hughes, a representative for Samsung Electronics, a major memory supplier. "Obviously, it is a lot of extra work for our logistics people."

HP is also turning to ground transport.

"We do a lot of local part storage, so a lot of orders can be done through ground transportation," a company representative said.

Air traffic is crucial to the tech industry because most companies have simultaneously dispersed their operations internationally and reduced on-hand inventories to cut costs. Millions of dollars worth of PC components and finished goods leave Asian airports daily; finished products also get assembled in the United States, Latin America, Europe and elsewhere.

One lasting effect of the disaster could come in the form of heightened security, which could lengthen travel time even on cargo-only flights, sources said.

Although PC buying has slowed, North America remains one of the largest markets for consumption for most tech products.

Companies that sell their products to consumers directly over the Web such as Dell Computer and Gateway ship many orders by air.

Dell spokesman Mike Maher said it is too early for the company to gauge the impact of the disruptions.

"We're continuing to take customer orders," Maher said. "We are continuing to produce goods at all manufacturing sites."

Maher said the company is using existing parts inventories at its U.S. manufacturing centers in Nashville, Tenn., and central Texas. As for shipping goods, Dell uses both air and ground transportation and is still shipping some orders by ground.

Maher said the impact has not been material to Dell's business thus far. "At this point, it's not had one. But who knows what's going to happen longer term."

Last year, international airfreight totaled 18.8 million tons and domestic airfreight around 11.4 million tons, according to Reuters.

"Everything that goes by air has been held up," said Sean Mahoney, a spokesman for memory chipmaker Micron Technology. "Typically, we do ship a healthy portion of our product by air...It's not just the products we manufacture, but it's also some of the materials we need for production."

However, Mahoney said that the company has inventories of the components it needs and that its manufacturing operations are still running.

"There has been no impact on our business," said Chuck Mulloy, a spokesman for Intel. "The factories are going."

Although Intel produces and tests many of its chips and motherboards in the Far East, the company has current inventories of these products in the United States and also produces chips here, he added.

A Gateway representative said the company is "still assessing the impact" of the interruption of air traffic.

IBM declined to comment.

"Really what you're looking at is some people not getting their PCs overnight," said Dean McCarron, an analyst at Mercury Research. "The greater concern would be what's going on with the commodities markets--things such as fuel that affect the cost of manufacturing."

Many PC components, he added, come by container ship from Asia and thus will not be affected by a halt in international air travel.

Stephen Baker, analyst with NPD Intelect, discounted any long-term problems. "I can't see how it's going to be more than a temporary glitch" he said.