Challenging Conditions Ahead for Electronics Manufacturers per IPC’s Global Sentiment of the Electronics Supply Chain Report
Per IPC’s September Global Sentiment of the Electronics Supply Chain Report 81 percent of electronics manufacturers are currently experiencing rising material costs while 74 percent indicate labor costs are on the rise. At the same time, ease of recruitment, profit margins and inventory available from suppliers are presenting declining.
Among other data, survey results show:
- Cost pressures appear to be easing slowly
- Materials Cost Index declined three points, but remains in expansionary territory. Materials Cost Outlook Index declined five points
- The Labor Cost Index and the Labor Cost Outlook Index both declined in September, each falling two points
- Demand, while still positive, is showing some signs of a slowdown
- The Orders Index fell three points and the Backlog Index fell four points. Both remain in expansionary territory, but both indexes are at the lowest point since the survey began
- The Order Outlook Index fell four points to the lowest point in the history of the survey and the Backlog Outlook Index dipped to 99, the first time the index has been in contractionary territory
- Lead-times are improving but much of the electronics supply chain expects lead-times to decline in the coming months and the recovery appears to be unevenly distributed
- Two-fifths (37%) of electronics manufacturers indicate lead times have improved over the past month
- Notably, manufacturers are more likely to say that lead times have ‘improved considerably’ in the past month among those primarily operating in APAC (20%) and Globally )13%) when compared to manufacturers primarily operating in North America (1%)
- Looking forward, half (48%) of manufacturers expect lead times to improve over the next six months
- Manufacturers primarily operating globally are more likely to anticipate lead times to ‘improve considerably’ over the next six months when compared to manufacturers primarily operating in North America (29% and 7%, respectively)
- Two-fifths (37%) of electronics manufacturers indicate lead times have improved over the past month
- Over the next six months, manufacturers expect to see continued increase in both material and labor costs, although to a lesser extent than what they are currently experiencing, especially as it relates to material costs.
- On a positive note, manufacturers are anticipating a decline in backlogs over the next six months.
For the report, IPC surveyed hundreds of companies from around the world, including a wide range of company sizes representing the full electronics manufacturing value chain. View full report.
