IPC: High Material, Labor Costs Continue to Challenge the Electronics Manufacturing Industry

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New data from IPC show that supply chain challenges remain acute, but may have peaked, while lead times remain high. IPC’s February economic update and global electronics manufacturing supply chain sentiment reports found that high material and labor costs are expected to continue for at least six months while recruiting and finding skilled talent continues to be difficult. 

Among other conclusions, the global electronics manufacturing survey results show:

• Nearly nine in ten electronics manufacturers report material costs are rising, with an additional four-fifths reporting rising labor costs
• Only 13 percent of the electronics manufacturing supply chain reports inventory is growing and one in ten say inventories from their suppliers are growing
• Ease of recruitment and profit margins are currently declining, along with inventories, especially those available from suppliers
• The electronics supply chain reports orders, shipments, and capacity utilization are expanding, but weak inventory availability and higher costs for materials and labor hurts profit margins

The data on future economic outlook suggests growth is decelerating, but good growth is expected in the year ahead. After growing 6.1 percent in 2021, global growth is expected to slow to 4 percent in 2022 and close to that in 2023. In North America, growth will fall from 5.4 percent in 2021 to 3.7 percent in 2022. In 2023, growth is expected to slow further, anticipated at 2.6 percent. In Europe, growth is expected to slip this year from 5 percent to 4 percent and decline to 2.4 percent next year. In Asia, growth is expected to fall from 6.7 percent to 4.8 percent this year. Five percent growth in Asia is predicted for 2023.

“While growth slows this year, this should not necessarily be interpreted as weak growth,” said Shawn DuBravac, IPC chief economist. “Growth rates in 2022 will generally be higher than they were headed into the pandemic.”

IPC surveyed hundreds of companies from around the world, including a wide range of company sizes representing the full electronics manufacturing value chain.