It’s Only Common Sense: Customers Need Confidence More Than Low Prices
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As the world adjusts to the effects of the global pandemic, there are at least some things that can be relied on to remain constant.
The Chinese economy having struggled at the start of the pandemic, has recovered strongly, with Chinese manufacturing activity having increased for the 9th straight month according to the National Bureau of Statistics.
Production for Chinese domestic PCBs currently exceeds export orders in many factories and coupled with price increases on raw materials in excess of 35% in some cases, PCB manufacturers are now willing to pass these increased costs to customers, which they were loath to do during the early phases of the pandemic.
As export orders start to pick up available capacity continues to reduce putting further pressure on material supply chains, allowing raw material producers to charge further premiums.
Gold remains a universal hedge to global economic uncertainty, with the precious metal rampaging to a historic high, a performance that has doubled the cost of the metal over the last 5 years.
The cost of PCB technology is not immune, with ENIG surface finishing costs having increased across all technologies, the impact of these increases being felt more across lower layer count products as the % of the increase is inversely proportionate to the number of layers.
The rebound speed of the Chinese economy is also being felt across the globe, with the U.S Dollar declining 6% against the RMB since January 2020. PCB factories with dollar exposure from billables are having to take the foreign currency translation hit as their labour costs are paid in local currency.
With increases in raw materials likely to continue until after the Chinese New Year along with the continuing rise in globally traded commodities, the market has now reached the point where PCB output prices are increasing to a level that is not sustainable for the factories to contain.
As we head toward peak production season, the importance of analyzing your forecasts and revisiting buffer stocks to mitigate longer lead times and further future price increases, cannot be overstated, and if you need any advice on your PCB supply chain, then please let the PCB Connect Group know.
