The international electronics manufacturing supply chain is already feeling the impact of the Russia-Ukraine War, according to the latest monthly economic update by international trade association IPC.
The report stated that the fallout of the Russian invasion of Ukraine continues to have “significant economic implications” which will be felt most severely in Europe.
As a result, the organization lowered its GDP forecast for Europe by nearly one percentage point. The GDP forecast for the United States has also been lowered by two-tenths of a percentage point, to an expected 3.5 percent growth in 2022.
The conflict is impacting the economy in several ways, including rising energy and commodity prices. Metals like copper, palladium, nickel, aluminum, and zinc all reached historic highs in March, the report said.
In addition to economic sanctions slowing economic growth, the analysis also highlighted a decline in confidence, which will result in reduced spending by consumers and investment by businesses.
“Energy and commodity prices are up significantly for three primary reasons: perceived potential shortages, increased stockpiling, and speculative buying amidst the uncertainty,” said Shawn DuBravac, IPC chief economist. “Both the European and U.S. economies are, at least for now, on solid footing and are well-positioned to weather the negative shock of the war, but growth will be hindered.”
The report also pointed out that high inflation rates and rising Covid rates in China also presented risks to the industry in the US and beyond.
Global Sentiment Survey
IPC’s April Global Sentiment Survey found that four-fifths of manufacturers expect the war to have a negative impact on commodity prices and transportation costs, while seven in ten anticipate a negative impact on the stock of raw materials.
Among other conclusions, the IPC survey results show:
- The Material Costs Index rose to its highest level, with almost the entire panel reporting rising material costs.
- Manufacturers expect the automotive, consumer, and industrial electronics markets to be most negatively impacted by conflict, while the defense market may be positively impacted.
- Overall demand remains strong. The New Orders Index declined slightly in the last month but remains well in expansionary territory. The Backlog Index also fell slightly.
- Inventories Available to Customers (IAC Index) slipped into contractionary territory this month, suggesting inventory levels are low.
- Inventories Available to You from Your Suppliers (IAFS Index) improved marginally but remains in contractionary territory, suggesting most respondents are experiencing this.
IPC surveyed hundreds of companies from around the world, including a wide range of company sizes representing the full electronics manufacturing value chain.
