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Rising material costs continue to bite

IPC May global sentiment report
Rising material costs continue to bite

"Russia’s invasion of Ukraine is a negative supply shock on already strained supply chains. It will take many months to fully determine the full effect it is having on the electronics industry,” said Shawn DuBravac, IPC chief economist.

Source: Pixabay

Nine in ten electronics manufacturers are currently experiencing rising material costs, while nearly four-fifths are experiencing rising labor costs, according to IPC’s May Global Sentiment of the Electronics Supply Chain Report.

In its May Economic Report, the industry association found there were three main forces exerting pressure on the economy and on the electronics manufacturing industry: Russia’s invasion of Ukraine, inflationary pressures pushing costs higher, and China’s strict COVID policy that is hindering production in China and compounding existing supply chain issues.

“Russia’s invasion of Ukraine is a negative supply shock on already strained supply chains. It will take many months to fully determine the full effect it is having on the electronics industry,” said Shawn DuBravac, IPC chief economist. “While the invasion has more severe negative consequences for Europe, the impacts are being felt globally.”

The survey also found that inventories remain tight with the latest results suggesting inventories available from suppliers have deteriorated over the last month. Moreover, the survey showed that only three in ten electronics manufacturers feel their government is moving with appropriate breadth to spur innovation and capacity.

“Downside risks have increased but a recession is still unlikely in the United States in 2022. The risks of a recession in 2023 have increased somewhat,” added DuBravac. “In Europe, the probability of a recession in major economic markets has increased. Several countries will see flat quarterly growth for several consecutive quarters which could easily turn negative and result in a recession in 2022.”

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

ipc.org

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