Though cost pressures continue to impact the electronics industry, product demand and inventories remain positive, leading to a healthy supply chain, industry association IPC has reported. “Over the next six months, electronics manufacturers expect to see continued increase in both labour and material costs, although to a lesser extent than current conditions,” said Shawn DuBravac IPC chief economist. “Conversely, while backlogs and profit margins are expected to improve, ease of recruitment is likely to remain challenging.”
Each month, IPC surveys executives in the electronics manufacturing sector from across the globe in order to assess the current state of the industry. These latest results are based upon the findings of its survey undertaken in July.
The survey also found that profit margins are declining more among European firms compared to North American and global firms, where profit margins are remaining stable. Nearly half (45%) of firms in Europe are currently experiencing a decline in profit margins, compared to 20% in North America and 6% among firms operating globally.
Additional survey data showed:
- The Labor Costs Index rose four points in August. The index remains extremely elevated. The electronics industry has yet to see a break in the trend of raising labor costs.
- The Material Costs Index rose five points in August. This is the first monthly increase since October 2022. Future months will help determine if this rise was driven by data volatility or a more meaningful trend.
- The Shipment Index rose solidly in August and remains in expansionary territory. The Orders Index rose one point and also remains in expansionary territory.
- The Backlog Index rose in August but remains in contraction territory, though just barely. New orders and shipments seem well balanced in the electronics industry right now which has likely weakened backlogs.
