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© Intervala - for illustrative purposes Analysis | January 27, 2022

Material and labor costs continue to challenge the industry

New data from IPC show that supply chain challenges remain acute, but may have peaked, while lead times remain high. Growth rates are expected to slow, but good growth expected in year ahead

IPC is reporting that high material and labor costs are expected to continue for at least another six months while recruiting and finding skilled talent also continues to be difficult. 

In its February economic update and global electronics manufacturing supply chain sentiment reports, IPC say that nearly nine in ten electronics manufacturers report that material costs are rising, with an additional four-fifths reporting rising labor costs.

IPC also found that 13% of the electronics manufacturing supply chain report that 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 report that orders, shipments, and capacity utilisation are expanding – but weak inventory availability and higher costs for materials and labor is hurting profit margins.

IPC says that the data on future economic outlook suggests that growth is decelerating, but good growth is expected in the year ahead. After growing 6.1% in 2021, global growth is expected to slow to 4% in 2022 and close to that in 2023. 

In North America, growth will fall from 5.4% in 2021 to 3.7% in 2022. In 2023, growth is expected to slow further, anticipated at 2.6%. In Europe, growth is expected to slip this year from 5% to 4% and decline to 2.4% next year. In Asia, growth is expected to fall from 6.7% to 4.8% 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.”

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May 24 2022 12:51 pm V20.5.24-1