Owing to better demand and lower costs, the electronics manufacturing supply chain improved slightly this month, though profit margins and recruitment challenges persist.
In August, the electronics production chain experienced a slight increase globally, though it remains below the April 2024 peak. This uptick was attributed to more robust demand and lower costs, as noted in IPC’s recent report titled ‘Sentiment of the Global Electronics Manufacturing Supply Chain’.
The report stated that the demand index for the manufacturing industry rose by 3.3%, which was calculated by sightly improved backlogs despite contracting, higher capacity utilisation, and positive order sentiment.
Analysing the trends of last three months, it was mentioned that backlogs and new orders has climed by three points in the diffusion scale to 96 and 105 respectively, whereas capacity utilisation has seen a rise of five points, to 104. Shipments, however, increased by only two points equalling to 108.
Cost pressures eased slightly in the ongoing month as the labour and material costs indexes dropped by one point, though they remain in expansionary territory, rising by 50% and 46% respectively.
Simultaneously, challenges in recruitment, profit margins, and backlogs are worsening at the rates of 29%, 26%, and 32%, respectively.
Looking ahead six months, manufacturers anticipate that labour and material costs will remain high but stable, rising by 51% and 40%, respectively. The report also anticipated improved profit margins and backlogs, growing by 19% and 31%, despite ongoing recruitment difficulties.
According to regional insights, profit margins are declining sharply among electronics manufacturers in Europe, where 46% of companies report a decrease compared to just 5% globally. Forecasting the future, 27% of European and 37% of APAC manufacturers expect further declines in profit margins over the next six months, while none of the global firms anticipate decreases.
Conversely, 76% of North American manufacturers expect their profit margins to remain steady, compared to only 32% in APAC.
Furthermore, in the survey, over 40% of respondents expressed significant concern about geopolitical risks and trade policies, and 44% were worried about trade policies and tariffs. These concerns were consistent across different regions.
