Rising material and labour costs squeeze electronics makers, even as demand holds strong; talent shortages and weak margins signal mounting pressure on global supply chains.
The global electronics manufacturing supply chain is grappling with mounting cost pressures, even as demand remains resilient, according to a July 2025 report by the Global Electronics Association (formerly IPC).
In the survey, three-fifths (61%) of electronics manufacturers reported higher material costs, while more than half (54%) faced rising labour expenses.
The material cost index, although easing slightly from June, remains high at 129, underscoring the persistent inflationary strain. Labour costs followed closely, with a diffusion index of 127, pointing to continued upward momentum.
While profit margins registered a modest improvement (+6 points), the recovery remains weak. Only 15% of companies reported margin gains, while 22% saw declines, leaving the Profit Margin Index at 96, a level that signals contraction.
Shawn DuBravac, Ph.D., chief economist at the Global Electronics Association and lead author of the report, said: “While demand indicators like orders and shipments remain strong, cost pressures continue to weigh heavily on the global electronics manufacturing sector. Operational momentum remains intact, yet the cost structure is straining under pressure. Manufacturers are adapting, but margin recovery remains elusive.”
Operational indicators remain in expansion territory. Orders (35% rising vs. 22% declining) and shipments (29% rising vs. 17% declining) each recorded a diffusion index of 106, pointing to stable demand.
Capacity utilisation also showed steady momentum, with 26% of firms reporting increases (index 106). Backlogs expanded modestly (index 102) as firms worked through uneven supply conditions.
Inventory available to customers rose slightly (index 107), while inventory from suppliers remained mostly flat, though still positive (index 102).
Despite growth opportunities, manufacturers face significant hiring challenges. The Ease of Recruiting Index fell to 89, with 30% of firms reporting worsening conditions. Globally, 60% of companies are actively hiring, particularly in Europe, where firms are prioritising critical roles. Yet 63% of manufacturers said that labour shortages are directly constraining business growth.
“Electronics manufacturers worldwide report their growth is constrained by an inability to recruit, onboard, retain, and upskill workers,” the report noted. “Labour remains a critical operational challenge.”
The report also highlighted diverging regional trends. In the Asia-Pacific (APAC) region, half of the manufacturers reported rising profit margins, compared with only 5% in North America. APAC firms also noted some relief on material costs and anticipate future declines in labour costs, while North American firms continue to face entrenched inflationary pressures.
Over the next six months, firms expect material and labour costs to remain elevated, while recruitment challenges persist. Demand fundamentals, however, are expected to hold, maintaining momentum from the rebound that began in late 2024.
