A cautious outlook for 2025 despite a recovery in December 2024? The global electronics industry sees rising demand, but rising costs, recruitment struggles, and mixed inventory trends still remain a challenge.
The global electronics industry showed signs of recovery in December 2024, with demand rising to a neutral level of 100, according to the findings of the Institute of Printed Circuits’ (IPC) survey.
According to the IPC’s ‘January Sentiment of the Global Electronics Manufacturing Supply Chain’ report, this resurgence after four consecutive months of contraction, signals the threshold between expansion and contraction.
Of the four key demand parameters, the ‘New Orders’ and ‘Shipment’ index both saw modest increases, moving into expansion territory. However, the ‘Backlog’ index remained below 100, showing little change over the past month.
Over half of electronics manufacturers reported increases in both labour (52 per cent) and material (51 per cent) costs, signalling that financial pressures are not easing. Inventory availability presented a mixed scenario: inventory available to customers was rising for 32 per cent of respondents, remained unchanged for 56 per cent, and declining for *12 per cent. Inventory available from suppliers also followed a similar trend, with 27 per cent seeing an increase, 64 per cent reporting no change, and 9 per cent experiencing a decline.
Other operational metrics showed more stability. Shipments increased for 30 per cent, stayed the same for 48 per cent, and decreased for 22 per cent. Capacity utilisation rose for 24 per cent, remained flat for 49 per cent, and declined for 28 per cent. Meanwhile, orders had increased for 32 per cent of the respondents, remained flat for 45 per cent, and declined for 23 per cent.
Profitability remained under pressure, with only 16 per cent of businesses seeing profit margin growth, 55 per cent reporting no change, and 29 per cent witnessing declines.
Furthermore, the ease of recruiting/finding skilled talent had improved for just 13 per cent, with 61 per cent reporting stability and 28 per cent facing difficulty. The backlogs indicator also leaned towards contraction, with 19 per cent seeing growth, 43 per cent unchanged, and 37 per cent declining.
The Diffusion Index—which gauges expansion versus contraction—indicated a neutral to contracting trend, with values such as 126 for labour costs, 123 for material costs, 110 for customer inventory, and 109 for supplier inventory, all reflecting higher costs and supply constraints.
However, other business indicators such as orders (102), shipments (104), and capacity utilisation (103) hovered near expansion, while profit margins (94), recruitment (94), and backlogs (91) indicated contraction.
These indicators suggest that the industry continues to grapple with rising costs, with aggregated cost measures reaching a four-month high.
Looking ahead, minimal changes are expected in work arrangements for 2025. While some regions, notably Europe, are projected to see a 5 per cent increase in hybrid work models, the factory floor remains largely unchanged. These positions require hands-on involvement, and operational and technical demands continue to make on-site work the standard.
“For factory floor employees, minor increases in hybrid work are anticipated, but on-site roles remain the overwhelming standard, underscoring the rigidity of these positions,” said Shawn DuBravac, IPC’s chief economist.
Thus, despite a neutral stance in key business indicators, the industry’s outlook remains cautious, with recruitment difficulties, cost pressures, and declining profit margins making for a challenging 2025.
