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IPC: Material and Labor Costs Remain Large Issues for Electronics Supply Chain
BANNOCKBURN, IL – Material and labor costs continue to be two of the largest issues facing the electronics supply chain, according to an IPC report. Nine in ten electronics manufacturers report rising material costs, and nearly three-fourths report rising labor costs, the association says.

Ease of recruiting workers remains difficult, with 57% reporting it has gotten worse in the last month. Seventy-two percent of North American firms report ease of recruiting workers is declining, while 37% of firms in APAC and 43% of those operating globally report the same.

Conversely, 35% of firms operating globally report ease of recruiting workers is improving, whereas 6% of firms in North America and Europe report the same. Among firms in APAC, ease of recruitment is holding steady at 51%.

While order flow remains positive, higher costs are hurting profit margins, with 58% of electronics manufacturers reporting orders are expanding, says IPC. Forty percent report profit margins are declining, and 19% report profit margins are improving.

Eighty-two percent of manufacturers in North America indicate labor costs are rising vs. 59% among firms operating in APAC, where, along with European firms, labor costs are more likely to be holding steady, says IPC.

Ninety-eight percent of North American manufacturers indicate rising material costs compared to 90% in Europe, 88% in APAC, and 78% among global manufacturers.

Fifty-three percent of firms in North America report declining inventory available to customers, while 30% of firms in Europe, 29% of firms in APAC, and 26% of those operating globally are currently experiencing declines.

At the same time, 30% of European manufacturers indicate inventory available to customers is rising, with the diffusion index in Europe no longer indicating a state of contraction.

Two-thirds of manufacturers report their government is not invested in the electronics industry’s success. Only 20% of North American manufacturers agree their government is invested in the success of the electronics manufacturing industry, compared to higher agreement among manufacturers in Europe (38%); APAC (57%); and those operating globally (57%).

Similarly, 13% of manufacturers in North America agree their government is adequately helping the EMS industry transition to the factory of the future, whereas 37% of firms in Europe, 41% of global firms, and 50% of firms in APAC feel the same.

Fifty-six percent of North American manufacturers expect backlogs to rise in the next six months, compared to 28% among firms in Europe, where 60% of firms expect backlogs to remain flat.

Thirty percent of global manufacturers and 21% of manufacturers in APAC expect ease of recruiting to rise in the next six months, while 9% of manufacturers in North America and 4% of manufacturers in Europe anticipate the same.

Eighty percent of North American firms anticipate rising labor costs in the next six months, compared to 55% among firms in Europe, where 41% are expecting labor costs to remain flat.

Fifty-seven percent of global manufacturers, along with 55% of APAC manufacturers, expect capacity utilization to rise in the next six months, compared to 30% among firms in North America.

Eighty-eight percent of North American manufacturers expect material costs to rise in the near future, compared to 67% in Europe. European firms are more likely to indicate material costs will remain stable (31%), while firms in APAC are more likely to anticipate further decline (7%).

Thirty-six percent of North American manufacturers expect inventory available to customers to decline, while 13% of firms in Europe anticipate the same. (CD)