In its latest economic analysis (May Global Sentiment of the Electronics Supply Chain Report) from May 4, 2022, the US association IPC reports that nine out of ten electronics manufacturers are faced with rising material costs and also have to cope with almost 80% higher personnel costs. According to the IPC, this dual problem constellation is likely to worsen over the next six months. From a decidedly North American perspective, the IPC May Economic Report points to three parallel causes: the Russian invasion of Ukraine, the generally high inflationary pressure and the rigid Chinese Covid-19 policy with its negative impact on domestic production and global supply chains.
"The invasion of Ukraine is an additional shock to already strained supply chains," explains Shawn DuBravac, IPC Chief Economist. "It will be several months before we can assess the full impact on the electronics industry. It is being felt globally, although the consequences for Europe are more negative."
Industry inventories remain at a low level. This applies to the stocks intended for delivery to customers as well as to suppliers' stocks. Accordingly, the ability of upstream producers to deliver has continued to decline over the past month, which is clearly reflected in the extremely high backlog indices compiled by the IPC. The US government is also not doing enough to stimulate the general willingness to innovate and expand the chip industry's production capacities. As a result, delivery delays are increasing faster in North America than in the Asia-Pacific region. "The downside risks have increased slightly, but a recession is unlikely, at least this year." In Europe, on the other hand, the likelihood of a recession in the larger markets has increased: "Some countries will see flat quarters that could easily slide into negative territory."
