IPC survey finds materials shortages are causing delays and price increases for manufacturers

A new survey from global electronics and manufacturing trade association, the IPC, has found that electronics manufacturers around the world continue to be harmed by the global shortage in semiconductors and other components, parts and materials. This, says the organisation, is leading to production delays, increased material goods costs, and a cloudy industry outlook.  

The electronics industry sees no immediate end to shortages, according to the survey, as 58% expect the problem to linger until late 2022 or beyond. In addition, the survey has found that companies continue to face significant challenges in hiring and keeping skilled talent.

“Supply shortages and other dislocations are impacting the global electronics supply chain and every downstream industry these manufacturers serve,” said IPC chief economist and lead researcher on the study, Shawn DuBravac. “Strong demand is helping industry sales, but shortages are delaying shipments and increasing backlogs. Manufacturers are facing higher prices as they compete for limited supply. This is a global phenomenon that is going to take well into next year to resolve.”

The survey results found that:

  • Shortages are leading to delays. 88% of respondents have experienced increased lead times, and 31% saw production delays of eight weeks or more.
  • Companies report the issue will not be resolved soon. 58% of companies expect the shortages to end in the second half of 2022 at the earliest.
  • Global inventories – already depleted – are declining. 59% of respondents said that backlogs are increasing. 25% say inventory available to customers will continue to decline, and 48% say inventories will stay flat.
  • Shortages are forcing companies to spend more to produce their products. 90% of respondents have paid increased prices to suppliers because of shortages.
  • Companies are increasing wages and upskilling workers to address workforce hiring and retention. 80% of respondents believe the challenge of finding qualified workers isn’t likely to ease. Firms have increasingly taken to upskilling their workers on their own (46% of respondents), boosting wages (44% of respondents) and other measures to fill the gaps.
  • “While there has been plenty of attention paid to the shortage in semiconductors, it’s important to point out that electronics companies around the globe are facing additional shortages and backlogs, experiencing diminished inventories, and paying higher materials prices,” added John Mitchell, IPC president and CEO. “The current situation is unsustainable. If the current shortages extend beyond 2022 as feared, they will continue to have serious consequences for all industries tied to electronics manufacturing.”
  • IPC surveyed hundreds of companies from around the world, including a wide range of company sizes and representing the full electronics manufacturing value chain. Survey respondents were from North America (44%), Asia (20%) and Europe (17%).

Metal shortages also causing a headache for appliance manufacturers

Shortages of metals including steel and aluminium are also causing significant problems for manufacturers in the domestic appliance industry and the automobile industry.

In the US, it is estimated that the price of steel and iron nearly doubled in August 2021 versus the year before – the biggest relative increase since records began in the 1920s.

In the UK, supply chain backlogs caused by ongoing Covid disruption at ports and shipping delays have engendered a shortage of raw materials, while a shortage of workers has squeezed production levels, further intensifying a scarcity of inputs.

Meanwhile, high demand for raw materials resulting from businesses ramping up production of goods is rubbing up against constrained supply levels.

Higher prices being passed to consumers

Consumers around the world are being hit by higher prices as manufacturers and retailers attempt to protect their profit margins.

In the UK, factory goods prices increased 5.9% over the past year alone, while in the US, the price of appliances rose by 6.8% this August – said to be the highest year-on-year increase in a decade, according to Labor Department data.

Appliance manufacturers including Bertazzoni, Miele and Smeg have all reported to be planning price increases, but it is not clear whether price changes will be implemented globally.

Not all bad news – consumers are prepared to pay

Despite the rising prices for both manufacturers and consumers, the IPC survey found that the electronics supply chain continues to perform well, with manufacturers reporting rising orders and improving capacity utilisation.

In addition, appliance manufacturer Whirlpool is on track to achieve its highest profit in decades. The firm has enjoyed a boom in demand for its appliances, due to consumers having plenty of savings, who have been happy to pay higher prices. Whirlpool has raised its prices by around 12% in various markets.

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