Geopolitical Uncertainty Affects Electronics Manufacturers Worldwide
New data from IPC show that the electronics manufacturing supply chain is already feeling the impact of the Russia-Ukraine War.
IPC’s April Monthly Economic Update and Global Sentiment Survey found that four-fifths of manufacturers expect the war to have a negative impact on commodity prices and transportation costs, while seven in ten anticipate a negative impact on the stock of raw materials.
Among other conclusions, the IPC survey results show:
- The Material Costs Index rose to its highest level, with almost the entire panel reporting rising material costs.
- Manufacturers expect the automotive, consumer, and industrial electronics markets to be most negatively impacted by conflict, while the defense market may be positively impacted.
- Overall demand remains strong. The New Orders Index declined slightly in the last month but remains well in expansionary territory. The Backlog Index also fell slightly.
- Inventories Available to Customers (IAC Index) slipped into contractionary territory this month, suggesting inventory levels are low.
- Inventories Available to You from Your Suppliers (IAFS Index) improved marginally but remains in contractionary territory, suggesting most respondents are experiencing this.
The economic impact will be felt most severely in Europe, with the GDP forecast adjusted downward by nearly one percentage point. The GDP forecast for the United States has been lowered by two-tenths of a percentage point, to an expectation of 3.5 percent growth in 2022.
The Russia-Ukraine conflict is impacting the economy in several ways, including rising energy and commodity prices, with many hitting new all-time highs; and a decline in confidence, which results in reduced spending by consumers and investment by businesses. Bidirectional sanctions are also slowing economic growth.
“Energy and commodity prices are up significantly for three primary reasons: perceived potential shortages, increased stockpiling, and speculative buying amidst the uncertainty,” said Shawn DuBravac, IPC chief economist. “Both the European and U.S. economies are, at least for now, on solid footing and are well-positioned to weather the negative shock of the war, but growth will be hindered.”
IPC surveyed hundreds of companies from around the world, including a wide range of company sizes representing the full electronics manufacturing value chain.
View the full reports:
Current Sentiment of the Global Electronics Manufacturing Supply Chain