Manufacturers expect to see continued increase in both labor and material costs, although to a lesser extent than previously anticipated.

Over the next six months, manufacturers expect to see continued increase in both labor and material costs, although to a lesser extent than previously anticipated. On a positive note, backlogs are expected to decline. This, according to IPC’s February 2023 Global Sentiment of the Electronics Supply Chain Report.

Among other data, survey results show that on average, electronics manufacturers expect labor costs to increase by 9.2% over 2022 levels, materials costs to rise by 9.9% during the year, and most surprisingly, freight costs to rise by 7.2% in 2023.

“Though manufacturers anticipate freight costs to rise, depressed demand and improving supply chain dynamics are currently pulling freight costs down, a trend that should continue during the year,” said IPC Chief Economist Shawn DuBravac. “Downward cyclical pressures will curtail volume which should keep prices in check. For some companies, declining freight costs are likely to be their most significant cost savings in 2023.”

Regarding digital project initiation, roughly 14% reported ERP system implementation and enhancements were their number one project for 2023. Other top projects include equipment, tools, resources, and technology investment and upgrades, and pursuit of CMMC certification.

Profit margins are expected to decline at a significantly higher rate in APAC vs. North America. Around 42% of manufacturers in APAC anticipate profit margins to decline, while 15% of manufacturers in North America are expecting the same.

For the report, IPC surveyed hundreds of companies from around the world, including a wide range of company sizes representing the full electronics manufacturing value chain. View full report here.