Electronics Firms Continue to Feel Pain from Chip Shortage, Higher Costs

This article is part of TechXchange: Chip Shortages and Counterfeits

The global chip shortage continues to leave electronics companies lacking key components for their products, the IPC said in a report released last month, citing its latest industry survey.

According to the report, only 13% of companies in the global electronics supply chain said their inventory levels are improving, while only one in 10 reported inventory levels of components such as chips rising at their suppliers.

The survey, which polled hundreds of companies in the global electronics supply chain, found that electronics firms continue to pay higher prices for scarce materials. About nine out of 10 electronics manufacturers said material costs are rising, pressuring profits. High material and labor costs will likely remain for the next six months, the IPC noted, as hiring skilled workers to run factories continues to be a challenge.

However, electronics companies reported orders, shipments, and production output are growing. But the report from the IPC signaled that they are using up components almost as soon as they procure them.

The report mirrors the results of a separate survey released last month by the U.S. Department of Commerce, which warned that U.S. companies are severely strapped for chips, with only several days of inventory on hand. Commerce Secretary Gina Raimondo said U.S. companies anticipate the chip shortage, which has snagged production of everything from cars to smartphones to medical devices, to last at least into the second half of this year. 

The agency's report said that while companies are seeing faster service for more advanced chips, they continue to face trouble with analog, power management, logic, and other ICs based on more mature (also called "legacy") technology nodes.

The IPC report highlighted other issues on the road to recovery. About 80% of companies replying to the survey said that they are struggling with rising labor costs as a talent shortage continues to delay product shipments. 

The IPC indicated that, while it's possible the supply chain problems have peaked, electronics companies are preparing for further hikes in material and labor costs through the first half of the year, with declines in inventory persisting. 

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