Though electronics manufacturers remain extremely concerned about the effects of the Covid-19 pandemic, just over 40% of them expect business to return to normal this summer. So says IPC, the association representing electronics OEMs, PCB and wiring harness makers, and electronics suppliers. The association reports it has continued to monitor the health of the electronics manufacturing industry amid the COVID-19 pandemic, including a series of calls with member company executives. It recently released observations about the industry current as of March 30, 2020.
IPC says the majority of electronics manufacturers and suppliers continue to report they remain open for business. Many companies also report they are seeing an increase in new orders for medical equipment components. Other sectors of the industry, notably the automotive supply chain, are reporting fewer orders. Some of these companies have begun marking down their 2020 forecasts. Because of the large uptick in orders for components for medical equipment like ventilators, some new
orders are showing up in non-traditional channels.
Understandably, there are reports of medical orders getting priority. IPC says some manufacturers report waiving “quick rates” for medical equipment orders. Standard quick rates are normal premiums charged for short turnaround requests. And several manufacturers report they are prioritizing incoming medical-related orders.
Additionally, several companies continue to report higher transportation costs, in some instances reaching an order of magnitude higher than normal rates. This is especially the case with air freight. Passenger flights account for roughly half of air cargo capacity. With the precipitous decline in passenger flights, air cargo capacity declined significantly, and freight costs increased significantly.
IPC also says several airlines including American, Delta, Qantas, Lufthansa, and Korean have reported they are beginning to run cargo-only flights. The government of China announced they will increase cargo flight capacity by relaxing certain restrictions. Shipping company CMA CGM recently reported that some ships diverted to other ports are in the process of being directed back to their final destination in China.
In the same vein, some companies report building additional inventory and output in case of unforeseen disruptions. For example, some companies report using public warehouses. Because there is a concern that certain public warehouses might be closed by state or federal order, companies are diversifying their warehousing and building additional inventory and output.
As with other industries, electronics manufacturers and suppliers say they are adjusting their operations to abide by state and federal guidelines. Manufacturers running multiple shifts, for example, might normally overlap them by 30 to 90 minutes. Many companies have adjusted shifts to maintain a 30-minute separate between them. Manufacturers and suppliers also report limiting employees to a single entrance and conducting health screenings there. Some companies now check the temperature of arriving employees and pass out wristbands to those who pass and can enter the facility. Some also are locking down facilities to suppliers and customers and using common carriers, such as UPS, as the only mechanism to get things in or out of manufacturing facilities. Other efforts include adding full-time sanitizers who clean common surfaces like doors, tables, and desks and requiring employees to wear N95 or other protective masks while on site.
IPC says some companies also report providing employees with letters stating the work they do is “essential” under government guidelines
As part of weekly calls with member organizations, IPC says it conducts flash polls to get a sense of how executives feel about the current environment. Executives who replied to a March 25 flash poll remained concerned about how COVID-19 is affecting their businesses. Overall, 67% reported being “extremely” concerned. But IPC says expectations might be
stabilizing somewhat. Half of respondents report they feel about the same as they did the previous week. Just over a third report they feel worse.
Electronics manufacturers and suppliers also reported they expect business to return to “normal” in the coming months. Just over 40% expect business to return to normal by June 2020; 75% expect normalcy by August 2020; and 90% see it returning by October 2020.