Efficiency is the driver of electronic component cost trends.
Rising costs are on the minds of everyone in the electronics industry. Managing the costs of building electronics products is the primary objective of all entities in the PCB development and production supply chain. Central to meeting this objective is understanding the drivers of electronic component cost trends. This foundation enables the development of strategies and processes that optimize PCB design and manufacturing efficiency, which are the keys to successfully navigating cost trend volatility today and in the future.
Drivers of Electronic Component Cost Trends
There are many factors that affect the cost of electronic components, as shown in the table below.
As the table above illustrates, some key electronic component cost trends of 2023 will also impact the electronics industry in 2024. There is good news; however, and understanding the causes and impacts of the cost drivers is important to plan and execute a winning strategy going forward.
Raw materials availability
Arguably, the most impactful driver of electronic component cost trends is the availability of essential materials. Metals, like copper, gold and silver are among the base elements that experienced fluctuations in 2023. Unfortunately, global events; such as the conflict in eastern Europe will continue to affect prices. Yet, the industry is adapting by seeking important PCB materials from other geographical locations which should help increase availability going forward.
Manufacturing capacity
Lack of manufacturing source diversity is one of the most glaring problems with the electronic component supply chain. This issue was illuminated as the world struggled with the government mandated shutdowns in response to the COVID-19 epidemic. Fortunately, there have been several initiatives to address this issue; such as the CHIPS and Science Act in the US, that have resulted in more dispersed manufacturing of important electronic components.
Product demand
Keeping up with demand has been a challenge for electronics component manufacturers for the last few years and will continue to be so for the foreseeable future. This may seem like a favorable condition. However, the benefits are limited to manufacturers as high demand allows for higher prices. Downstream, the imbalance between supply and demand results in higher electronic component costs and delayed manufacturing.
Available skilled labor
Electronics manufacturers and other industry entities point to finding skilled talent as one the biggest challenges of 2023. Retirement and loss of experience and expertise are among the major causes of the labor shortages. As a result, salaries are up and more emphasis is placed on exploring strategies and techniques to increase workflow efficiency.
Supply chain disruptions
The electronic component supply chain has faced unprecedented challenges over the past few years. Many of the causes of supply chain disruptions in 2023; such as excessive demand and trade uncertainty–due to conflicts and government trade restrictions will continue in 2024.
Regulations and standards
Also impactful on electronic component cost trends, are government regulations. In deference to government initiatives to invest in increased manufacturing, there have also been restrictions placed on the international trade of some important electronic components and products. It is also notable that standards; such as Restriction of Hazardous Substances (RoHS), are gaining wider international acceptance. The full impact of restrictive regulations is difficult to predict; however, the thrust to mitigate global electronic component shortages and stabilize the electronics supply chain should result in reduction of these efforts.
Unforeseen global events
As Murphy’s Law asserts, “Anything that can go wrong will go wrong.” Or there is always the possibility that unforeseen and impactful events will occur. Medical emergencies, manufacturing facility shutdowns, conflicts, and environmental issues are among the causes of unplanned events that can change the trajectory of or more electronic component cost trends factors.
Controlling Your Component Costs
As discussed above, the factors that drive electronic component costs are varied. Although, most of these are not directly controllable by engineers and PCB designers, there are impactful actions that you can take, as listed below.
Following the guidelines above will help you add resiliency to your supply chain and avoid the negative effects of electronic component cost trends today and in the future.
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