Many US manufacturers are in a tough spot. A strong dollar (USD) is good for fighting US inflation. But, a strong USD is bad for US manufacturers with global operations. A strong USD also wreaks havoc on emerging markets with debt marked in USD, resulting in extremely unfavorable currency exchange rates which can eventually result in EM nation state defaults and manufacturing supply chain instability locally, regionally, and globally.
A strong USD is taking a toll on profit outlooks for US manufacturers, especially manufacturing firms with global supply chain operations.
It’s as if currency FX impacting total landed costs and country-of-origin stickers were not enough for tech managers to have to think about.
US manufacturers costs vs profits
As a result of a strong USD, US manufacturing executives and managers in capital intensive technology manufacturing industries with extended contract electronics manufacturing supply chains are witnessing, first-hand, billions of dollars being wiped from their corporate earnings as markets push through 2H 2022.
Venture Outsource expects many manufacturers to announce more layoffs 2H ’22, into 2023, to help decrease manufacturer operating inputs in hopes of meeting profit forecasts while stopping stock buy backs to save cash, especially those manufacturers with high inventories facing sluggish demand. Rest assured savvy manufacturing finance departments are keeping eyes on this. From our perspective, some markets with a bit more breathing room include aerospace, industrial, cloud, energy, medical, and military and defense
Nonetheless, with the economic climate and various wars occurring, plus real possibility of a large, global conflict, manufacturers are facing uncertainty on multiple fronts. So, they are rethinking projects, asking; which projects do we stop or pause? If we continue, how much will it cost to fully implement? What if we move forward with an alternative vendor? Once we get a better view of our our markets and the economy, which project(s) do we start once funded. Manufacturers want to solve current business challenges but also need some confidence today’s solution will support growth. Attributable ROI/ROA is the goal.
Venture Outsource closely monitors and tracks contract electronics pricing of services and fees, and the various factors impacting total landed costs and “we see many electronics manufacturers revising down earnings and forecasts”, says Venture Outsource president Mark Zetter. A weak USD helps global manufacturing and a strong USD helps fight US inflation. USD is in a strengthening phase.
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Effective RFQ for EMS manufacturing programs
Differences between OEM, CM, CEM, ECM, EMS, ODM, JDM, design houses
Technology equipment manufacturers can read more about assessing accuracy of supplier quoted pricing (from providers of contract electronics services) vs actual internal factory costs, here, in how to approach cost vs price analysis for contract electronics services. This becomes especially important as manufacturers reassess projects and project spend, reprioritize (or cancel) projects while focusing on capital preservation.
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For electronics brand companies seeking quote pricing from EMS and ODM firms for your electronics programs, this article provides detailed steps and RFQ best practices for contract electronics programs.
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