2022 Technology and Consumer Electronics Outlook
Uncertainty about the economic future is now possibly at its greatest point since the pandemic began in early 2020. While economic development has been robust in recent months as nations have mostly opened up, the supply side has failed to keep up with rebounding demand, resulting in inflation.
Over the last year, pandemic-related disruptions have created a variety of supply-side bottlenecks in sectors like raw materials, intermediate products – including semiconductors for consumer electronics – and freight transit. Suppliers’ efforts to construct buffers in response to the fear of scarcity of specific items have exacerbated shortages, revealing the weaknesses of global ‘just in time’ supply networks.
Meanwhile, supply-demand mismatches have been exacerbated by a pandemic-induced shift in demand away from services and toward products, most notably in the United States. Not only have these imbalances acted as a constraint on the global industrial recovery after the pandemic shock, but they have also contributed to an increase in inflation.
Other examples include a near-doubling of semiconductor lead times (which resulted in temporary production shutdowns in high-tech industries, particularly the automobile sector), a sevenfold increase in global container freight tariffs, and a sharp increase in the global PMI sub indices for input and output costs, which was triggered by a surge in commodity prices.
However, the year 2022 will see us mostly continuing “as we were,” but in a more stable, if still difficult, condition. Supply constraints on consumer electronics and high demand seem expected to persist throughout the year.
However, as the year unfolds, it is expected that headwinds will become more apparent. This will be facilitated by spending returning to more conventional patterns, price rises damping demand, stockpile effects waning, and – ultimately – political pressure to reduce reliance on East Asia, so assisting the supply side of the equation with investment. Capacity expansion takes time – years instead of months – but it also cannot be readily fine-tuned lower. Excessiveness becomes as pervasive as scarcity.
It’s hard to predict whether this will be a gradual return to the circumstances we were used to or a dramatic regression. We all hope for the former – but will be looking closely for evidence of the latter roughly a year from now.
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