Electronics in the Eye of the Storm

The global electronics industry is navigating one of its most complex operating environments in recent memory. Five forces are converging simultaneously: geopolitical conflict, energy market disruption, semiconductor supply concentration, trade realignment, and a growing productivity imperative. And yet, at the headline level, the industry is holding up remarkably well. 

That resilience, however, masks a more uneven picture, one worth examining closely. 

AI Is Squeezing the Memory Market 

The Global Electronics Association's Memory Squeeze report identifies a challenge that is becoming hard to ignore. AI infrastructure is consuming semiconductor resources, memory in particular, at a rate that is driving real price pressure across the supply chain. GEA member sentiment confirms it. Costs are up, even if availability has not yet deteriorated to crisis levels. 

The deeper issue is structural. The global semiconductor supply chain runs through a remarkably small number of companies and geographies. Taiwan's export data makes that plain, with electronics now dominating its export profile. That concentration was always a latent risk. In the current geopolitical environment, it is an active one. For EMS companies and OEMs, the message is straightforward: semiconductor availability cannot be taken for granted, and procurement strategies need to reflect that. 

Energy Costs Are Stickier Than Markets Expect 

The Iran War and its impact on the Strait of Hormuz has introduced an energy cost shock that is broader and more durable than consensus forecasts suggest. Futures markets are already pricing oil at least ten dollars a barrel above pre-pandemic levels through 2026 and into 2027. Shipping costs are up. Insurance is rising. Input materials are more expensive. All of it feeds directly into the cost of manufacturing. 

European producers face the sharpest exposure, having already identified energy costs as a competitiveness concern before the conflict began. The key risk is that markets, eager for resolution, are systematically underpricing the downside. A prolonged conflict means prolonged inflationary pressure, and manufacturers not planning for that are carrying risk they may not have fully accounted for. 

A Two-Category Market 

Despite all of this, electronics output is defying expectations. US production is at or near all-time highs in several series. Asian exports remain strong. Book-to-bill ratios for PCB and EMS are showing positive momentum. 

The explanation is a two-category story. AI infrastructure investment and defence spending are carrying the market, both largely insulated from the consumer dynamics that would normally translate energy shocks into reduced output. Outside those categories, the picture is different. When households are spending an extra forty to eighty dollars a month on fuel, discretionary electronics purchases are an obvious casualty. Manufacturers with significant consumer electronics exposure need to plan accordingly. 

Supply Chain Shifts Don't Reverse 

What began as tactical tariff workarounds has become genuine strategic reconfiguration. Companies are no longer just asking where to manufacture to cut near-term costs. They are asking where to manufacture to build long-term resilience. That momentum does not reverse easily. 

For EMS companies, the practical implication goes beyond having capacity in multiple geographies. It is about building the operational muscle to use that footprint dynamically, qualifying lines in more than one location, and developing the programme management capability to move work fluidly when circumstances demand it. 

Data as Competitive Advantage 

Underlying all of these trends is a need for better, faster, more granular intelligence. The Global Electronics Association is building toward exactly that, with European data acquisitions, new regional offices, and further announcements imminent. The goal is to move beyond macro sentiment reports to insight specific enough to inform individual company strategy. 

The industry is not in crisis. But it is in transformation. The manufacturers investing in intelligence, agility, and operational resilience will be the ones who look back on this period as an inflection point. 

Philip Stoten is a journalist, speaker and host specialising in the global electronics manufacturing services industry. He hosts the EMS@C-Level, EMS & The Economist, and MADE IN EUROPE podcasts. 

Shawn DuBravac is Chief Economist at the Global Electronics Association. 

This feature is based on the most recent episode of EMS & The Economist which is available in video format on YouTube and in audio format by searching for EMS@C-Level wherever you get your podcasts.