Mixed Signals Define Electronics Manufacturing as 2025 Winds Down
By Shawn DuBravac, Chief Economist, Global Electronics Association
Key Summary
• The October 2025 Global Sentiment Report shows electronics manufacturing facing both challenges and progress as the year ends.
• Material and labor costs remain elevated, putting pressure on margins across the supply chain.
• Orders, shipments, and capacity utilization remained steady in September while backlogs continued to ease.
• Some manufacturers are experiencing improved labor conditions and slight declines in material costs.
• Expectations for early 2026 reflect cautious optimism with stable inventories and projected increases in orders.
The Global Electronics Association’s October 2025 Global Sentiment Report captures an industry navigating a mix of headwinds and tailwinds as it enters the final quarter of the year. Cost pressures persist, but demand indicators remain resilient, setting the stage for a cautious yet stable close to 2025.
Input Costs Remain Elevated, Margins Under Pressure
Rising costs continue to weigh on profitability across the electronics value chain. Nearly three-fifths (58%) of manufacturers report higher material costs, while 43% cite increasing labor costs. At the same time, backlogs and profit margins remain soft, underscoring the ongoing squeeze on margins.
Still, there are early signs of relief. The Labor Costs Index reached its lowest level on record this month, suggesting that some manufacturers are experiencing improved labor dynamics. A handful of respondents also noted modest declines in material costs, suggesting that inflationary pressures — while still present — may be starting to stabilize.
Orders Strengthen, Backlogs Ease
Despite cost concerns, demand fundamentals remain steady. Orders, shipments, and capacity utilization all held firm in September. Importantly, backlogs continue to ease, signaling that production is catching up with prior demand surges. This reflects a more balanced market where supply and demand are gradually realigning.
Cautious Optimism for the Months Ahead
Looking toward early 2026, manufacturers expect cost pressures to persist, but they remain confident in the sector’s underlying strength. Orders are projected to increase in the coming months, though sentiment softened slightly compared to last month’s survey.
Inventory levels are expected to remain stable across both suppliers and customers, consistent with a more measured, sustainable demand environment.
A Market in Transition
Taken together, October’s report points to an industry in transition, one where input costs are high but stabilizing, production is catching up to demand, and manufacturers are adjusting to a slower yet steadier growth trajectory.
The coming months will test how well the sector can sustain this balance as it prepares for another year of global economic uncertainty and continued technological transformation.
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The primary concerns are higher material and labor costs, along with persistent pressure on profit margins.
Yes. The Labor Costs Index reached a record low and a few respondents noted small declines in material costs.
Orders, shipments, and capacity utilization remained steady in September, reflecting stable overall demand.
Backlogs are easing because production is catching up to earlier spikes in demand, signaling a more balanced market.
Manufacturers expect ongoing cost pressures but remain optimistic about steady orders, stable inventories, and a gradual realignment of supply and demand.