Issue link: https://iconnect007.uberflip.com/i/1392944
58 PCB007 MAGAZINE I JULY 2021 ery obligation and it can be across a wide range of things. e ones that we see in the newspa- per are just the ICs. Johnson: Everybody thinks ICs are sexy. McMeen: Because that's the high dollar item, that's right; it's the sexy one with the latest technology that allows us to do all these great things. But remember, there are all kinds of re- sistors and capacitors and inductors. ere are a bunch of non-sexy components that still must be built. And the raw materials have to come out of the ground, and everything has to be converted and be in the pipeline so that it can flow to the converters, to the contract manu- facturer, or the OEM, and this type of dynamic hasn't been seen. Johnson: We're going to find potholes in the supply chain that we never anticipated. How do you recommend managing all of this? How do you help your customers smooth this out? McMeen: Pricing is going to be driven by supply and demand. We can definitely see there's go- ing to be inflationary pressure on the raw ma- terials, from the most basic to converted raw materials. ere's always this gradual increas- ing in pricing, but there may be a surge at first where tech goes into a premium, and then it settles down, but it never settles back down to what it originally was. So, your point needs to be viewed as two different things—labor and mate- rial cost pressures. Raw materials that have a tendency of increasing will have a slight decrease. en we find this new equilibrium or new norm, but there's still this increase. Materi- als conversion, where we're convert- ing and adding whatever we've got to do from that standpoint, also has an inflationary push because whether it's the adhesives or the electricity to con- vert the raw materials, it's increasing as well. Whether you're building chemistries that are used as a subset to convert our materi- als, all of those are increasing. ose are infla- tionary pressures, just on the materials side of the house. e labor side of the house is also increas- ing because we're under a new norm and the cost of living itself is increasing. Look what oc- curred in 2020 when we stopped eating out, we stayed home more, and we started buying more from grocery stores. We saw what hap- pened to the wholesale food industry. As grocery sales went up, we saw a change in our culture. You couldn't get cleaning supplies. Meat prices went up because those plants were struggling to keep people inside these process- ing plants so that they could convert the food to the grocery store so that we could live our new norm, which was staying home and cooking more. at put inflationary pressure on the cost of living. As the cost of living goes up so does the labor rate for people. As the cost of living goes up, then companies must raise their salary rates. So how do we combat pricing pressure? We generally use forward contracts to try to con- trol the prices for the components we buy. If you have a purchase volume and customer base that is very consistent, that's not too cyclical, then oen you can just soen sudden down- turns by pushing the delivery date to the right. What we're finding is, as we took the 2020 sales