Issue link: https://iconnect007.uberflip.com/i/1437606
DECEMBER 2021 I PCB007 MAGAZINE 13 months of inventory relative to sales. In the current environment, we have a couple weeks of inventory relative to sales. You can have a lit- tle bit of an overhang to restock those inven- tory levels and get them back to more normal, arguably healthy, levels. Matties: So, listening to everything you just said, you seem optimistic that 2022 will be a positive year for our industry. DuBravac: I'm cautiously optimistic, but I think there are tailwinds. If you look at dura- ble goods, which is where our industry fits, that's up from pre-pandemic levels by nearly 20% today. Spending on services hasn't really recovered to pre-pandemic levels yet. Some of that will presumably settle out in 2022. We will see a pickup in spending on services. We see some headwinds against spending on durable goods as a result. Growth rates will be slower for the econ- omy in 2022. We'll have presumably less stim- ulus than we have had since Spring 2020. Even considering the potential for the infrastruc- ture bill, you're going to have less stimulus to drive spending. We'll be more reliant on wage increases and business investment to drive growth. Businesses are showing a bit of uncer- tainty, and consumers are showing less confi- dence than they were pre-Delta variant. Here's an anecdotal example from a friend. His phone was dying, so he went to the carrier store to get a new one, but they weren't in stock. He got the bat- tery replaced instead, and now the phone is charg- ing fine, so he isn't going to upgrade. He said, "Well, now it's charging fine, so I'll just use this phone a little longer." at happens in a lot of categories where we extend the durability of the product. You see it in cars, especially, where there is a high degree of durability, and the life cycle can be long. Going back to my example with Apple, by their estimate they've lost over $12 billion in sales over the past six months. Some of that will materialize later in 2022. Maybe some of it is a missed opportunity, but some of it will re-materialize. As I said, there are some head- winds and tailwinds, but the overall environ- ment looks pretty good. Matties: e other impact, of course, is labor. Right now, there's obviously a shortage of labor. When you're looking at the market reports, how do you factor the labor into your thinking? DuBravac: If you look at IPC's newly released indices, the ability to hire skilled labor remains a major constraint and companies—at least over the next six months—so I don't anticipate that to improve. In fact, most firms say that will deteriorate over the next six months. My rough estimate is that we have nearly 120,000 open jobs in our industry in the U.S. Prices will go up for labor because they're going up in other places for labor. Manufactur- ers are competing against Amazon, Walmart, Starbucks, and everyone up the value chain, depending upon what type of job you're recruit- ing for. Matties: Many of those major companies are offering hiring bonuses and other incentives. DuBravac: Exactly. Both Ama- zon and Walmart this year of fered to pay higher edu- cation costs for some of their employees. Walmart a n n o u n c e d a c o u p l e months ago they were going to give half of their associates, about 750,000 people, a smartphone to use while they're in the store but then also to use for their own personal use out- side of the store. So, there are these fringe ben- efits together with real tangible benefits.