2025 is going to have a lot of surprises.

The political winds of change present challenges and opportunities for electronics manufacturing services (EMS) companies this year. This shift creates many challenges for EMS program managers. My April column discussed how to address customer tariff concerns. Here I will focus on the dynamics of market uncertainty.

IPC's April market trend data provide valuable insight into changing dynamics in the manufacturing sector. According to the US Federal Reserve, domestic factory output was up 0.7% year-on-year in February, predominantly driven by an 8.5% surge in motor vehicle production. US output showed renewed weakness in April, however, with the Purchasing Manager’s Index (PMI) declining to 48.7 from a year to date high of 50.9 in January. IPC’s EMS book-to-bill ratio data show shipments rose 0.2% in March compared to the previous year, while bookings climbed 12.7%. April orders pushed the EMS book-to-bill ratio to 1.37, its highest level since November 2022.

So, what do these contradictory data mean for program managers? The short answer is that customers are reacting to market uncertainty. Tariff concerns have incentivized material pull-ins to get ahead of tariff cut-ins. Since tariff rates have become a matter of negotiation rather than fixed policy decisions, this situation adds another layer of uncertainty to the market, complicating the program management role. Nevertheless, one rule of program management never changes: you can’t control what happens, but you can control how you respond.

First, let’s look at the impact of uncertainty on customer orders. Tariffs drive the need to understand price elasticity of demand. Some products are inelastic, meaning that the product is so necessary that consumers will continue to buy it at similar levels regardless of price increases or decreases. Other products are elastic, meaning that demand decreases or increases when prices rise or fall. Consequently, program managers should review their programs to determine under which category the products are likely to fall. Programs with inelastic demand such as defense, industrial infrastructure and medical products will likely perform to forecast. Natural disasters such as those experienced last year and this spring may drive ordering spikes in some industrial infrastructure. Comparatively, programs involving products consumers buy with discretionary income are likely to be pushed out, because these products are elastic and demand will drop as prices increase. Material availability may also fluctuate. There is already a spike in demand for components from countries with the lowest tariff rates. Reduced demand for products bought with discretionary income may partially offset this.

Do your homework. Program managers should work with their purchasing teams to better understand changing availability trends and options, particularly for programs with inelastic demand because these steady runners are going to be critical to achieving near-forecasted revenue levels. When dealing with programs that involve products with likely elastic demand, review the material related to orders, on-hand inventory, forecasts and contract terms. Discuss market conditions with customers and determine if there is demand softness that could lead to changes in agreed-upon forecasts. If a customer needs to push out the schedule, have an internal discussion on any contractual customer obligations (such as buying excess or inactive inventory) and decide if negotiation is necessary.

On the opportunities side, OEMs are going to be shopping to price out supply chain realignment scenarios. But much of this activity is likely to be “what if” scenarios rather than a sincere effort to select new suppliers until tariff policies stabilize and become predictable. Southeast Asia and Mexico will likely emerge as winners in this realignment, and if India opens its markets, it may also benefit. US manufacturing is set to see a reshoring of projects that never suited offshore settings. If tax policy changes to further benefit Made in USA manufacturing, this opportunity could expand.

Sales teams should do their homework on potential customers to determine how serious these prospects are on changing supplier location versus simply developing a pricing model. This diligence will help avoid wasting resources on quoting exercises or prioritizing quotes that cannot win over those that can. That said, increased shopping translates to increased opportunities to get on the radar screen of companies that may be serious prospects longer term. If there is a potential fit, it’s worth building a relationship and staying in touch even if the initial interaction is a pricing exercise.

In short, 2025 is going to have a lot of surprises. Program management and sales teams who carefully watch trends and strategize the best responses are going to have better outcomes than teams who simply react as their customers react.

Susan Mucha is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm providing strategic planning, training and market positioning support to EMS companies and author of Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services. She can be reached at smucha@powell-muchaconsulting.com.

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