6 factors that impact pricing of electronics worldwide
There are various factors that have a direct (and sometimes indirect) impact on the pricing of electronic products regardless of the country they are manufactured in. Prices can sometimes remain fairly stable for extended periods of time, however slight price increases occur regularly.
Here are six factors that that have an impact on pricing:
1. AUD/USD EXCHANGE RATE
The AUD/USD exchange rate has a big impact on the final pricing of your product. As stocked electronic components within Australia are limited, most parts are bought from overseas in USD. For some years the exchange rate has been fairly stable, however the AUD/USD rate has been steadily decreasing since 2018 (source).
This results in an increase in cost to build your product and can result in a higher price in AUD. Manufacturers are usually able to absorb minor price fluctuations, however this needs to be reviewed on a case by case basis whilst re-quoting.
This applies to PCBs as well, as they are manufactured overseas.
2. RISE IN MINIMUM WAGE
The minimum wage in Guangdong province which includes Shenzhen, Dongguan and Guangzhou (China’s most important industrial province) has doubled in past 8 years (source).
3. PRICES OF SOME MINERALS (EG. GOLD)
Prices of some minerals used to manufacture PCBs have increased. For example, the price of gold has increased by more than 15% in the last 2 years (source).
4. PRICES OF SOME COMPONENTS
The prices of some components (eg: ceramic capacitors) have increased by at least 25% because of the tariffs imposed on Chinese imports by the Trump administration. Companies have stated that they would charge this amount to customers to cover the additional costs from the tariffs (source).
Some components are also influenced by market supply and demand. As obsolete components have limited availability, their prices fluctuate heavily and can vary per quote or purchase order. In these scenarios, quotes will need to be updated on a case by case basis.
5. FREIGHT COSTS
Freight costs from Hong Kong to Australia has increased over the past five years by at least 15%. The table below displays the % increase in shipping costs in 2015 vs 2020:
6. HEALTH CRISES AND NATURAL DISASTERS
Health crises and natural disasters can lead to temporary or long-term disruption of local or global output of component manufacturing. A good example of this is the current COVID-19 pandemic, which has led to tighter supply and higher prices for some components including multi-layer ceramic capacitors (source).
Since the beginning of 2020, businesses have been forced to slow down or close down with lockdowns implemented in various countries. This has led to a direct impact on the availability of components, their lead times and pricing - and the price difference will depend on the length of the forced lockdowns.
Generally, our quotes are valid for 60 days from the time of quoting. After this time period, the price will need to be confirmed by our account managers. If the AUD/USD exchange rate and the price of components have remained stable (within a 5% difference), we should be able to provide the same pricing for our customers.
Please contact your account manager if you have any questions or concerns in regards to your quote.