UK electronics manufacturers have seen a sales revenue lift of 30% in 2021 vs 2020, outpacing the average performance of manufacturers of 24%, according to data from a soon-to-be released Unleashed State of Manufacturing report. Other figures reveal stable profit margins despite the withdrawal from the common market, and improved performance amongst firms adopting eCommerce channels.
The report analyses over 79,000 data points from UK manufacturers that use Unleashed software. Isolating data from electronics manufacturers within this cohort reveals the recovery this sector is undergoing post-Covid.
Sales revenue has risen significantly in 2021
Comparing average monthly sales revenues in the first three quarters of 2021 vs figures from 2020 shows the electronics sector recovering from the worst impacts of the pandemic. The sector is outperforming the overall increase among manufacturing firms by 6 percentage points.
Average increase in sales revenue, 2020 to 2021
This steep upward trend is promising given the challenges manufacturers have faced over this period, including labour shortages and supply chain disruptions that have resulted in delays and rising costs, and a global semiconductor chip shortage.
Additionally, manufacturers have seen these increases in spite of an overall loss of trade volumes with the EU following the departure from the common market on January 1, 2021. Unleashed data shows that amongst manufacturers that normally export to Europe, revenue from EU sources has halved since Q4 2020.
Average sales orders are up on 2020
Average monthly sales orders are also showing a radical improvement on 2020’s figures – climbing from an average of 193 orders per month in 2020 to 233 per month in 2021.
Increase in average monthly sales orders, 2020 to 2021
The improvement for the electronics manufacturing industry is lower than for manufacturing overall, but is still a giant leap from 2020, reflecting the general trend of post-Covid economic recovery in the UK.
Overall profit margins remain healthy
Another key measure is gross profit margins, and electronics firms in our study have recorded a healthy average profit margin in 2021 of 45% – a figure comparable to the overall figure for manufacturers in the UK.
Average gross profit margin, 2021
Again, these figures are a positive sign for electronics manufacturing. Profit margins have remained stable over 2020–2021, suggesting that changes to trade with the EU – along with other issues like supply chain disruptions – have not had a major impact on manufacturers’ margins.
Electronics firms that use eCommerce post higher profit margins
Last – but definitely not least – the Unleashed Manufacturing report looks at who is using eCommerce integrations to manage their sales and what impact this has had on profit margins.
Average profit margin for electronics firms, 2021
Examining electronic firms within the broader manufacturing cohort, we see a strong correlation between those using eCommerce platforms and increased profit margins – a trend that holds true for all manufacturing firms analysed. 2020’s lockdowns forced many businesses to look to new sales channels – especially eCommerce –and it looks like this trend is here to stay.
And it makes sense that firms who have turned to eCommerce have been reaping the benefits in 2021, since using eCommerce has multiple benefits once it’s set up. Customers now often expect to be able to do their product research and purchasing online at any time of day – a trend that’s fuelled by the fact that millennials are now more likely to be involved in this process. And eCommerce software – especially when integrated with inventory management – makes your shipping, tracking and stock management more efficient, leaving more time for your staff to engage in other value-adding activities.
Takeaways for the electronics industry
Nearing the end of 2021, manufacturing appears to be settling into post-Covid patterns, and after a challenging couple of years, firms are finding their feet again and business confidence is up. However, we know we’re not yet out of the woods. Rising component costs are rampant, putting even greater pressure on manufacturers to maintain healthy profit margins.
Day to day, businesses are telling us that they buy something on the Monday, then go to buy the same thing again on a Friday and the price has gone up. Therefore, when looking to protect your margins you need a real-time view on costs and how they are changing, so you can evaluate pricing in as close to real-time as possible.
Secondary to that, when prices for electronics components are increasing, you may need to make difficult decisions about which products not to make or sell, as you simply won’t be able to generate enough profit from those products.
We know that a supplier for a customer of ours, one of largest electronics manufacturers in the UK, had to press pause on production of a number of key product lines. The cost price for raw materials had increased to a level where their analysis told them they would be making a loss.
For electronics manufacturers to thrive, not just survive, an increased laser focus on changing cost prices, coupled with a constant evaluation of your sales price, is essential to ensure you remain profitable.
Unleashed gives manufacturers clarity across suppliers, production, inventory and sales. With a live view of costs and profit margins, plus total oversight of stock levels and sales volumes, Unleashed helps manufacturers adapt to challenging conditions with confidence.