COVID-19 pandemic winners and losers in industry

March 1, 2022

With the COVID-19 pandemic approaching endemicity in many regions of the developed world, we caught up with Adrian Lloyd, CEO of Interact Analysis for his take on the pandemic, its implications for manufacturers, and other aspects of the roller-coaster ride we've all been on these past two years.

Q: Adrian, what’s the most interesting thing you’ve seen in your current manufacturing research?

A: It’s the shape of the recovery, which I can only describe as elongated and lumpy. There were winners and losers during the pandemic, and it all looks a bit random. It’s not random in reality, of course: there’s a reason for everything. But in this downturn the outcomes were highly unpredictable.

Normally a downturn has a negative effect across the whole economy. But with the pandemic, that wasn’t the case. Some industries saw soaring growth, such as consumer electronics, and some went into meltdown. Some, like automotive, initially collapsed in a way one might expect given lockdowns. But then bounced back almost immediately in a most unexpected fashion. Others, such as aerospace, will take much longer to recover. Without specialist insight, the global manufacturing sector during COVID looks like a child playing with a mixing deck: randomly pushing some dials up and some down.

Additionally, recovery at a regional level has been dependent on government responses to the pandemic. Again, it’s been a bit unexpected. Countries that stayed open in the name of putting the economy first, such as Brazil, have recovered slowly. Countries that immediately shut down their economies, such as China, are now booming.

It’s fascinating, and a challenge, to model these dynamics.

Q: What can you tell us about reshoring?

A: There’s been a lot of talk about reshoring being the solution to the supply chain crisis we face right now. It isn’t. The supply chain crisis needs short term solutions. Reshoring is a long-term thing. But that doesn’t mean it isn’t a real trend in some sectors.

One aspect driving reshoring is political pressure and the green agenda. With more food, for example, being produced and consumed locally. New techs such as vertical farming may well facilitate this. In other industries, there may be some targeted reshoring. I’m talking about ‘strategic’ industries, such as semiconductors, where the West has hitherto been pretty much totally reliant on supplies from Asia. The EU recently committed $43 billion to boost semiconductor manufacturing in the region, following the US’s lead.

Q: What should companies in the manufacturing value chain be looking out for now?

A: My advice to people in manufacturing, particularly equipment providers or component vendors, is to be mindful that fears about shortages will result in overordering. Companies are playing safe. They are placing multiple orders and then cancelling them. It’s artificial demand and it can quickly go from a boom to a bust cycle. Stockpiling can also be an issue. All this distorts demand cycles and ultimately causes slumps down the line.

Q: How is 2022 looking so far?

A: 2022 is going to be a growth year because of the elongated recovery. When it comes specifically to machinery, I call it a ‘square root recovery." We’ve seen a huge dip in machinery sales, and now we’ll see a slow, protracted return to growth. Our partners at ITR Economics are predicting a slowdown in the US economy in the 2nd half of 2023, but not a massive shock.