As ERA’s CEO, Edward Smith explains, amid uncertainty, companies investing early in adaptation and resilience will define the electronics industry’s future in 2026.
In 2026 the electronics components industry is facing many uncertain events. Let’s start with tariffs. There are two parts of tariffs: the first part of tariffs is the legality of the US President’s unilateral application of tariffs: the US Supreme Court is deliberating that issue as we speak. The Court should rule on this issue by June 2026. It will be a nightmare to have to rebate or give back up to $1 trillion of tariff money if the Court rules improper application of the law.
The second part of the tariff situation is the uncertainty around the amount of the tariffs. As we have seen, they can change quickly and not for reasons associated with business practices. The reasons could be geopolitical or retaliation for a slight or some other reason. Therefore, it is not always easy to figure out when and how this will affect demand and pricing. There is a lot of work being done to try to avoid or lower tariffs, such as migration to southeast Asia and Mexico. You are also starting to see free trade zones and other logistics strategies taking place, which all cost money and time.
Cyber threats are real and many companies have had incidents of these threats becoming real with ransomware attacks, data exfiltration attacks and other attacks increasing dramatically. Some companies have not recovered for weeks after an attack. We also have new defense/aerospace requirements, such as CMMC flowdowns, that have started to be imposed this month and will increase as we move forward in order to avoid cyberattack incidents.
The biggest uncertainty is the growth of AI. Many questions are raised by this fast-growing segment, such as: where will the power come from to drive this mass of data centers? Which new companies will power these centers? Which big industrials will benefit from this huge growth of AI and/or will new players evolve?
Any new technologies growing this fast will bring winners and losers to the party. AI will also change how we work and what we do. This is important as the fast adopters will have a strategic advantage in cost and better data to implement decisions. There is also the customer side of AI: the companies that provide products that power AI are growing faster and are more valuable than traditional companies. Uncertainty will continue until some of these issues become clearer in 2026.
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