Comparing PCB industry in China and the United States, how small and medium-sized enterprises can do better
Electronics are the driving force of the global economy. Electronics are everywhere, from life-saving medical equipment to safety and security systems, communications and automobiles. The electronics manufacturing industry has created a large number of jobs in this industry as well as other industries through increased productivity and continuous innovation. Applications such as wearables, augmented and virtual reality, high-end graphics and video are just some of the upcoming electronics-based innovations.
In many ways, the technological advancements brought about by electronics are amazing. The basis of an electronic system is the PCB. Without a PCB, semiconductor chips and other components cannot be attached. There is a very vivid metaphor “chips cannot be suspended”, which means that only with PCBs can the interconnection of the entire electronic system be realized.
A trusted manufacturer of complex interconnect substrates is required to support mission-critical applications. Most of the PCBs are moving to Asia, and North America is gradually shrinking. It is strategically important for the United States to invest in PCB technology and manufacturing to maintain the strength of the electronics manufacturing industry, and its investment will be significantly lower than that of the semiconductor industry.
Reason for this situation
Before the transfer of PCB production to Asia in 2000-2001, U.S. PCB production was valued at just over $11 billion. Like Japan, the United States leads the way in this critical and enabling technology.
Today, U.S. PCB production is just over $3.5 billion. Part of the reason for the decline in production is OEMs, who made proprietary interconnects in the mid-1990s to support their hardware. However, as technology has advanced, many OEMs have decided to close their PCB manufacturing facilities in favor of specialized manufacturers. These manufacturers are mainly from other countries, and over the past 20 years, China has developed into a major force in the PCB industry.
The lack of in-house manufacturing by OEMs has led to the loss of technological leadership. As manufacturing moved to other countries , the original engineering and manufacturing talent of the large OEMs disappeared. In addition, OEM-only factories are responsible for guiding and utilizing advances in research and development, materials and processing. However, once the outsourcing decision is made, the United States also loses these technical capabilities, including in HDI and automation.
Today, there are fewer than 200 PCB manufacturers in North America, down from 1,500 in the 1990s. Many of these independent production sites are owned by a few companies. With the exception of a core group of 10 to 12 large companies, most are small, single factories with an annual output value of less than $15 million. Mass production has moved to Asian countries such as China.
HDI, micro-via, build-up technologies are critical for miniaturization, enabling next-generation communications, high-performance computing and IC substrates, semiconductor packaging. Flexible circuits, especially high-volume roll-to-roll production, serve a variety of end markets, including automotive, medical, and computers, notebooks.
While the outward shift in capacity could mean a bleaker future for the North American PCB industry, some opportunities remain. Manufacturers currently have some capacity to support these technologies, so further capacity expansion is required.
PCB end market
While the low-end computer and office equipment segment may not offer growth opportunities for U.S. PCB manufacturing, there are opportunities in communications and internet infrastructure, as well as aerospace and defense (A&D), industrial automation (smart factories and CFX) , as well as “protected” applications such as data transmission, network security and servers, data storage, etc.
Technology development trend
It is estimated that in 2020, the top 100 electronics companies in the world produced products worth more than $2.4 trillion. This is important for the following reasons:
- The top 100 companies drive technology development in other areas;
- Most companies are headquartered in the United States;
- Most PCBs are manufactured elsewhere.
Today, the state-of-the-art technology associated with high-end PCB manufacturing is no longer developed in North America. When leading OEMs decide to close their PCB factories and buy from outside, much of the R&D capability disappears with it. For example, HDI was invented in the US and is a great enabling technology for faster signal speeds, smaller form factor and lower cost.
However, most of the production of HDI, and the interconnect (IC) carrier board on which HDI relies, comes from Asia. This is the main problem because the technical center goes hand in hand with production, including specialized equipment, materials, chemistry, and of course PCB assembly. The now well-known shortage of computer chips complicates the situation.
Embedding components into IC substrates was invented in North America in the 1950s and 1960s as a laboratory technique. Today, it has grown into a multi-billion dollar technology. But the point is not value, but technology. HDI and embedded components are the enabling technologies, and they are an important part of next-generation hardware. North America has lost the ability to produce such products.
To make matters worse, many purchasing managers want to commoditize PCBs with the explicit goal of driving down prices. Due to the U.S. International Traffic in Arms Regulations (ITAR) and U.S. Department of Defense requirements, some protected market segments, such as aerospace and defense, IoT, and high-performance computing, must be available in the U.S. and North America through a network of trusted suppliers manufacture.
The opportunities don’t end there. The evolving and enabling technology trends, including artificial intelligence (AI), wearables, additive manufacturing, and the “factory of the future,” provide North American PCB companies with ample means to expand their business. However, these companies are required to strengthen their technological capabilities for a competitive advantage.
Areas of opportunity
Among the many major changes taking place in the electronic interconnection industry, small and medium-sized enterprises have the opportunity to accelerate their technological development.
First, for these companies to be successful, they must be constantly aware of developments in their industry and others that may affect their business. For example, how is artificial intelligence (AI) impacting the electronics industry? What does it mean for materials and electronics manufacturing as products are developed for high frequency applications? Manufacturers need to ensure that processes and materials come together to support advanced manufacturing.
The maximum frequency at which OEM products operate is expected to increase over the next 5 years. Communications OEMs expect frequencies to reach 77GHz and above. They also expect the maximum life expectancy of the product to increase to more than 25 years. This is especially important for PCBs as this will drive higher reliability requirements.
However, while these technology trends present opportunities for PCB manufacturers, they also present significant challenges. When the authors interviewed representatives of 9 PCB manufacturers, the following questions were asked the most:
- More layers, higher-order HDI, thicker PCB
- Finer traces and spacing less than 2 mil
- Finer pitch
- Ultra HDI
- Small components and micro BGAs
- Higher aspect ratio
- Stacked blind vias and reliability issues
- Thinner media
- High-speed material handling
- Via fill copper capability
Moreover, these companies will struggle to attract and retain skilled workers as rising raw material and transportation costs have squeezed profit margins. How to develop and retain skilled labor has been an obstacle to growth for many years. How to deal with it?
The way forward
Most North American PCB manufacturers need to change their mindset to move into high-end advanced technology and manufacturing. Quality improvement and technological development cannot be achieved without strategic investment. They need to upgrade and develop their workforce, not just engineers, but manufacturing people who understand key requirements such as workflow, quality and delivery time.
In addition, there is a need to increase production capacity. Yes, it all requires funding. However, loss of market share, over-reliance on overseas manufacturing and diminished technological advancement are unacceptable.
Currently, industry and government departments are planning to invest at least $50 billion in state-of-the-art semiconductor chip manufacturing facilities in the United States. Even so, when these facilities become operational, they will only meet part of the demand for U.S. chips.
Which begs another question: Where will these chips be used? Electronic systems require not only chips, but also organic substrates, advanced multilayer boards, and assembly and test (OSAT). If we’re serious about the future of the North American tech industry, it’s time to realize that without circuit boards and IC substrates, there would be no semiconductor industry.
In order for the United States to overcome technological barriers and improve its competitive position, HDI and Ultra HDI must be made a standard design requirement for advanced electronics manufacturing.
But mastering HDI technology is not straightforward and requires significant investment in capital equipment, labor training, and the development and adoption of new processing technologies, including semi-additive processes and alternatives to traditional metallization. Manufacturers must master the following key technologies and processes:
- Fixture and material selection
- Small hole drilling and micro drilling
- Laser via hole formation
- Decontamination, hole metallization and plugging
- Fine routing and precision alignment, image transfer and etching
- Blind Via Plating (Super Filled Copper)
- Quality control and certification (test boards, reliability verification)
Still, the amount of investment required to revive the U.S. PCB industry is much lower than the semiconductor industry. Based on preliminary research conducted over the past few months, the key is to increase the manufacturing capacity and advanced technology capabilities of the top 100 U.S. PCB manufacturing entities.
Each fab can invest $10-12 million in equipment to improve yield and technical capabilities, including laser drilling equipment, laser direct imaging, alignment and subtractive process technologies, as well as via filling, metallization And a comprehensive upgrade of internal quality control.
How do small and medium-sized PCB manufacturers who already have reasonable internal capabilities invest? The first is to subsidize the top 100 identified OEM manufacturers and manufacturers in the military aviation field through tax incentives and low-interest, interest-free loans. Assuming that 100 companies invest, the total investment is only $1 billion, which is far less than the $10 billion invested by chip manufacturers.
Another possible strategy is for businesses to claim the R&D tax credit and, if possible, take advantage of the accelerated depreciation of the new investment. It would be wise to demand more from companies that receive such funds and incentives, including paying employees appropriate wages and providing medical benefits, providing a safe work environment, and increasing labor accordingly based on investment.
The near-term goal is to double U.S. manufacturing capacity for high-reliability complex PCBs and IC substrates over the next 3 years, and then increase capacity by another 50% by 2027.
While these expansion targets may seem overly optimistic, they are still quite feasible given the existing history of PCB interconnect manufacturing in the United States. The initiative will involve leveraging the existing infrastructure base to increase capacity and further develop manufacturing technologies.
If the federal government, as well as major chipmakers, are serious about semiconductor manufacturing in the U.S., they will need to invest heavily in PCB manufacturing and labor.v