Printed Circuit Board Industry: Lessons Learned from 2013

In Summary

After a very challenging 2012 for the domestic PCB industry, global business conditions are slowly improving. Let’s take a look back at 2013 and what we can expect as we move into the new year. Like many of you, I grew up in this business. I cut my teeth (and more than a few body parts) in this industry working for my dad in the family business. At the risk of dating myself, this was well before the advent of CNC machines, CAD/CAM and automatic plating equipment. Over the past 3 decades I have been proud to see this business grow into the professional industry it has become. I am vested in the success of our industry; it matters to me.

News Flash: US economy is still not working!

After a number of false starts, missteps and failed technologies in the renewable industry, solar/photovoltaic demand is beginning to recover. Europe’s tighter fiscal policies has squeezed consumer purchasing power and increased sovereign-debt tensions, which has an impact on global business. US consumer confidence has not improved, still hovering around 80%. The unemployment rate is 7.2% (published), which is bad enough, but after factoring in the millions of people that are no longer counted because they have flat-out quit looking, the “real” unemployment number is somewhere north of 14% (Forbes/BLS). The US is dead last in the world for Gross Domestic Product growth in 2013 at 1.7%; with forecasts for 2014 only slightly better at 2.8%, pulling ahead of only Japan and the EU. Whether it is RoHS, Conflict Minerals or the EPA, restrictive legislation continues to make it harder for PCB manufacturers to not only make a profit, but survive. Look for the biggest to get bigger through acquisitions both domestically and globally.

In 1990 there were roughly around 1,000 US printed circuit board manufacturers, in 2000 there were 700, and in 2010 the number of domestic shops had fallen to only 365. Unfortunately, I fear this number will be sub 300 by the end of 2015; a short 2 years away. Where the US market needs to continue to compete are QTA/proto business, advanced technology and short run orders.

Global PCB Snapshot

The global printed circuit board industry total available market is currently at a little over $60 billion, with Asia still dominating world production. There are a little over 2,900 printed circuit board manufacturers globally, The United States held onto its fifth place rank with just under a 5 percent share, which may look encouraging; however, this is extremely misleading as the top 4 countries are responsible for 89% of the total global PCB pie. People much smarter than me are only forecasting single-digit growth of the industry for the next 5 years.

Bright Spots Looking Forward

There are a few positive signs looking forward: leading indicators are rising in some regions and new product designs are starting to show some life. The overall world PCB production is increasing (100% growth over the past 10 years), which will continue to present more opportunities for the US market.

Much of the talk at April’s IPC/APEX Expo was how to bring manufacturing back to the US. Onshoring (preservation of existing manufacturing in America) is increasing as a result of US companies becoming more globally competitive through efforts such as lean, product design, reduced labor cost through increased efficiencies, and improved customer responsiveness. Reshoring (return of work to America that had been previously lost to offshore competition) is also on the uptick. China’s rising labor costs, political unrest & weaker exports are driving this trend. Apple plans to move $100 million of Macintosh computer manufacturing back to the US. While this may be a PR move on Apple’s part, but nonetheless, it is still $100 million of work coming back.

Smart Connected Devices: Timeless quotes from folks that didn’t learn from history:

 “I think there is a world market for maybe five computers.”

— Thomas Watson, chairman of IBM

 “There is no reason for any individual to have a computer in his home.”

— Ken Olsen, founder of legendary minicomputer company DEC

 “So we went to Atari and said, ‘Hey, we’ve got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.’ And they said, ‘No.’ So then we went to Hewlett-Packard, and they said, ‘Hey, we don’t need you. You haven’t got through college yet.'” — Apple Computer Inc. founder Steve Jobs on attempts to get Atari and HP interested in his and Steve Wozniak’s personal computer

 Fortunately, these three boneheaded visions couldn’t have been more wrong as printed circuit boards are the backbone of the electronic technology that has taken us to a place that none of these “prophets” could have imagined in their wildest dreams. The smartphone market is approaching a billion units a year with tablets adding another 400 million to this number. Every one of these devices has at least one printed circuit board that needs to be redesigned and replaced with each new generation launch.

Keep Your Chin Up

Process equipment manufacturers are growing at a solid rate, which is a positive indicator for the PCB industry as a whole. Laminate and other material suppliers are also showing slight growth. So, 2013 was a bit of a wash, but in this economy that is a win and with any luck, 2014 looks to be a little better.