‘A Good First Step’
PCBAA’s executive director lauds recent funding wins but says the heavy lifting remains.
by MIKE BUETOW
Year-end is typically not the time when big announcements are made, but the news came fast and furious in November as TTM Technologies and Calumet Electronics both announced plans for new factories. Coupled with the opening of Schweitzer Engineering Laboratories’ new fab in Idaho and the not-so-secret plant Starlink is building in Austin, one would have to return to early 2001 to see this level of PCB construction in the US.
All this new activity happily coincides with the efforts of the Printed Circuit Board Association of America. The fledgling trade group, which was founded in 2021 to advance US domestic production of PCBs and base materials, has been rallying federal legislators for attention – and funding – to ensure an onshore supply chain for domestic electronics.
We spoke with PCBAA executive director David Schild in late November on the PCB Chat podcast on the latest legislative and industry developments. Excerpts:
Mike Buetow: Much has happened since we last spoke in July. The big news this month is a couple of major investment announcements by your members, one in Michigan and one in New York.
David Schild: Absolutely. Our industry continues to demonstrate an ability to invest in itself and to lead in innovation. We know that in addition to the next-generation semiconductors that are going to be made with Chips Act money in places like Ohio and Arizona, we’re going to need next-generation PCBs and next-generation substrates to form a next-generation electronics stack. There’s been some really good announcements in recent weeks demonstrating our industry’s commitment to the technologies we’ll need to power the future, to borrow a phrase. You mentioned a couple of them: first in Calumet, Michigan, Calumet Electronics partnered with the Michigan Economic Development Corporation to expand their capacity in the field of organic substrates. It’s going to mean millions of dollars – I think about $7 million in capital expenditures – 80 new jobs in the Upper Peninsula, and certainly a critical capability when you talk about organic substrates. Also, we see from TTM an announcement that in the state of New York they’re going to spend nearly $130 million to expand their Syracuse facility and the ability to produce ultra-high-density interconnect PCBs, another next-generation technology that we critically need. Finally, going back to Calumet, an exciting announcement that the US Defense Department, under the Defense Production Act accounts, is going to contribute almost $40 million for defense-specific printed circuit boards to be built at Calumet.
So what you see there is investment by the government, the Department of Defense, and the state of Michigan understanding that we have to build out the entire microelectronics stack. But you also see private sector commitment. You see these companies stepping up and saying we will break ground, we will engage in greenfield initiatives, we will invest in next-generation technology, and I think it demonstrates that the PCB and substrate industries in America are not sitting still. This is great news. Of course, I have to caveat that while this is a good first step, as the Chips Act was, this does not go far enough to reverse the slide we’ve seen over the past 30 years. (The US) used to have 2,200 board companies and now we have something like 150. We used to have 30% global market share. Now we have something like 4%. To reverse that slide and build truly resilient and secure supply chains, it’s going to require government policy and investment to the tune of billions of dollars. While the millions we saw (in November) are a great first step, we need things like the PCBs Act, increases in funding for the Defense Production Act accounts and those appropriations. I think we need to see more tax incentives to buy American when it comes to microelectronics.
MB: When we spoke last, industry had just sent a letter asking for $100 million in the next budget toward onshore PCB and IC substrates technology development. And they were specifically targeting the Defense Appropriations Subcommittee, if I remember right. As you noted, the Calumet award was, in fact, provided by the Defense Production Act. Can we say that approach worked?
DS: I would say the DPA account has been used to a limited extent to support the industry. If you look at the amount of money allocated versus the expenditures, they don’t match up. My view is that one of the reasons that the appropriations committees cut the DPA account this year is because their feeling was perhaps the money was not being spent fast and efficiently enough. A great team of people at the Pentagon are committed to the supply chains that power everything that our men and women in uniform use. They understand the critical role of microelectronics. We have folks on Capitol Hill who similarly want to fund the DPA account. I think there’s a little bit of a mismatch and that’s why we’ve been on Capitol Hill consistently this year with the partnership of IPC to say, “Don’t cut the DPA accounts.” That’s our message to Congress and the Pentagon: Spend more robustly and more quickly inside of the accounts because the need is now.
MB: Does that suggest that some funds remain on the table to be allocated in the right situation, or was the Calumet award essentially the entirety of what was available for the current fiscal year?
DS: There’s still money on the table and obviously these are not simply blanket awards; they’re targeted at specific technology sets and specific programs and specific critical needs that the Department of Defense has identified. You need to have a specific plan and you need to be meeting a specific DoD requirement to seek out these funds. That’s what Calumet did. I don’t think this is the last domestic PCB or substrate company you’re going to see receiving an award, and of course there’s a whole microelectronics ecosystem beyond boards and substrates that the DPA can be used to fund, but I think many more companies that could contribute to that ecosystem could apply for funds, and I think that demand signal would probably overwhelm the amount of money that’s currently available. We need to work out this disconnect between Congress and the Pentagon first to make sure these accounts are funded at the appropriate levels and consistently year-over-year. Then I think we can pivot and engage with our customer at the Pentagon and say, “OK, how do we make sure that this is getting out the door quickly getting to industry quickly as you know these are not technologies that get developed overnight, right?” There are months or sometimes years of lead time to build circuit boards and substrates that will work with next-generation chips but also in the very dynamic environments that you find in the national security arena, so I think the time to act is probably now and you know we’re talking to both the executive and legislative branch about what needs to be done.
MB: Is it within the realm of possibility that monies allocated by the Chips Act could be used almost on a pass-through basis to help support supply-chain companies that are trying to build products that then would be part of the chips ecosystem? For example, an Intel or a Micron could receive funding that then would be used to help boost technology development at the IC substrate level with a partner company?
DS: Mike, this is such a great line of discussion because obviously our association launched in the midst of the fight for the Chips Act. The semiconductor industry has been well-organized, well-funded and focused on the goal of government support for a number of years. The Chips Act took almost five years from the time it was conceived to the time it was signed on the President’s desk, and the money still has not begun flowing. There is money from the Chips Act that goes to the Department of Defense. A great deal of money – almost $52 billion – is designed to be allocated. We are just starting to see funding guidance from the Department of Commerce and we are just starting to see some of the initial awards.
The way Congress wrote (the Chips Act), the language is interpreted to mean semiconductors. I think you are seeing a recognition at the Department of Commerce under Secretary (Gina) Raimondo that we need an ecosystem. She uses the term “manufacturing nodes,” and I think what she is envisioning is a chip fab surrounded by a test facility surrounded by raw material suppliers surrounded by board and substrate manufacturers. It has not been articulated exactly that way, and we have let them know that we’re part of the ecosystem. My sense is that this money will be allocated over the better part of a decade and that the first people to (benefit) be the world’s largest semiconductor manufacturers – the Intels, the Microns, the TSMCs.
At some point we think that a reinterpretation or another look at the Chips Act and where the money is going would be a good idea by both Congress and the administration. But right now, when you look at the guidance documents that detail how you can apply for Chips funds, they do not seem to carve out a space for board and substrate manufacturers.
MB: The TTM announcement in New York looks more like a partnership between the company and the state rather than the federal government. Does PCBAA get involved at the state level?
DS: We are primarily federally focused at the moment. My view is that eventually we have to start getting the message out into the states, and we’ve talked with economic development corporations and even mayors all over the country about what increased manufacturing of PCBs and substrates would mean. You are seeing states move very quickly on the heels of the Chips Act; New York, Arizona, Texas, California, Ohio, Illinois: these all come to mind when it comes to incentives. New York and Michigan are partnering with some of our member companies to say, “How can we speed the process of construction? How can we help you with workforce issues? You know what incentives are available on the ground?” That’s what the Michigan Economic Development Corporation did with Calumet. And TTM and the state of New York have a very positive relationship.
The remedies we’re looking for, the billions of dollars of direct funding and tax credits, are being sought at the federal level. We want them to apply across the country to anybody within the contiguous borders of the United States who is doing this sort of work. Our 44 members come from all over the country. Once we have run that process, and it’s probably a process that will continue to run for many years, we will have to branch out and start thinking about state initiatives. But don’t sleep on what state and local governments might be offering as well.
MB: Along those federal lines then, the Protecting Printed Circuit Boards and Substrates Act of 2023 is in committee and has seven cosponsors.
DS: I’m glad you brought this up. There’s really three major policy initiatives that we’re tracking. The first is this idea that the Defense Production Act is a hunting license, and that we have to have bullets in the gun in the form of appropriations funding. I mentioned the fact that the DPA account was cut for fiscal 2024. We are trying to get those cuts reversed, and have money added to the DPA account. We talked about how just in the last few weeks you’ve seen almost $40 million flow into Calumet from that account. There’s more that could be done, so that’s one policy priority.
The second would be the continued defense of provisions in the National Defense Authorization Act, or NDAA, that calls on the Pentagon to look inside its commercial off the-shelf supply chain – its COTS technologies – and (locate) microelectronics from restricted countries that we do not want to do business within the defense arena. The Pentagon has agreed that by 2027 they will have a plan to look inside those supply chains and make sure everything is trusted and sourced accordingly. I think that’s a great opportunity for American manufacturers beyond the ITAR market, where we obviously provide critical technologies today. Because it’s a 2027 implementation, we have to keep it sold. We have to play defense and make sure that is in every successive NDAA for the next several years.
Finally, there’s the Printed Circuit Boards and Substrates Act. Now we have a House version of that bill championed by Congresswoman Anna Eshoo and Congressman Blake Moore, with bipartisan support growing on both sides, we need a Senate companion, and I have spent a lot of the last few months going directly to the US Senate and doing a lot of education. What are PCBs and substrates? Why do we depend on them? Why has this supply chain gotten a little fragile and a little thin and what can we do to reverse it? We need a similar bipartisan bill in the Senate. Most probably don’t realize there was a Chips bill in the House and there was a Chips bill in the Senate. They reconcile those differences in what’s called the Conference Committee. It eventually goes to the President’s desk. Legislation is a long road. We have our House bill. We need our Senate bill. So that’s really our third leg of the legislative stool.
MB: Any early indications as to who might be a co-sponsor on the Senate side?
DS: I’m going to reveal that when we feel like we have commitments. I will say we’ve gotten very positive feedback from Democratic and Republican senators. Both sides of the aisle seem to understand this is a real issue related to economic security and national security. Nobody’s ready to put their name on the bill quite yet, but I can tell you they’re looking at the House legislation. They’re looking at where their constituent interests lie, the states where we manufacture these technologies and have a vested interest, and I’m optimistic that very soon we will have a Senate companion bill. We will move forward then to advance both in both chambers.
MB: What would you recommend the industry do insofar as trying to directly encourage their legislators in favor of restoring the cuts to the DPA, signing on to the Printed Circuit Board and Substrates Act, getting on board with getting one introduced in the Senate and so forth?
DS: There’s two things that industry can do. The first is to assist us in our educate part of the “Educate, Advocate, Legislate” mission. What I mean by that is, engage with your local Chambers of Commerce, engage with your state economic development authorities. Invite your local Member of Congress, invite your governor, invite your state representative to tour your PCB or substrate facility, to come look at your microelectronics manufacturing line. Get in there and explain to your elected officials what your contribution is to the economy and to the technologies that we depend on for modern life, because the response we often get on Capitol Hill is, what is a printed circuit board? What is a substrate? Why are they so important? The educate mission is something that everyone can service, and if you are struggling with how to make that happen, please contact the PCBAA and join our team because it’s one of the things that we can help facilitate the advocacy mission is being advanced every day by a team including both PCBAA and IPC. In Washington DC, we are calling on the executive branch, we are calling on the legislative branch, we are doing the briefings, we are advancing legislation. I think that that mission is best serviced by our trade association representatives and the committed advocates and lobbyists that are doing that work.
You’ve probably seen a lot of the public affairs work in the form of interviews, op-eds and educational programs. But I don’t think (the industry) can sit on the sidelines. The call to action is to engage with your lawmakers because I guarantee if you are running a manufacturing facility anywhere in the country, right down the road the corn growers, the steel workers, the folks who design and introduce software, the retail chains are all engaged in this kind of education advocacy and legislative outcomes. It is not unusual in Washington to be going into a meeting and someone is walking right out the door. They had their concern. We have ours. It is a competitive political environment. You’re competing for the attention of lawmakers and their staff, so the more involved our industry is by supporting our trade associations and letting lawmakers know “I am out here; I am a contributor to the economy; this is my economic footprint; these are the jobs I represent; these are the critical technologies” – that is so critically important to understanding an education is the first step on the road to policy change and we’ve got to have that.
MB: The notion that a printed circuit board manufacturer or assembler might be pushing on their local Chamber of Commerce for support seems, perhaps, a little unusual in most circles. I wonder whether part of the strategy there is because permitting in the United States is a big issue and for the last 40-plus years a lot of barriers have been put up when it comes to printed circuit fabrication. We have water issues. We have toxic chemical issues. We have land issues. There’s a host of things that have to be dealt with in order to put a shovel in the ground. Of those companies building new fabrication plants, most of them are building in out-of-the-way places. They’re not building in California. Is the idea here that the local Chambers can help pave the way to understanding why these types of businesses are actually good long-term investments in a community? Manufacturing jobs tend to be long-range careers and when it comes to community stability there’s a lot these types of businesses can offer.
DS: You are mirroring the sentiment that the Department of Commerce is expressing when it puts out these funding documents. For the Chips Act – and these are 75-page documents – when you get into the language, when you apply for these federal funds they want to see the partnerships, the agreements, the permitting process that you’ve already gone through with the state and with the city. The federal government is reflecting what you’re saying, that simply having federal money or federal tax incentives is not enough. You can have the funds to put up a building. You need the permit to put up the building. You need to have cleared regulatory approval.
Now the federal government can’t do very much to relax the rules or speed the process at the state and local level. But I think there’s a recognition that there is a partnership with state and local government and the federal government, right? The federal government providing the funding; state and local governments in many cases providing either incentives or speeding regulatory processes to get us where we need to go. The industry for a long time has faced challenges in that arena, and I would say to state lawmakers, “Federal money is now available. Look to your local communities and ask if there could be a new greenfield initiative.” In the case of New York and Michigan, I think they’ve shown a lot of vision in expanding domestic capacity and in making it easier to do business. Not every state is going to take the same attitude. We certainly see this in any number of manufacturing sectors. It’s easier to do business in certain states and that’s sort of a competitive environment that we’re going to have to operate in. I think there are enough municipalities, enough localities, enough states that see the economic potential. They see careers in microelectronics manufacturing. They see jobs for college graduates with degrees like engineering. They see significant economic impact because everything in the modern world relies on microelectronics. It isn’t just vacuum cleaners. It isn’t just automobiles. It’s electric vehicle chargers. It’s windmills. It’s solar panels. It’s every satellite flying to space. Any community is going to look at this and go, “Yeah, there’s a market. Why don’t we make this here?” This isn’t the kind of manufacturing like textiles, for example, where it’s gone overseas and it’s not coming back. We were the leader in this at one time and I think we can be in a very strong position again.
MB: In summary PCBAA has a very aggressive – and I mean that in a positive way – legislative calendar coming up over the next 12 or 18 months.
DS: Yes, 2024 of course is an election year, which in some ways provides incentive to move legislation and in other ways it distracts from lawmakers’ focus. The second session of the 118th Congress is starting in January, and as I said, we have a number of different priorities. There’s things that we have to keep sold for a number of years. There’s new initiatives that we need to advance, and I want to get to a place just like where we are with semiconductors where any lawmaker you speak to says, “I know what printed circuit boards are. I know what substrates are. I understand the technology stack. I get the sense that we led in one era and we have contracted and I want to right that ship. I want to turn that around.” We have dozens of lawmakers today who understand that argument. I want to make it hundreds of lawmakers at the federal and the state level. I think we can do it.