Navigating Rising Material Costs
Take proactive steps to minimize the impact of growing material prices.
Overseas board manufacturers have received formal notifications from major laminate suppliers about upcoming double-digit price increases for the raw materials required to produce printed circuit boards.
Compared to this time last year, gold and copper prices have risen significantly due to inflation, the push for green energy, and speculative demand and capacity limitations for these precious metals in the coming years.
While most notifications were heavy on apologies but light on details, one was specific about the increases:
- Copper and copper foil: up 30%
- Tin: up 40%
- Gold: up 35%
- Resin: up 20%
- Glass fiber: up 44%
The same notices about raw materials price increases indicate that overall, buyers can expect PCB prices to rise approximately 10-15% for new and repeat orders.
Boards requiring heavy copper, ENIG, or hard gold plating could see price hikes as high as 25%.
These percentages are estimates, however, as a board’s price is influenced by the required technology, quantity, physical size and lead time. Additionally, manufacturers might not pass all price increases on to customers, depending on their capacity and demand.
Mitigating price increases. What can PCB buyers do to mitigate these increases? Here are some suggestions:
Forecast: Consult your sales department and review your purchase plans. Inform your PCB vendor immediately to place an “anticipated order” of materials at current prices, helping to stabilize overall pricing.
Also, consider changing your buying lead-time from monthly to quarterly with monthly deliveries to cut costs.
Collaborate closely with your vendors to forecast demand and production needs. This partnership can lead to better planning and potentially lower prices due to the predictability of your orders.
Implement just-in-time (JIT) inventory practices to minimize the costs associated with storing large quantities of materials. Effective inventory management ensures that you only order what is needed, reducing excess and wastage.
Develop strong negotiation skills within your procurement team. Training in negotiation techniques can lead to better pricing, terms and conditions from suppliers. Understanding market trends and having up-to-date information on material costs can strengthen your position during negotiations.
Stay updated on market trends and industry developments. Regularly review industry reports, news and analyses to anticipate changes in material costs and availability. This foresight can help you make proactive decisions rather than reactive ones.
Freight: Discuss with your production team whether PCBs are needed in four weeks when manufacturing typically takes eight to 12 weeks. Consider air cargo, which has a 12-15 day transit time, or consider consolidating shipments. Extra planning could offset material price increases.
Function: Consult your board designers about cost-saving measures, including:
- Whether extra surface copper or an additional mil of copper in the hole is necessary for heat dissipation. Would extra via holes suffice?
- Whether a six-layer board could be redesigned as a four-layer board to save on copper and avoid tariffs (if the PCB is coming from China).
- Can panelization be optimized to reduce wasted material.
- Accepting X-outs to reduce the cost of delivering perfect boards in every panel.
Establish stringent quality assurance protocols to minimize defects and rework. High-quality production reduces long-term costs and improves customer satisfaction. Regular audits and inspections can help identify and address issues early in the production process.
Develop a set of performance metrics for your suppliers. Regularly review their performance in terms of quality, delivery times, pricing and communication. Reward high-performing suppliers with more business, while giving underperforming ones the opportunity to improve or face replacement.
Fielding quotes: Now is the time to reach out to potential vendors, both domestic and offshore. This isn’t about switching vendors immediately but keeping current vendors competitive.
When comparing prices, consider the total cost of ownership, including board cost, freight, and any tariffs. Don’t hesitate to bring on new vendors if necessary, and let current suppliers know you’re doing this to encourage better pricing.
To find new PCB vendors, attend shows such as PCB East in Boxborough, MA, in June, and PCB West in Santa Clara, CA, in October. Registration is free to visit the exhibit hall, which provides an opportunity to meet many PCB manufacturers and compare capabilities.
These events also offer educational courses on PCB technology to help you become a better board buyer.
Rising costs are nothing new in our industry. As a board buyer armed with knowledge and forethought, you can influence the impact these costs have on the delivered price. By integrating these additional strategies, PCB buyers can more effectively manage their costs, ensure a steady supply of materials, and maintain competitive pricing despite market fluctuations. This proactive approach will help mitigate the impact of rising material costs and contribute to overall business stability and growth.
Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of DirectPCB (directpcb.com) and can be reached at greg@directpcb.com.
