There is No Drop-in Replacement for China PCB Manufacturing – Yet

Observations from Malaysia and Thailand.

There has been a push of late by many OEM and EMS companies in the PCB industry – intensified by Covid and simmering trade and political tensions – to reduce the West’s reliance on China for printed circuit board manufacturing.

In the past year, several of our customers, primarily from OEMs in the automotive, RF and testing industries, have asked for an “Out of China” or “China+1” strategy.

These customers have been buying boards from China for years for products or technology that does not fall under any export control.

So why the change now?

Concerns about IP protection and supply chain issues certainly factor in. But also, the optics of buying PCBs from China are not as favorable as they once were.

In that vein, we recently traveled to Thailand and Malaysia to search for PCB manufacturing facilities in those countries.

Our “test quotes” for the technology our customers require consisted of multilayer power boards with 3 oz. of copper each layer, and HDI product that was 14 layers and above, requiring 100-200 pieces to be built at a time.

What we found during this trip was that the task of decoupling from the very mature China PCB supply chain is easier said than done. There does not appear to be an immediate drop-in replacement to China’s available capacity to produce high-mix, low-to-medium technology PCBs in a timely manner.

Everyone we met in Thailand and Malaysia seemed hopeful that business will soon return to normal. The PCB industry throughout Asia has been slow, so it can’t come soon enough.

Our trip started in Taiwan and China, where we visited our current circuit board vendors. For me, it was the first time I’d been able to return after a nearly four-year hiatus due to the Covid restrictions.

While overall business in China was slow during Covid, that did not stop our vendors from making process and facility improvements.

Automatic optical and visual inspection (AOI and AVI) was much more prevalent than before. We saw more vertical plating lines and robotics – not robots in the sense of loading or unloading, say, a machine, but rather as transport devices that moved manufacturing panels from one department to another.

We even saw facilities that had automatic stockrooms where a robotic cart could fetch a bin containing a specific part number from an opposite side of the warehouse and deliver it quickly to the packaging area.

Thailand was chosen for this trip because two of our PCB manufacturing partners in China are building manufacturing facilities located a few hours outside of Bangkok, with completion expected next year.

Our visit coincided with the Nepcon trade show in Bangkok, where we searched for additional PCB manufacturers. We did our homework, of course, and reached out to several factories prior to our arrival. We hoped to find others at the show.

Surprisingly, though, while the show was large and well-attended, most board houses represented were from China.

We did later visit several Thai PCB manufacturers, and we were impressed by their size of operations. The industrial parks they are located within are large and spread out; it’s not the usual claustrophobic feeling of an industrial area in Taiwan, China or India.

While Thailand produces over $4 billion annually in PCBs, we found the shops were limited in the availability of higher technology manufacturing. Most of the work in the factories we visited was of lower mix, medium-to-higher volume. While some shops did produce HDI boards, we saw nothing above eight layers.

Our opinion of the capability for PCB manufacturing in Thailand is obviously subjective and based on a single visit to available shops. We do believe, however, the capacity to do higher layer count boards in Thailand is limited.

Clement, who has extensive experience with PCB manufacturing in Asia, says there are not many “sub-cons” in the country. Unlike China, where you can get any process completed, Thailand is limited, and that is why it may be hard to service all of our customers’ needs when it comes to certain technologies.

Most of the work we saw was for automotive, appliances and televisions, including remote control devices.

In fact, the silver-in-hole process is available – a technology we saw in the US PCB industry some 30 years ago.

Not as many AOI stations were available, but every shop had punch presses. Plenty of punching was going on with boards that required carbon ink.

Metal finishes available per manufacturer were limited, with OSP being prevalent, followed by ENIG. HASL came next, with immersion tin a hard option to find.

Some shops were more automated than others; in some places, we had concerns about the handling techniques.

Minimum order values quoted were higher, and lead times were longer compared to China or Taiwan.

Concerns we noted about the future of the Thai PCB industry are focused more on workforce than technology, however. Technology will come as the demand for that technology increases. However, while labor costs are less than that of China, there will be a workforce crunch come next year. Where will the operators and engineers come from when there will be multiple facilities opening in the next six to 18 months that intend to hire 300-500 people each?

Thailand’s language barrier may also affect its PCB industry. With Taiwan and China expected to play a big part in the growth of the Thai market, a lack of Chinese speakers may be a problem. While English is prevalent in Thailand, Chinese is not.

In fact, one of our China manufacturing partners building a facility in Thailand has several key management personnel learning Thai in preparation for the new facility opening.

There is little doubt Thailand can become a PCB powerhouse. When it comes to automotive work in particular, a China +1 strategy featuring Thailand would be a good option. But what we see at present is a lack of capacity in the country to build higher layer-count boards at medium to lower volumes and in a reasonable amount of time.

We may have to wait until our China manufacturing partners open their facilities in Thailand next year to place orders like we have become accustomed to placing in China or Taiwan.

Our trip took us next to Penang, Malaysia, to visit one of our OEM customers. We wanted to check out a few board houses during this visit, hoping to find a shop to meet our immediate high-layer count requirement. But it was just as challenging as Thailand.

One of the PCB factories we visited was immaculate, and it had a great sales and engineering team in place. Communication was excellent, as English is the country’s official second language.

However, this facility still uses film throughout manufacture – no LDI anywhere. It had plenty of mass-lam capability, usually building four- or six-layer product, with the occasional eight-layer. As in Thailand, the Penang facility made heavy use of punch presses and had OSP as one of the main finishes. We will keep an eye on this facility. It is expanding, and we hope it will increase its layer-count capacity and its technology.

Just as in Thailand, however, Malaysia does not appear to be an immediate alternative to China for PCB manufacturing. If you need PCB assembly rather than bare board fabrication, however, the island city of Penang is the place to be. You’ll find many well-known names in the electronics manufacturing industry there.

We did not have enough time on this trip to visit India, South Korea or Vietnam to assess PCB manufacturing possibilities in those countries. We will report on that on our next trip.

Thailand and Malaysia each have their strengths and weaknesses in PCB pricing, technology and preferred order values. But they both share the same capacity limitations compared to that of China.

For now, a China+1 or Out of China policy is possible if your company’s technology and/or order size(s) will permit it. But for many PCB buyers, realistically, China will continue to be the only game in town for some time to come.

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 and can be reached at greg@directpcb.com. Clement Yuen is cofounder of DirectPCB; clement@directpcb.com.