PCB Industry Needs OEMs to ‘Chip’ In
To close the gap in IC substrates, buyers need skin in the game.
The CHIPS Act was passed more than a year ago and not one federal dollar has yet to be awarded – although private industry has committed and started to spend billions. Once funded, the new, more advanced foundries will take years to build and start operations.
When produced, however, the chips will be useless until they are packaged and mounted on PCB platforms. The facilities, materials and knowhow to produce the substrates used to package them remain primarily in Asia – including China.
Notably, the cost to build and equip the necessary substrate and PCB facilities to produce HDI and UHDI (ultra-HDI) circuitry in volume is substantially more than that of a typical PCB or flex circuit factory, but far less than that needed for a foundry.
To provide incentives, US Representatives Blake Moore (R-UT) and Anna Eshoo (D-CA) this year introduced H.R.3249 – Protecting Circuit Boards and Substrates Act. This bill is the second iteration of this effort and has a long way to go in gaining cosponsors and approval.
Creating sustainable Western PCB and substrate sources will take time, and will not necessarily be in the country of use. Today just a handful of American and Western companies have the technology to produce some level of UHDI circuitry. To develop a secure source, the US will need more than government words, resolutions, bills and funds with heavy ropes (not just strings) attached: It needs active OEM investment and participation.
Additionally, new standards need to be established for UHDI circuits and materials. Hopefully these will initially include a performance basis. Perhaps the acceptance criteria used by IC companies can initially be used to speed things up. Trade association committees are currently working on these in China, the US and Europe. Their development will not be rapid and there will be differences to sort out.
The current demand to profitably produce sufficient volume of these substrates and circuits does not justify the needed investment. New incentives are needed to spur commitment.
New forms and partnerships are needed. Industry members need the active, trusted and focused support of their trade associations, which must work with each other for their members’ benefit. The current geopolitical situation demands more than an equitable outcome. It requires a winning strategy coupled with focused actions and milestones.
During the period between 1900 and 2019 there were about 2,000 companies involved in some way with the construction of automobiles. At its peak, a reported 2,000 facilities in the US were involved in the manufacture of printed circuits. Now there are about 200 and consolidation continues.
Perhaps only those that can or will invest $100 million or more in the new substrate/PCB/FPC processes and factories will survive. Or, maybe more companies will integrate vertically. Recent examples include SpaceX, which is building a factory in Austin, TX, for the Starlink satellite internet equipment, and the new captive operations of Vicor Corp. in Andover, MA, and Schweitzer Engineering Laboratories (SEL) in Moscow, ID. Perhaps Teltonika in Lithuania has the right approach as it justifies spending $154 million for highly automated state-of-the-art PCB manufacturing to “enable it to reduce lead times, minimize supply chain risks, and become independent from third-party political decisions.”
In the ’80s (that’s the 1980s, not 1880s), after my first few visits to the PRC after the Nixon accords, I stated we will have to learn how to deal with China as a customer, supplier, competitor and partner without losing our self-identity and security. I met Jiang Zemin during the first Nepcon show in Shanghai, when he was electronics minister and mayor of Shanghai. Shortly thereafter he was named president, and the LA Times asked what I thought of him. My succinct reply: “I would not want him as a competitor.” China, I added, may seem a lifetime behind the US technically but would catch us in a few decades.
Now, we see the world order in a different way. Corporations (major OEMs) gave up too much too easily for the almighty dollar (and quarterly report), sacrificing long-term local suppliers (with their tribal knowledge and technologies) along the way. As they migrated to Asia and vanished from the domestic scene, so did the incentives to create the processes and materials now needed for advanced electronics.
That led me to first wonder, and often repeat: Are domains corporate or national?
Today I ponder the challenge of commercially engaging with China while eliminating security issues. How much disengagement is possible without calamitous global economic results?
I was asked if we were twitching the tiger’s tail by disengagement. Let’s review the situation.
China became the world’s factory during the past three decades. It provided the West with products at prices that European and American companies could neither match nor resist. The PRC built massive factories and adopted automation during those years. It acquired most of the technologies needed to fill the pipelines – buying advanced chips and equipment not yet in its domestic capabilities from the West (including Taiwan) when needed. During this period China learned how to make the necessary production equipment, produce HDI circuitry, and began to provide locally produced specialty chemicals needed to build and assemble PCBs – sometimes at local subsidiaries of Western firms.
In these years the PRC built with full government support the necessary infrastructure to support its domestic industries. Meanwhile, the West let its local supply chain sources languish as it fell behind technically without the dollars necessary to maintain domestic capability. In general, the ability and skilled labor to produce HDI circuitry, substrates and even some “conventional” MLBs – a handful of companies excepted – was lost.
Then came Covid-19 and the supply chain was broken. Companies resolved to never again be put into the situation where they could not produce because of a protracted or broken supply chain. Coupled with this was the increased tensions between the US and China due to worries of security issues in parts provided by China. Tensions between the US and China over Taiwan are increasing.
Now much of the world is in recession. China currently needs the West’s business as it tries to replace Western products in its home market and develop new markets elsewhere in the world. The West needs China’s factories to provide many of the items it no longer produces but needs. But it wants to de-risk doing business with China.
To this end, US Commerce Secretary Gina Raimondo urged American businesses to keep investing in China after a late August visit despite increased difficulties in doing so due to China’s tightened policies. Meanwhile, China is working hard to displace the US as the world leader.
As the saying goes, “May you live in interesting times.”
I say, “Does it have to be so interesting?”
Gene Weiner is business and technical consultant at Weiner International Associates (weiner-intl.com); firstname.lastname@example.org. A longtime PCB industry executive, and IPC Hall of Fame member he was president of a copper-clad laminate company, vice president of a several specialty chemical companies and spent 25 years on the board of directors of WKK, one of Asia’s largest SMT equipment distributors and EMS companies.