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China’s PCB industry faces development and challenges

In the past ten years, global PCB have continued to migrate to Asia, especially China , and China has rapidly become a major producer of electronic products and PCBs. While the circuit board industry chain is developing rapidly, challenges also follow.

In recent years, with the increasing complexity of the global economy and the constant disputes in the international situation, the circuit board supply chain, as an important global industrial base, has become the focus of competition among countries around the world .

Since the beginning of this year, the United States, South Korea, Japan, and Europe have been strengthening local circuit boards. The development of the industry also indicates that the global circuit board supply chain may usher in new challenges.

Challenges of China’s circuit board industry: changes in the pattern

Countries have expanded circuit board production capacity

In recent years, due to the stable development environment and industrial cost advantages, China has quickly obtained the transfer of circuit board production capacity, and half of the production capacity of the global circuit board supply chain is concentrated in China.

PCB Production Expansion

However, since the beginning of this year, the United States, South Korea, and Japan have all expanded their domestic circuit board production capacity chains. Representatives of the U.S. House of Representatives recently proposed bipartisan legislation to improve U.S. circuit board production and supply chain security, saying that shortages in the electronics supply chain are affecting every aspect of American life. 

Printed circuit boards are a key part of the supply chain and exist The risk of tampering with vulnerabilities associated with offshore production, but the global production share of PCBs in the US is only around 4%, compared to 52% in China. The bill would also create a financial aid program to incentivize PCB production and research through accredited training and educational institutions, a move that the U.S. is already doing.

Can the expanded production capacity obtain sufficient orders

Can the expanded production capacity obtain sufficient orders
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Expansion of production is the main theme in the past two years. For example, 10 projects such as China’s Ruijun Semiconductor and Hongchang Electronics have signed a cooperation framework agreement with the government of Zhuhai Jinwan District, with a total investment of over 20 billion RMB . Among them, the electronic grade epoxy resin project of Hongchang Electronic Materials plans to invest 1.047 billion RMB in Jinwan District .

Nanya’s new-generation high-precision IC substrate project and Jialianyi Electronics’ high-frequency high-speed intelligent 5G antenna project continue to settle in Kunshan, Jiangsu , China . It mainly produces various types of flexible multi-layer printed circuit boards for 5G high-frequency antennas, high-density and high-fine line flexible circuit boards, antennas and parts for wireless communication terminal products.

There are also many PCB projects in Jiangxi Province and Guangdong Province in China this year, which have successively recorded and expanded production. Such as Yinggao Technology, Qiangda Circuit, Kejie Electronics, Xusheng Electronics, etc., have all increased the production of HDI flexible boards and flexible and rigid circuit boards.

Expansion of production shows that the demand has been undertaken. On the one hand, it may be China’s own demand , and on the other hand, it is the global demand. However, the current decline in China’s economic growth is an important manifestation of the cooling demand. Whether the expanded production capacity can obtain sufficient orders in the future will be a concern.

At the beginning of this year, some people in the industry have said that in addition to the increase in costs caused by the continued rise of raw materials, the overall demand in the industry has declined, which has put PCB manufacturers in a difficult position to survive. 

Industry insiders said bluntly, “Compared with the same period last year, the order volume of most PCB manufacturers has dropped by at least 30%, and some manufacturers even have no orders. At present, almost all PCB manufacturers are not operating at full capacity.”

Can the technology upgrade further obtain global orders

Technological upgrades are key to qualifying as a Tier 1 supplier. In fact, it is estimated that large-scale production capacity will be launched this year. For example, the 10 billion high-end substrate project in Nanjing , China is expected to be trial-produced in the second half of the year, focusing on high-end substrates, applied to CPU, GPU, AI, FPGA, 5G, autonomous driving and Netcom products, etc. It will become China ‘s first mass-produced 5G and FCBGA high-end Substrate factories, especially like FCBGA, are substrates that can only be manufactured by high-end technology.

Chinese circuit board company, comes from other countries . Last year , the revenue of this part reached 374 million RMB , accounting for 53.41% of the operating income, an increase of 71.93% year-on-year, and the gross profit margin was 24.04% . Recognition of technology upgrades. Tianjin Pulin has sufficient production capacity for automobiles and communication boards, and continues to optimize the layout of high-end products to meet the needs of customers for technological upgrades and demand upgrades. 

However, not every company ‘s sales are smooth sailing. For example , China’s Jiahong Technology’s net profit in 2020 fell by 78.96%, and some global customers reduced orders. It can be seen that the weakening of the world economy and the reduction of orders or delayed delivery by customers will have an impact on Chinese companies.

In 2012, Chinese circuit boards also faced a big decline in global orders. At that time, they were experiencing a downward inflection point in the rapid development of more than 30 years. The orders of the entire PCB industry fell by an average of 30%. 

At that time, the Chinese market stimulated production capacity through 4 trillion investment and policies such as sending home appliances to the countryside , which made the market relatively saturated and even had excess production capacity . And the power of the current stimulus has been exhausted, so there may be more serious challenges .

Can the profits of high-end production capacity continue

Chinese circuit board companies continue to expand production and increase efficiency, but in fact, while revenue is increasing, profit growth has not been as fast as expected. 

However, compared with some companies in Taiwan, China , relying on the advantages of high-end circuit boards such as IC substrates, their profits have nearly doubled, far greater than other markets in China . Such as Zhending-KY announced the first quarter financial report of this year, the net profit after tax was NT$2.775 billion, and the net profit attributable to the parent company was NT$1.873 billion, an annual increase of 97.57%. 

In addition, Xinxing’s revenue in April was NT$11.157 billion, a year-on-year increase of 41.83%. The comparison of the two clearly shows that only by developing high-end technology can enterprises obtain high profits.Not only that, China’s circuit board industry must also consider whether the profits of high-end production capacity can continue.

In fact, in the first quarter of this year, most of China’s circuit board companies increased their revenue, but due to various factors such as chip shortages and rising raw material prices, their profits fell year-on-year. Among them, the profit of Jinan Guoji decreased by 93% year-on-year; the profit of Hongxin Electronics also decreased by 256%. The profits of Zhongjing Electronics, Jingwang Electronics, Sihui Fushi and other companies all decreased year-on-year. A considerable number of companies experienced revenue growth but profit did not increase. situation.

Two core development sectors of the circuit board industry in the future

When it comes to the hottest circuit boards now, it is the competition between IC substrates and emerging industry markets. The IC substrate market has always been firmly dominated by countries other than China , but now China has quickly joined. The emerging industry market is a brand new track, and all countries are actively exploring and increasing investment, thus setting off a round of market competition.

IC carrier board challenge is bound to activate

IC carrier board challenge is bound to activate
Digitally generated image, perfectly usable for all kinds of topics related to computers, electronics or technology in general.

In recent years, China has vigorously developed the production capacity of IC substrates, but at present, most of the production capacity of high-end IC substrates is still concentrated in the hands of other leading and Taiwanese companies, and it has further increased. For example, the global PCB giant Zhending Technology nearly doubled its profit in the first quarter of this year, which was mainly due to the strong shipments of computer consumer and IC substrates, as well as the opening of new production capacity for Mini LED ultra-thin boards. 

It clearly stated that the IC carrier board will be the focus of cultivation in the next 10 years. In the first quarter, the revenue and profit of the IC substrate business further increased, and the marriage rate was full. China’s IC substrates are increasing, and IC substrates from other countries around the world are also competing in the high-end field. This will be a battle to activate challenges.

Competition in emerging capacity markets

Competition in emerging capacity markets
Central Computer Processors CPU concept. 3d rendering,conceptual image.

This year, there has been a wave of expansion of emerging production capacity. The momentum of expansion has not only stayed in Guangdong , Shanghai, Kunshan, but also in Hubei, Sichuan, Zhejiang and other places. The market focuses on cloud servers, vehicle electrification, self-driving, and interconnection. As well as the development of high-level PCBs with high-level and high-density, the production capacity of hard boards is also increasing year by year.

Especially for IC substrates and new types of displays, the trend of expanding production this year is so obvious that construction is still frantically starting recently. For example, the 6 billion Guangzhou Xingsen Technology integrated circuit FCBGA packaging substrate project has been announced to break ground, focusing on the industrial transformation of high-end technology, as well as R&D and manufacturing in emerging fields such as 5G, AI, intelligent driving, and consumer electronics.

It is foreseeable that in the fields of IC carrier board, high-end copper foil, FCBGA (Flip Chip Ball Grid Array), etc., the next five years will also be a hot spot for global circuit board competition.

From high-end CPU and GPU chips, to 5G, AI, intelligent driving, consumer electronics, new energy vehicles, new display screens and other terminal innovation and emerging application fields, China’s circuit board industry is currently in full bloom, involving all aspects of the industry.

Conclusion

2022 is still an important year for the growth of China’s circuit boards, but with it, the production capacity and bubble crisis may also be born. Circuit board manufacturers must face the changes in the international circuit board situation and firmly grasp the firm position of the supply chain in order to gain momentum for continuous breakthroughs in the future!

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