PCB production grew in 2005, thanks mostly to foreign-owned companies operating in China.

Ed.: This is the second in a series on the World PCB market.

The first half of 2005 consisted of lukewarm PCB demand. Orders picked up briskly in the third and fourth quarters. The year closed out strong and demand continued into the first quarter of 2006. Many industry executives are cautiously optimistic for the remainder of 2006. Based upon conversations and visits to key PCB manufacturers in Asia Pacific and North America, I predict that 2006 will be another good year for the PCB industry.

In this part in our series on the world PCB market, we examine the output in each region, look at some of the key players and attempt to forecast output for 2006-08.

Table 1. Top 10 PCB Makers, 2005

1. Ibiden	$1,444
2. Nippon Mektron	$1,190 (bare flex circuits only)
3. CMK	$1,084
4. Shinko Electric	$967
5. Samsung E-M	$957
6. Unimicron	$930
7. Nanya PCB	$826
8. Young Poon Group	$700
9. KB PCB Group	$694
10. Daeduck Group	$654

In U.S.$ millions. Source: N.T. Information Ltd.

North America

Of the top 30 manufacturers, output dropped at North American operations of Tyco, Photocircuits, DDi, Endicott Interconnect Technologies, Compeq International, Unicircuit and Coretec. Revenue at Viasystems' plant in Canada was falling before the company closed it in mid 2005. On the other hand, overseas sales of North American-owned companies rose to $1.8 billion in 2005 from about $1.6 billion in 2004. Clearly, their growth is fueled by their overseas operations.

Operating under Chapter 11 since October of 2005, Photocircuits was rescued in March 2006 by American Pacific Financial Corp. (AMPAC), a private equity investor. Tyco recently sold its Spanish subsidiary while Parlex was divided and sold to Amphenol and Hong Kong-based Johnson Electric Holdings. Innovex is moving the bulk of its production to its Thailand facilities. Endicott Interconnect Technologies recently signed a collaborative agreement with Hong Kong-based Meadville Technology Group for the manufacture of BGA substrates. Multek and Viasystems derive the majority of their revenues from China operations. Sanmina-SCI is stepping up the expansion of its Wuxi plant. Merix is in the middle of reorganization of its China subsidiary, the former Eastern Pacific Circuits. It will be interesting to watch just how far the North American-owned companies expand their operations abroad.

It is estimated that North America imported about $1.6 billion worth of PCBs in 2004. PCB manufacturers imported a substantial portion of this. The volume production that remains in North America is in high-layer count multilayer boards for networking, servers, enterprise computers, and high-end telecom and storage devices. These are handled by a handful of manufacturers: TTM Technologies, Merix, Sanmina-SCI and a few others. The bulk of North American fabricators - 464 makers remain, according to FabFile Online - now specialize in prototyping and quickturn. They cater to specialty markets such as military, medical and industrial electronics. Their success is based on the logistics of close proximity to their customers. This makes it easy to implement design changes and enables delivery advantages available only to local suppliers.

Europe

European sales data come directly from Data4PCB and Michael Gasch, the former overseas sales manager at Schweizer Electronics. Caution is necessary to interpret Europe's numbers. The 2004 data are converted from euros to U.S. dollars at a ratio of €0.81:$1. The 2005 data, however, are converted using a ratio of €0.75/$1. With this in mind, the actual change as measured in euros was a 9% loss.

Viasystems folded its Netherlands operation in mid 2005. Circatex recently folded after experiencing a long period of decline. Schweizer's plant had a fire in mid-year that cut production. Fuba was in receivership for more than a year, but has crawled out of it. Half of the company is now co-owned by the owner of its Tunisian JV, but the revenue fell by more than 12%. Prestwick in the U.K. was shut down last year with a residual output of €26 million in 2005, down from €41 million in 2004. Once the largest PCB makers in Italy, Zincocelere was sold to Viasystems and then sold back to the management. It also collaborated with another Italian maker, CST, before it closed permanently.

Aspocomp reduced manpower at its flagship factory at Salo, Finland. Its European revenue dropped from €88 million in 2004 to €76 million in 2005. It will build a €75 million HDI microvia plant in Chennai, India, to be operational in 2007. AT&S maintained its European output, but like large North American fabricators its growth is derived from its overseas operations. AT&S has been building a second HDI microvia plant in Shanghai that will be twice the size of the first plant. The company is also expanding its plant in Nanjangud, India. Ruwel AG of Germany closed its Danish subsidiary, but has land in Romania on which to build a large factory.

It is reported that more than 35% of the PCBs consumed in Europe are imports from the Asia Pacific, with the percentage inching up every year. The situation in Europe is much the same as in North America with one difference. The volume production is mainly for automotive applications. Like North America, the rest of the boards are quickturn and prototyping, for the military, medical, telecom and industrial electronics segments. These are generally produced only in small quantities.

Japan

Despite being surrounded by so-called "lower cost countries," Japan did very well in 2005, growing a modest 3.4%. Several factors account for this growth. Japan is a net PCB exporter, with about $3.3 billion in exports and $1.2 billion in imports. Moreover, more than 50% of the imports are "out-in" - imported from Japanese PCB makers operating outside of Japan - accounting for about $3.4 billion per annum. About half the exports were IC substrates. Intel, AMD and Samsung Electronics absorb a large chunk of the IC substrate output in Japan. The only country that is equal to Japan in import/export is Taiwan. All other countries buy more from Japan than they export to Japan.

Japanese OEMs consider manufacturing technologies key to its strength and therefore many advanced products remain in Japan so that they can control the manufacturing process. A considerable amount of mass-produced products, however, are made elsewhere in Asia. Large consumer electronics companies such as Sony and Panasonic have more than 15,000 different types of circuit boards per annum. Of these, 4,000 to 5,000 roll from month to month and only 10% require a large quantity - over 300 to 500 m²/order. Many orders that bring higher prices are for quantities of less than 1 m². Trade practice, short turnaround, frequent design changes and low order quantity are not the strengths of manufacturers in China, Taiwan and Korea.

The types of boards Japanese customers require are generally higher in density, making it difficult for Asian makers to meet quality and pricing requirements. Also, it is known that Japanese makers would like to deal mainly with Japanese suppliers due to language difficulty. This is particularly true when quality related problems are encountered. They cannot communicate effectively with the suppliers to quickly resolve problems. Unlike most PCB personnel in Korea, Taiwan and China, the Japanese are not well-versed in English.

While America and Europe are strong in the extremely high technology arena, the demand for such technology is relatively small compared to high technology HDI microvia products and IC substrates. These types of products are needed in the millions rather than the hundreds. And this is the area where Japan leads the world. Japanese PCB makers are expected to invest between $2.3 billion and $2.5 billion on new capacity in the 2006-07 timeframe. The amounts invested in domestic and overseas operations are about the same. When these investments bear fruits, Japan may grow much more than is forecasted in Table 2 [PDF format]. There are four Japanese makers among the world's top 10; their combined revenue of $4.685 billion was larger than the individual output of Korea, the Americas and Europe.

China, Hong Kong and Taiwan

When it comes to the PCB business, China and Taiwan are inseparable. There are more than 100 Taiwanese PCB makers operating in China, many without any plants in Taiwan. Of the more than $10 billion worth of PCBs built in China in 2005, Taiwanese transplants made up approximately 35%. I recently investigated the top 45 PCB makers in China and found there were 21 Taiwanese companies (almost half) among top 45 producers. They accounted for 48% of China's output that is represented by these top 45 companies. Taiwan's output was nearly $6 billion. Therefore, the total output by Taiwanese makers amounted to $9.5 billon, second to Japan's $14.2 billion. The total U.S. output was estimated to have been $5.9 billion. The share of these three countries is $29.2 billion, or 70%.

The increase in capacity in China by Taiwanese fabricators has been phenomenal, which is worrisome to PCB manufacturers in the rest of the world. It is a fantastic opportunity for equipment and material suppliers, but they must expand their capacity accordingly. Yet they must also worry about the potential of excessive capacity. The big question is, how long can China sustain its current growth rate? The top 30 PCB manufacturers in China added a whopping 60% in capacity in two years.

China produces half of the surface area of PTH boards (double-sided and multiplayer boards) in the world today, judging from the consumption of liquid photoimageable solder resist. Large Taiwanese fabricators are concentrating on cellphone boards (Compeq, Unimicron, Unitech, Wus and to some degree Chin Poon), notebook motherboards HannStar and Gold Circuit), IC substrates (Nanya PCB, PPT, Kinsus, ASE and Unimicron), and LCD driver boards (Tripod, etc.) in Taiwan. They are shifting "easier" work to China. According to the TPCA, the leading applications for Taiwan-made PCBs in 2005 were:

IC package substrates	16.06%
Mobile phones	15.96%
FPD	13.83%
Computer/computer-related	11.7%
Communication products	9.57%
Desktop motherboard	7.98%
Consumer electronics	7.45%
Notebook motherboards	5.85%
Automotive electronics	6.38%
Base stations	3.16%
Others (industrial and medical)	2.05%

The top five applications absorbed 67%. Up until 2000, 80% of all PCBs made in Taiwan were for PC motherboards and peripherals. Today, Taiwanese PCB makers are still largely engaged in the manufacture of products for PCs, but only 25% are for such applications in Taiwan. The majority of PCBs for PC-related products are now produced in China.

U.S.-based makers Viasystems, Multek, Sanmina-SCI, Merix, Parlex (which is no longer a U.S. maker) and a small flex maker, World Circuit, collectively produced about $950 million (9.5%) in China. Twenty Japanese makers produced about $1.2 billion. Hong Kong-based fabricators produced about $3.2 billion and other foreign makers (AT&S, Aspocomp, Gul-Tech, MFS, etc.) were responsible for about $250 million. The total output by foreign makers adds up to $9.1 billion. China is truly a melting pot for PCB manufacturing.

What that also means it that less than $1 billion worth (about 9% of the total) was made by Chinese makers. The two largest Chinese makers are China Circuit Technology Corp. (CCTC) ($125 million) and Shenzhen Shennan Circuit ($58 million). All other "Chinese" makers, perhaps a total of 500 or more, are small producers. The production value in Hong Kong is less than $150 million. All Hong Kong-based manufacturers are also operating in China.

Southeast Asia

Singapore used to be the largest PCB-producing country in Southeast Asia, but today the top spot is occupied by Thailand. CMK, which used to produce $150 million worth of single-sided boards, shut its Singapore plants three years ago. Gul Technology closed its plants last September and is now concentrated in China (Suzhou and Wuxi). Hitachi Chemical moved its single-sided board production to Indonesia and merged with Kyosha. The JV is now nearly 100% owned by Kyosha. There have been several other closures in Singapore in the past several years. Today, 3M's flex operation is considered the largest, followed by Hitachi Chemical in Singapore. MFS is another large FPC maker (rumored to be merging with M-Flex, as MFS's parent company, WBL, also owns 55.7% of MFS), that maintains development and minor production in Singapore, but mass production is in Malaysia and China.

Thailand's growth is fueled by flex circuit manufacture by Fujikura (PCTT) and Mektec of Japan and U.S.-based Innovex. All three makers are heavily involved in flex circuit assembly. The output of these three inclusive of assembly exceeds $1 billion today. The largest rigid board maker in Thailand is KCE (2005 revenue: $175 million). More than 50% of Thai-made rigid boards seem to be for automotive electronics. While Western PCB makers eye India for the post China era, the Japanese seem to like Thailand. CMK is investing about $105 million in a new PCB plant in Thailand, to be operational in the second quarter of 2007.

Vietnam has three substantial makers, all from Japan. Its total output in 2005 was $225 million, slightly less than the output in India (which has more than 160 fabricators). In Ho Chi Minh City, one Vietnamese American appears to have recently invested in a small scale PCB shop. As the demand for PCBs increases gradually in Vietnam, all three Japanese makers are stepping up the scale of production to supply local need. So far, they all have exported their products.

Indonesia is also basically a Japanese base, with CMK and Kyosha. In Batam, there is a small Japanese flex-finishing factory operated by Maruwa Manufacturing.

Several Japanese makers are in Malaysia, including Elna, Maruwa, Hokuriku Denko, CMK and Sumitomo Metal Electro Device. There is one American operation in Kuching owned by Sanmina-SCI. The total 2005 output was about $455 million. MFS and Q-DOS, the two flex makers in Malaysia, combined for output of slightly larger than $100 million (bare board only).

The Philippines have several Japanese makers (Ibiden, First Sumiden, Toppan-NEC, Itabashi Seiki and Nippon Circuit Technology). Daeduck Philippines is a fair-sized operation. Another Japanese maker, Rex Philippines, folded its operation three years ago. Since then, Cambridge Electronics and Synertronics (Ionics subsidiary backed by IBM Yasu) also shut down. Photocircuits built a 400,000 sq. ft. factory in 2001 but it never opened. In the meantime, Isola closed its Philippines laminate plant. Still, the Philippines produced nearly $400 million worth of PCBs in 2005. All in all, Japanese makers produce about 55 to 60% of all PCBs made in Southeast Asia.

South Korea

South Korea (Korea) has produced more than I originally estimated. In the past, production was dominated by Daeduck Group, Samsung Electro-Mechanics, LG Electronics and Korea Circuit. However, in the past several years, there has been a growing number of medium to large-scale makers emerging, particularly in flex. Interflex (a part of Korea Circuit), Young Poong and SI Flex are three large FPC makers. There are more than 20 other FPC makers in Korea, combining for more than $1 billion of flex per annum.

Korea is growing, but is sandwiched between Japanese technologies and Chinese pricing.

Korea is the only large PCB-producing country in the world that does not have a substantial overseas presence. Its overseas production is less than $200 million. Large domestic market fueled the growth of Korean PCB industry, but this has also made Korean makers less competitive in the international market. When Samsung Electronics and LG Electronics do poorly, all major PCB makers in Korea suffer. There is one exception: ISU/Petasys, which is one of the largest suppliers to Cisco Systems.

Another problem is Korea's heavy dependence on the cellphone industry. It is estimated that nearly 50% of $4.4 billion in PCBs Korea produced in 2005 was for cellphones.

HDI microvia boards, CSPs, and flex and flex-rigid boards have been sold to Samsung Electronics, LG Electronics, Pantech-Curitel and a handful of other cellphone makers in Korea (Nokia, Motorola and other subcontractors). The Korea PCB industry may need to diversify in order to be strong on the international scene.

Other Regions

My knowledge of other areas of the world is very poor. The former Soviet block, Middle East (Israel and Turkey in particular), India, Africa and Australia/New Zealand, and Central/South America constitute "other regions." The best estimate is that these countries and regions produced about $500 million in 2005. Even substantial growth there would not change the world picture much.

Brazil had a lot of potential, but the recent closure of Adiboard (November 2005) was a big blow to the local PCB industry. Lack of available capital for investment and excessive government protection has made Brazilian PCB industry noncompetitive in the international market. The only sizable PCB maker is Multek de Brazil, the former Micro Elétronica. The eastern block of Europe and Russia may be interesting, but so far no substantial investment has been made there.

It is not easy to forecast the PCB industry. However, there is no doubt that China is going to be the undisputed leader in PCB production, although over 90% of its production is built by foreign-owned companies. Its world share was 8.5% in 2000. It took 24% in 2005 and if this author's forecast proves to be relatively on target, its share will climb to 32% in 2008, of which Taiwanese manufacturers in China will own 50%. Yet the nation has many challenges ahead, as I enumerated last month ("Worldwide PCB Output for 2005," July 2006).

"Post China" has been a hot subject in recent months. India and Thailand/Vietnam seem to be next hot spots for the PCB business. As noted, Aspocomp is investing heavily in Chennai, India. Western companies will follow in their footsteps. Although still relatively small (revenue slightly larger than $40 million), the Indian operations of AT&S has been in place for several years. A couple of Japanese PCB makers have looked at India in recent months, too, but it seems more likely that the Japanese will invest in Vietnam or Thailand.

All in all, China's dominance will continue for the foreseeable future despite the mounting problems the country is facing.   PCD&M

Dr. Hayao Nakahara is president of N.T. Information in Huntington, NY. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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