Capacity is about to peak, and demand has slackened.
Printed circuit board buyers can capitalize this year on cost-saving opportunities if they’re smart about it. Here are some factors to consider:
- Compared to a year ago, fluctuations in material pricing have settled.
- Worldwide semiconductor revenue declined by 11% and overall personal computer shipments fell almost 15% last year.
- Lead-times from Asia are relatively short compared to this time last year.
- PCBs manufactured in China and then imported into the US still face a 25% tariff. But the tariff exemption on two and four-layer rigid boards has been extended through the end of May 2024.
- Speaking of tariffs on boards made in China (as well as “Out of China” policies being adopted by some customers), new board houses are being built in India, Thailand, Vietnam and Malaysia to help offset those tariff costs and offer purchasers the option to buy elsewhere.
- Many companies in China are allowing employees to leave early to enjoy the Chinese New Year holiday because business there is down.
What does all this mean? Offshore capacity is, or very soon will be, at an all-time high, while demand is down. Pricing in these conditions becomes far more negotiable, and there are bargains to be struck.
And it’s not just offshore board houses that are in the midst of a slowdown. Business at domestic shops is not as robust, either.
This is the time to shop, PCB buyers. And the time to save.
Your company needs a solid board-buying strategy for 2024, or it will miss out on these cost-saving opportunities. Does your firm have one?
Here are some helpful hints to capitalize on 2024 spending:
Price checks. One way to do this is an activity I call “quoting for fun.” Don’t hesitate to give potential vendors a shot at quoting an ongoing project “for fun.” Let potential vendors know it’s an existing project and you’d like to see where they stand on pricing.
Also, let all your vendors know you will be testing the waters and comparing their pricing to others. A vendor that is too comfortable with your business may think twice about whether they could offer a better price when sending you that next quote. Be sure you follow through on checking out other vendors’ prices. And don’t be reluctant to bring on new vendors, if necessary.
While a few pennies per board difference in price is not worth switching vendors if you’re happy with existing ones, it’s wise to always keep your options open. This practice will also help keep your vendor base on its collective toes.
If you are happy with the delivery and quality of your vendor, that’s great. Checking prices will still provide a useful benchmark. And if there is a significant per-board price difference, you can use your cost comparison as a negotiation tactic with the present vendor. Say something like: “Why is (XYZ company) 16% less than you, with all other things being equal? We are under pressure to reduce costs, and we are not necessarily asking you to meet or beat what was quoted. But how can we get closer?”
And just like that, you are likely to get a better price from a known quality vendor.
Vendor visits. Demand your vendors pay a visit to your operation. The more business they do with you, the more visits should be required. I can’t tell you how much this helps in the ongoing negotiation process. The more excited the vendor is about your operation, the better the service and pricing will be. If a vendor doesn’t visit, this means they are too comfortable with your business, or they really don’t want it. That may well mean you’re paying too much.
Keep a scorecard. How often do you review the performance of your vendors? A vendor that is regularly evaluated for on-time delivery and quality acceptance in comparison to its competitors will generally also offer better pricing. Also, it is important that the pricing being compared is evaluated between like vendors. For example, pricing from one domestic PCB shop can be measured against another domestic house, and offshore pricing compared to another offshore manufacturer.
Pay on time. The one thing the vendor should never have to worry about is on-time payment. Consistent payment to vendors makes it easier for you to demand better service and pricing. There shouldn’t be any excuse for a vendor to not jump through hoops for you.
I understand everyone is busy these days. But that ingrained habit of not looking outside the present cozy and comfortable PCB box is keeping many companies from saving money on bare boards, one of the most expensive items found on the bill of materials.
It’s a core buyer responsibility to keep vendors competitive in pricing, and it is management’s job to ensure buyers are not so overwhelmed with other responsibilities that they neglect that core duty.
This is a great time to look closely at what you’re spending on PCBs and take advantage of the savings available in 2024.
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 This email address is being protected from spambots. You need JavaScript enabled to view it..
