Naka nailed it: The domestic PCB industry will flounder without a clear direction.
“History is always repeating itself, but each time the price goes up.” – Will Durant
In February 2017, I wrote a column titled “An Afternoon with Naka” in which Hayao Nakahara (or Naka to his friends) – a true PCB veteran embarking on his 60th year in the industry – described the state of the US PCB manufacturing. Naka nailed it then. And eight years and two presidential administrations later, his analysis is just as applicable.
Let’s review some of what I call his “Naka-isms” and how they apply, with the additional element of tariffs, which, for obvious reasons, are top of mind for many in our industry right now.
PCB revenue growth is directly dependent on production capacity. Yes, the purpose of tariffs on imports is to drive business back to domestic shores. But that pesky old law of supply and demand still applies. Because of limited manufacturing capacity in the US (supply), the ever-increasing demand will mean longer lead times and higher pricing. Tariffs increase pricing not only for imports but also for those items made domestically. That’s not just my opinion. It is a historical and economic fact.
A government-inspired artificial demand (read: inflation) is being put on all PCB buyers regardless of where they source. This will drive up pricing. Because of those extended lead times, buyers who genuinely wish to have their product made domestically may not be able to wait; they will be forced to go offshore as they need time to manufacture and ship their final product, too.
Lots of US businesses rely on offshore (primarily China) circuit board manufacturing. Even US PCB manufacturers outsource much of their business – more on that later.
Buyers are being penalized with tariffs on product that they have never bought domestically and cannot get made domestically in a timely manner.
Consolidations will continue. Some may find odd that, as a broker of offshore printed circuit boards, I applaud the efforts of the Printed Circuit Board Association of America (PCBAA) to reduce US reliance on foreign PCB manufacturing.
I agree with the PCBAA that our dependence on other countries for PCBs and electronics assemblies can, in some cases, be a national security risk, especially when it involves military, aerospace and medical products. Hopefully, PCBAA’s efforts will help reverse the dwindling trend of our manufacturing capacity, as it has only worsened in the past eight years.
In 2020, there were approximately 200 PCB shops, according to Tom Kastner of GP Ventures, a company that specializes in mergers and acquisitions in the electronics industry. By 2022, that was down to about 170, and last year there were about 160 shops left. Ninety-five of those facilities have less than $5 million in annual revenues, with about 30 at $2 million or less.
“It's not very easy to track the number of active fabs in the US/North America,” Kastner explains. “So many of the small shops close without any notice or they make the switch to either brokering and/or assemblies.”
Only a few PCB facilities have opened in the past decade, Kastner says, adding, “and there’s been nothing that has a similar or larger manufacturing footprint compared to those commonly found overseas.”
In real estate, the bedrock principle is location, location, location. In our industry, it should be capacity, capacity, capacity.
While overall US capacity is ticking up thanks in part to OEM captive investments such as Schweizer Engineering Laboratories and Starlink, the merchant changes are marginal, especially relative to what’s happening offshore.
The opportunities for the US to rekindle a strong and robust PCB industry will be few and far between. We can certainly produce some PCBs domestically. But our ability to increase capacity to meet demand is as severely limited now as it was eight years ago. The last copper foil manufacturer in the US announced in late November it would soon close its doors. Most of the laminate and chemistry needed to manufacture a PCB is either produced entirely outside the US, or at least originates outside the US.
And will we ever have enough domestic PCB equipment manufacturers to support the hoped-for infrastructure?
To add insult to injury, many of the smaller shops can’t afford direct imaging systems, laser drills, or the latest horizontal plating equipment – the machines needed to produce for an industry that is demanding higher tech and tighter tolerances.
Let’s not forget about the labor force required as well. With fewer Americans entering electronics manufacturing, how will we meet the challenge of finding the right talent to backfill the operations of a PCB facility?
We must have the necessary infrastructure to support the needed capacity for growth if we hope to be entirely or mostly self-reliant in PCB manufacturing. But the obstacles Naka identified eight years ago remain. They are now just more difficult and expensive to overcome.
To spur investment as part of a larger tax package to incentivize domestic manufacturing, the PCBAA is advocating for a 25% tax credit on the purchase of American-made circuit boards. While I am not a complete fan of the idea, I do like the idea of incentives (tax breaks) rather than punishments (tariffs). But I have a few questions:
- Would that credit apply to PCBs that couldn’t go offshore anyway, like MIL and ITAR work?
- To meet customer demands, many domestic board manufacturers “sub out” partial manufacture (mass-lam) and/or outsource (through brokers like me) PCB manufacturing in its entirety from offshore facilities. Would those boards qualify for the credit as well?
- Until we have that additional manufacturing capacity, would the tax credit have the adverse effect of increasing the demand on already limited domestic supply, further driving up pricing and lead times and possibly forcing buyers to go offshore anyway?
I am not an apologist for overseas manufacturing. Part of my job is to educate PCB buyers by explaining the realities of better board buying. That includes revealing the total costs of ownership regardless of where the product is built.
The US and its PCB industry, in my opinion, should focus on determining what direction it wants to go in circuit board manufacturing. Should we have lots of small, high-value technology shops or just a few that produce zillions of pieces of commercial product? Whatever the combination, we must realize we can't build it all here.
There used to be an annual PCB Leadership Summit hosted every year at IPC Apex. Maybe the PCBAA needs to pick that up again. Because until we have that much-needed direction, our industry will continue to waffle with government-influenced higher pricing as we wait on that same government to invest in our industry.
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..
