Fresh off its inaugural meeting, the PCBAA gets legislative good news. What’s next for the organization that wants to rebuild US production?
In early May the Printed Circuit Board Association of America, or PCBAA, held its first annual meeting, at which they shared progress on their overarching goal, which is to advance US domestic production of PCBs and base materials.
Coinciding with that meeting came an announcement from a pair of US legislators that they had introduced a bill to incentivize purchases of domestically produced PCBs, as well as industry investments in factories, equipment, workforce training, and research and development.
The bill, known as the Supporting American Printed Circuit Boards Act of 2022, is said to be modeled on the CHIPS Act of 2021, a much-touted piece of legislation that earmarks more than $50 billion toward new onshore semiconductor fabrication plants.
Timing is everything, right?
Travis Kelly, president and chief executive of Isola, the materials developer, and chairman of the PCBAA, spoke with PCD&F/CIRCUITS ASSEMBLY in May.
Mike Buetow: Travis, I want to chat about the May meeting, but first, can we get your thoughts on the Supporting American Printed Circuit Boards Act, or what I’m going to call the “Boards Bill?” What in your estimation are the key provisions?
Travis Kelly: That’s a great question, Mike. The association is grateful to Representatives Eshoo and Blake for taking on this important issue. As you know, the US PCB industry has shrunk to the point where we only produce 4% of the world’s PCBs, down from approximately 26% 20 years ago. This means the semiconductor industry, as well as other microelectronics industries and segments, are reliant on [offshore] PCBs because, as we know, chips don’t float. What’s important here is the legislation that’s been introduced calls for $3 billion of investments in the following areas: domestic manufacturing and PCBs, research and development facilities and workforce initiatives, and then also there’s tax incentives to companies that purchase domestic PCBs. It’s approximately a 25% tax credit for the purchase of American-made PCBs that will help offset – and this is the important part – the cost-differential that has happened because other countries, primarily in Asia, have heavily subsidized other industries, so it’s very difficult for some domestic fabricators and other microelectronics suppliers to compete. This levels the playing field.
MB: So, $3 billion is about $3 billion more than has been invested by the federal government in the PCB industry in, oh, about 30 years.
TK: And that’s just it. It goes back to the CHIPS Act, too, with the $52 billion earmarked for that. You and I have talked several times, and the PCBAA continues to educate, advocate and legislate not only government but industry. It is a large and complex ecosystem that we’re operating in. Semiconductors get the most focus right now because of supply chain issues and how that relates to vehicles and the long wait for people trying to order cars, but it’s much more complex. We don’t talk about advanced packaging. We don’t talk about the fact that, although we can build foundries in the US, we still send those chips back to primarily Asia for packaging, and then you have to embed them on a printed circuit board. Once again, chips don’t float. We need people to be conversant on that and work together to figure out the root cause problem that we’re trying to solve and the corrective actions we need to implement to make sure we have a sustainable, viable and trusted source of PCBs and the material supplies that go into them.
MB: That comment about the $3 billion investment is tongue-in-cheek, of course. But in my experience, the US government puts its money where its priorities are, and that it is committing any sum to the printed circuit board industry is a step in the right direction insofar as the recognition of how critical this industry really is.
I want to talk about that 25% tax credit. That really levels the playing field in terms of making costs more comparable to Southeast Asian sources. Do you think that will stick in the final bill?
TK: It’s hard to say. Ultimately, we’re very pleased this bill was introduced because, at the very least, it’s showing momentum. The government is investing into this microelectronics system called a printed circuit board, and there’s recognition people are becoming more conversant on the topic. However, let’s be realistic. It is an election year. We’re going into midterms. It’s always hard to gauge Congress’s intent to move legislation, so I don’t want to opine on what they will do. I think part of the bill will be passed, and what parts will be passed and what won’t be passed are very difficult to say going into such a volatile midterm election. It’s good Representatives Eshoo and Moore recognize the dire straits our industry is in, and I look at that as a positive. Microelectronics are largely hidden in the shadow of the chip shortage. This [bill] allows us to ensure people viscerally understand it’s a lot bigger than just semiconductors. We’re optimistic the bill was introduced; it’s the national priority that has too long been invisible to anyone outside our industry, so I look at all of this as very positive for the overall industry.
MB: I don’t want to politicize this, but it can’t hurt that the supply issues Russia is currently experiencing underscore the point on just how important it is to have these supply chains and materials available on short notice.
TK: It seems every time you and I talk there’s another issue from around the globe. What’s happening in Ukraine and Russia, the rolling blackouts in China relative to Covid-19 and Omicron variants spreading there rapidly … every time I think there is a glimmer of hope and people see the supply chain is correcting itself, we are back to where we started. We see the supply chain gets tighter because, even though the port in Shanghai is open, it’s still not to the efficiency levels it was before the shutdowns. A lot of containers are trapped on ships waiting to get into that port. Typically you won’t see the ramifications of that until 60 or 90 days after the blackout. To your point, we’re going to continue as a nation to have to make conscious decisions relative to where we are willing to invest, where we are willing to maybe spend a little bit more for that trusted supply chain and resilient supply chain, and these conversations are bipartisan. As a nation we have to make sure we can fulfill the demands of our people to be sure we have what need to be successful.
MB: About that bipartisan support. Anna Eshoo represents a portion of the Silicon Valley, a California district that is heavily invested not just in electronics manufacturing but also in their customers. Blake Moore comes from Odgen, Utah, which is home to some key US defense manufacturing operations. Spartronics has the EMS site there, the former Inovar. And TTM has the board fabrication shop in Logan, less than an hour down the road. Has PCBAA had conversations with Eshoo or Moore, and if so, what is your general sense of their focus on this bill?
TK: That’s a great question, and let me answer it by first segueing into the Printed Circuit Board Association of America meeting we had in Washington, DC. It was our inaugural annual meeting, and although it was our first year, we got a lot of consequential things done.
When you and I spoke several months ago, we had five founding members. We’ve grown the PCBAA to 17 members, and all were represented in Washington.
We had three great speakers. First, we had the Honorable Alan Shaffer, the former deputy undersecretary of defense for acquisitions and sustainment. He brought really good insights into the way the Department of Defense views our industry and how we can best serve the men and women in uniform. That was a fantastic speech. He also had dinner with our members and got into some very candid, transparent discussions relative to the needs of the Department of Defense and Pentagon moving forward.
We also had Dr. Lara Brown of George Washington University, who works at the graduate school of political management. She gave a nice summary of the state of play in Washington and what it means for midterm elections, the different partisan and bipartisan approaches to certain bills that will be passed and that will be introduced.
Finally, to your point, although Congress was in recess, Congressman Blake Moore took the time to talk with our members via live feed from Utah. He spent more than 30 minutes with our team, answering and asking pointed questions. We were all very happy and impressed with how conversant Representative Moore is on the industry. I was pleasantly surprised he understands [the loss in global market share]. The right number is obviously not to bring everything onshore, but it’s definitely higher than 4%. He is passionate about the bill that was introduced relative to supporting PCBs, and it really has garnered a lot of bipartisan support, with Moore representing the Republicans and Eshoo representing the Democrats, working hand-in-hand to get this bill introduced. It was a great discussion. From an industry standpoint, when you look at defense spending, and what that means for our microelectronics industry, it is a relatively small portion of the overall sales within the US. As you know, the demand signal is volatile at best; it’s high-mix, low-volume, so it’s really looking at what can we do to supply certain critical components, as opposed to just looking at defense. What about banking? What about medical? What about critical infrastructure like 5G? Is there a potential way to aggregate that demand signal, so if you’re at a domestically located PCB or material supplier, you can actually have some stability with that demand signal, and a demand signal that’s big enough where you’re willing to invest those capex dollars? Coming out of the meeting, we have a lot of work relative to how we continue to garner that momentum and get consequential things done into future years.
MB: I know building your membership has to be a priority for the coming year, but where does the Boards Bill stand in that priority list, and what else is on that list?
TK: We look at a bunch of things. When you think about all the offshoring that’s taken place over the past 20 years, you’re not just offshoring the brick and mortar; you’re offshoring the technological knowhow. I use examples like signal integrity engineers and the like that’s absolutely critical for what we do as an industry.
The focus of the PCBAA is to continue to educate, advocate, and legislate on behalf of the industry. But what does that really mean? Let’s look at some of the top critical items we need to really get our voice around. One would be STEM. How do we get the right sciences and mathematics and so forth into the schools to ensure we have the right talent we need to be successful as an industry? On top of that is workforce development. For people out of school, how can we continue to get them up to speed on the nuances of our industry? How can we continue to train and develop that workforce? And ultimately, how do we build out the right infrastructure, the automation of factories? The tax incentive is definitely helpful, but we as an industry have to innovate as well. How can we take costs out of our system, whether it’s through value-stream mapping and Kaizens?
The PCBAA’s focus now is to protect some of the wins we have because everyone’s legislating every year, and we have to [maintain] the wins we have with the National Defense Authorization Act and the Supporting American Printed Circuit Boards Act; our members had their hands in helping form that language. But we as an organization also need to focus on continuing to develop that resilient supply chain. It’s more than just, “We need to build more printed circuit boards and have more material suppliers.” It’s building up the education. It’s building up the workforce development, the infrastructure.
It’s like eating an elephant. It has to be a bite at a time. If you just try to solve all the problems you want to, it’s overwhelming. You can’t offshore over 20 years and expect to flip a switch and get it fixed in a year. This is a marathon, not a sprint.
I’m very thankful for the work our complementary organizations are doing – the PCBAA, the USPAE. We are getting a lot more traction, and more people are talking about the PCB and microwave electronics industry. I’m very encouraged with what I’ve seen over the last 12 months.