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Alun Morgan on the European PCB Market and Role of EIPC
March 14, 2013 |Estimated reading time: 9 minutes
Not too long ago, I was fortunate enough to once again visit one of my favorite cities when I attended the bi-annual electronica show in Munich, Germany. Although I visited all halls of the exhibition, my focus, as always, was on PCB manufacturing exhibits. I remember writing about my fist ever visit to electronica back in 2008 and I was interested to see how things had changed over the last four years.
According to recently published statistics, the show had just under 2,700 exhibitors and 72,000 visitors from 78 countries--more or less the same numbers as 2008. At face value a similar event, but the reality seemed to be rather different.
I commented back in 2008 that around 18% of PCB fabricators exhibiting at that time were from the Far East, predominantly Chinese. This year, more than a third of PCB fab exhibitors were from that region, either as fabricators or brokers. Even more striking, these guys had grown in stature. Four years ago they were predominantly a cluster of 3m x 3m info booths. This year many had much larger, more impressive exhibits, showing off their products and capabilities. Several proudly charted their rapid growth from start up to organizations with sales in the tens of millions of dollars after three or four years of trading. Stop and think about that for a moment: In only three or four years, these companies have started from nothing and are now generating more sales than a typical Western shop.
Many questions spring to mind. Let’s assume the answer to "why?" is lower cost, be it actual or perceived. But what about the "how?" Making PCBs is a highly capital-intensive business, bringing together many expensive pieces of equipment to process a vast array of substrates through an even wider range of chemicals to build multiple, complex, and largely bespoke circuits which become the building block of countless electronic products. So, where does the funding come from? What about the skills? How can these truly complex processes be mastered so quickly? Or is it a case of highly-automated factories with decision making limited to a small number of highly-competent engineers at the front end determining the process flow?
If it’s the latter, then let’s assume that the personnel cost is secondary to the cost of capital equipment, so why can’t this be replicated and perhaps even improved here in the West?
According to the latest figures I could find, only 10% of PCBs are now fabricated outside Asia and this amount is effectively halved between Europe and North America. Projections seem to suggest that the industry will grow by approximately 5% per year, but at that this growth will be consumed by the factories of East.
Contrast this with the EMS/ODM market. Figures from the same source show that non-Asian manufacturing accounts for 26% of the global market. Projections are for this market to grow from US $371 billion in 2011 to a staggering US $660 billion by 2016. If these projections are correct, and I’ve got no reason to doubt them, then this amounts to 12% annual growth in this segment. Equally striking, the European/Americas slice of the pie is expected to hold up at 26% of the total, meaning that the non-Asian EMS/ODM revenues will have grown by 78% by 2016.
I guess I won’t be alone as I slowly shake my head at the clear and growing disparity between the bare board and assembled board markets in the west, wondering if there is any way in which the fortunes of the Western fabricators can be reversed.
I’ve sold PCBs and I’ve sourced both bare boards and EMS services. For me, the glaring difference between the two is it’s just so much harder to buy EMS--it’s more complex and time consuming, relying on constant dialogue between vendor and customer about BOMs, component availability etc. Back in the day, I was one of those engineer-type PCB sales guys bestowing the virtues of new embedded data formats that would allow designers to send their CAD files with all intelligence locked in so that the PCB CAM department could quickly and easily read the data and safely make boards. Things have now moved on even further and "black box" software packages are available, completely automating the data entry and design analysis processes.
As such, it’s now actually pretty easy to source PCBs now and maybe this is part, perhaps even a large part, of the problem.
One thing is for sure: The volume of PCBs to be consumed by the Western EMS/ODM segment is going to increase. I wonder how much of this new requirement will be sourced locally?
On the eve of their winter conference in Berlin, I hooked up with old friend and recently appointed EIPC Chairman Alun Morgan to get his thoughts on things. I have high hopes for the EIPC now that he’s at the helm. He’s a good guy and I hope his drive and enthusiasm will be infectious and a catalyst to positive change.
Stuart Hayton: What do you see as the main purpose for the EIPC?
Alun Morgan: I can sum up the purpose of the EIPC quite easily in saying that we exist to provide value to our members. That is a simple statement, but behind that ,of course, is the question of what the EIPC’s members perceive as being of value. Here I can be more specific and split the EIPC’s role into a few discrete areas.
We are probably best known for our twice yearly conferences where we provide a platform for business and technology information exchange and dissemination. We are fortunate to have an excellent board of management and associates with the vision and prominence to attract top speakers and capable staff who are consistently able to deliver well organized events, always adding plenty of networking opportunities. The Berlin conference has attracted delegates from 16 different countries and will deliver a global view of the business and technology of PCB manufacture. This brings me to our membership of the World Electronic Circuits Council (WECC) which links the world PCB associations of China, Europe, Hong Kong, India, Japan, Korea, Taiwan, and the U.S. Our Vice-Chairman, Rex Rozario, is also the Deputy Secretary General of WECC and in this role ensures our participation at the top level in this body that covers nearly all of worldwide PCB production and related businesses.
On another level, the EIPC contains members and staff with a wealth of skills that we can mobilize to help member companies enter new markets, solve technical issues, or develop new products. We additionally use these skills to organize workshops on specific technical issues to provide practical tools to help our members develop their processes. We are currently working on developing a series of workshops and Webinars to provide such practical tools to PCB shops to reduce process variability and improve yield.
Hayton: What are your highest priorities in your new role?
Morgan: In addition to a few practical restructuring measures which are already underway or complete, my highest priority is to deliver an agenda that will attract and retain new members and increase participation from all across Europe. It is only in our delivery of conferences, workshops and seminars that we can judge our success. Successful events attract high numbers of qualified delegates who derive value for their businesses or organizations. I am pleased to be able to say that in 2012 we were able to increase our membership by 10%.
Hayton: What role can the EIPC play in halting this alarming demise of European manufacturing? Is there any way we can start to rebuild what was one of the worlds’ most dominant technical markets or has that ship sailed for good?
Morgan: First, as you have already intimated, future growth is forecast in the East; however, this does not mean that the European PCB business must shrink. The consensus is that Europe accounts for a little over 5% of worldwide PCB production, this equates to a value of around US $3 billion with around 40% in Germany and single digit share in the other markets of Russia and FSR, Italy, Switzerland, Austria, France, the UK, Scandinavia, Benelux, Spain and Portugal, Turkey, and the Central European Countries. The consensus is that the European market will continue to oscillate in a narrow range around the US $3 billion mark. This is really not too shabby if we consider that at its height in 2000 the European market was around US $6 billion. Within that US$3 billion there are ample opportunities for European PCB makers to specialize and continue to develop successful businesses. Many have successfully positioned themselves and delivered double digit growth in recent years. It is not difficult to find success stories in the thermal management, military, defense, aerospace, and medical sectors.
The worldwide PCB industry has experienced fundamental structural change in the past decade. Despite the challenges electronics consumption has continued to grow and now deeply pervades most of our daily activities. Developing economies, including China, enter the world economy by providing low-cost labor and exporting cheap goods. However developing economies eventually become developed and China is no different in its gradual shift from dependence on agriculture and manufacturing into increasing dependence on services. As the Persian poet, mathematician and astronomer Omar Khayyam wrote in his Rubaiyat: “The Moving Finger writes; and, having writ moves on.” We are where we are and I believe that the most successful companies focus their efforts in developing their vision and striving to get where they want to be rather than in trying to recapture past glory in a world that has moved on.
Hayton: Do you have any plans to bring OEMs, EMS, and PCB providers together to explore and better understand the Western food chain and to highlight potential advantages of local sourcing?
Morgan: The EIPC has a good representation of members from the OEM, PCB, materials, and academic sectors, however we are actively seeking greater participation with the EMS sector. The European region remains the largest consumer concentration in the world and many EMS companies have seen the benefits of siting operations near to their largest market. We see a concentration of such companies in the East of Europe and are actively engaged in seeking ways to make our activities attractive and of value to them. By way of example, Professor Martin Goosey, our vice president of technology, has been invited to deliver a presentation on behalf of the EIPC at a conference in Brno, the second largest city in the Czech Republic. This will present a good opportunity for the EIPC to showcase its services to EMS and other companies in the region. Furthermore the EIPC is proud and excited to be the host organization for the 13th Electronic Circuit World Convention (ECWC) in Nuremberg, Germany, May 7-9, 2014, which will bring together the whole electronics supply chain. The PCB was invented in the UK within the European Union. It will be the honor of the European electronics industry to share leadership in development of new materials, innovative technologies and application with the World during ECWC 13.
Hayton: Thanks, Alun. There’s clearly a lot to be getting on with. It’s hugely reassuring to learn that there is a strong belief in the future European PCB industry. Good luck in your new role. I am sure you will be a great success.