Although U.S. PCB companies have been waving the flag for years, the COVID-19 crisis has shined a spotlight on the U.S. dependency on overseas suppliers for many electronics products. It was kind of a “Sputnik moment” for the U.S. that spurred many calls to beef up support for the electronics industry. We should continue that momentum to build back these critical industries.
How will production come back to the U.S.? Here are five ways.
There is some evidence that production is coming back to the U.S. from China, where increased wages, trade disputes, higher shipping costs, and other risk factors are making the U.S. more cost-competitive. Something dramatic would need to happen for the majority of this business to come back, but it seems that the tide has turned. Even a 5–10% reversal would be a massive boost to the U.S. PCB and PCBA industries.
Concerns over intellectual property (IP) control, counterfeit parts, unapproved changes, logistic issues, and communications should keep more business in the U.S.
All ITAR-related products, government procurement, FDA/medical, and other critical industry products will be made and assembled more in the U.S.
U.S. prototypes and quick-turn producers have beefed up their front-end technology and production equipment to provide excellent service and speed. Domestic companies have a natural advantage in terms of communication, proximity, and logistics and should create a corporate culture of speed-to-quote, speed-to-ship.
Because Asian producers are more set up for low-cost volume production, a large amount of this production will not come back to the U.S. Many U.S. PCB and PCBA companies have established factories or partnerships in Asia for those volume products. Customers typically prefer to work with a local producer to handle prototypes, quick-turns, design changes, volume production, and quality control. Customers want a low-, medium-, and high-volume option under one roof, whether the product is made or assembled in the U.S. or at a near-shore or offshore facility. U.S. companies should continue to capture more of this import business while building up their U.S. production.
While U.S. companies are making progress to keep more business in the country, the government can do more to promote these critical industries. Tax incentives, R&D credits, low-interest loans for equipment, and the expansion of ITAR regulations would help. The U.S. government also needs to look at the big picture, critical projects to help promote U.S. production. For example, for both security concerns and domestic industry promotion, PCB boards for 5G equipment should be made and assembled by U.S. companies. With enough government and industry backing, more greenfield PCB fabs can be built in the U.S.
At the same time, we want production security with standards. Electronics is a critical industry; however, the U.S. does not want to create a “welfare state” for companies that do not invest. U.S. companies are dominant in many electronics industries, such as semiconductors, semi equipment, and connectors. Although there are many U.S./North American companies in the top 100 list of EMS companies, about 90% of assemblies are made in Asia. If even a small percentage of that work came back, it would result in a huge gain for U.S. companies. Industry standards will continue to tighten naturally as customers demand higher quality, which will induce more companies to invest in equipment, technology, and training.
One issue with increasing re-shoring is the lack of skilled employees. This will continue to be an issue, which can be resolved through increased automation, software, training, more immigration, and easier procurement of technical and education visas.
From an M&A perspective, U.S. PCB shops will bulk up to keep up with needed investments in equipment, technology, and systems. PCBA companies must continue to invest in automation and quality controls. There will be a tremendous amount of consolidation as Baby Boomers retire, and smaller companies are consolidated into their larger competitors. More investment in new automation, high-end equipment, and test equipment will reduce the cost advantages of overseas companies, but only larger companies will be able to afford these investments. This will further increase consolidation in the PCB and PCBA industries.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.