The Big Picture: Geopolitics and the PCB Supply Chain

When I first entered the PCB industry in 1982 (I can’t believe it was that long ago), I rented a 10’ x 10’ booth at the NEPCON West Show in Anaheim. I had a small card table to showcase the beginnings of a budding software program designed for PCB fabricators. I had no idea what to expect, and I hardly knew anyone in the industry. 

Being a technical/software guy, I didn’t know anything about sales. Looking back, maybe that was an advantage. Nonetheless, I came back with several hundred leads for my fledgling software business. At that time there were over 2,000 PCB shops in the U.S. alone. As the industry made its way to China starting in the mid-1990s, I followed the herd. It was a good move as I ended up with some of the largest PCB companies in China as customers and got to know so many more people in Asia. 

The shift to Asia, and specifically China, made a lot of sense at the time. Everyone was investing in China—the U.S., Japan, and Taiwan were leading the pack. They still own factories with a major share of the PCB market while local Chinese owned companies continued to invest and have now become major players in the market. In fact, that shift worked so well that if you combine Chinese and Taiwanese non-captive PCB production, I wouldn’t be surprised it if didn’t account for over 90% of the world’s PCBs. Keep in mind, I’m talking about non-captive production. There is still quite a bit of captive production in Japan, South Korea, and other places. We are so dependent on that market that I find most PCB factories here in the U.S. themselves buy PCBs from those Chinese and Taiwanese factories while they remain focused on ITAR, quick-turn, and other specialty products. The result is almost total dependence on China and Taiwan for any volume production. 

What happens if (more like when) China decides to make a move on Taiwan? In the past, the U.S. position has been to defend Taiwan in such a scenario, but is that still the case? Look at what’s happened in Hong Kong—lots of talk, but at the end of the day China got what it wanted. Recent developments in Afghanistan certainly don’t give one a warm and fuzzy feeling about Washington’s ability to get things right. A move by China on Taiwan may create a supply chain tsunami the likes of which the world has never seen, especially if the U.S. and Western nations retaliate either militarily or economically. Either way, it will be tough. We can sit here and blame all kinds of people, but we did this to ourselves. At least Japan and South Korea have maintained quite a bit of captive capacity. 

Given China’s need to continue to grow its economy, one would hope that the lure of the American market would entice them to cooperate and maybe slow down the move toward Taiwan. However, the recent assault on China’s tech industry by China’s leaders would suggest that they are willing to take drastic measures to impose their ideology even if it is likely to prove self-defeating. For example, Alibaba hosts twice as much e-commerce as Amazon. Tencent runs WeChat, the world’s most popular super-app with over 1.2 billion users. Their tech advances have allowed them to get into AI and digital healthcare—a much sought-after shift from the traditional manufacturing prowess. Their tech industry has the potential to be a foundation to challenge American supremacy. 

So, why has China’s leadership launched such an aggressive assault on its $4 trillion tech industry? I think the answer is that China’s ruling party wants, above all else, to have total control and wants to redesign the tech industry according to its blueprint. Its recent regulatory actions against its tech industry have reduced the combined market cap by over $1 trillion. 

Having billionaire tech tycoons being worshiped by the masses does not fit the Chinese ideology. Make no mistake: The crackdown on China’s unruly tech is a demonstration of the party’s unparalleled power. It is this power that will eventually propel them to make a move on Taiwan. Hopefully the shiny object that is the American market will allow trade to continue and avoid a supply chain tsunami. 

Mehul J. Davé is CEO and chairman of Entelechy Global Inc. and chairman of Linkage Technologies Inc. 

 

 

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2021

The Big Picture: Geopolitics and the PCB Supply Chain

08-26-2021

As the PCB industry made its way to China starting in the mid-1990s, I followed the herd. It was a good move as I ended up with some of the largest PCB companies in China as customers and got to know so many more people in Asia. The shift to Asia, and specifically China made a lot of sense at the time.

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2020

The Big Picture: Globalization—Imagine a United States That Isn't United

10-12-2020

What if the U.S. was fragmented with 50 state fiefdoms, each with their own rules and barriers blocking the free flow of goods and services across state lines? We cannot even imagine such a scenario, yet that is exactly what’s happening—fortunately not across state lines, but across global borders. Mehul Davé advocates for starting the hard work to get globalization back on track.

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The Big Picture: COVID-19 Helps Kill Globalization

07-13-2020

Globalization was in trouble even before the pandemic. The decades-long open system of trade that dominated the world economy has been damaged by the financial crisis and—more recently—the Sino-American trade war. Mehul Davé explains how COVID-19 has added a third-body blow to globalization.

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The Big Picture: Globalization—The Onset of COVID-19

04-20-2020

In Mehul Davé's last column, he spoke to the challenges of tariffs and alternate sources for PCBs and the larger divide between the U.S. and China, potentially leading to far broader implications for U.S.-led vs. China-led technologies. The world has changed dramatically since then. Mehul explores how the COVID-19 outbreak has impacted the rollout of 5G and relations between the U.S. and China.

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The Big Picture: Globalization—Tariffs and Alternate Sources

01-09-2020

The new year is upon us, so Mehul Davé started thinking about the main challenges his company and customers are facing as we enter 2020: tariffs and finding alternate sources for PCBs. Mehul shares his thoughts.

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2019

The Big Picture: Globalization—What Happened?

07-16-2019

Cheap products and services from places like China and India are good, but giving up the position of being the top dog doesn't sit well with most people—especially when you have leaders around the world reminiscing about the past and wanting to make XYZ great again or something similar.

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Can Do in CAM Outsourcing: CAM Engineering— Building Redundancy in Critical Areas

01-22-2019

Many believe that outsourcing is wrong because it takes away from local jobs. That may be the case if this industry can find the talent level at a cost that they can afford, but this is not the case in North America or Europe.

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2018

‘Can Do’ in CAM Outsourcing: Improving Quality in CAM Engineering

09-19-2018

In this series, Mehul J. Davé, CEO of Entelechy Global Inc., will address six ways in which a company can significantly benefit from outsourcing their front-end CAM work.

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CAM Engineering—Reducing Costs

06-12-2018

While having on-demand capacity, improved automation, and fast turn-around are critical to any front-end engineering operation, achieving those goals with a cost-effective solution is imperative. Electronics are constantly under cost-reduction pressures. Functionality, capability, and complexity increase while costs decrease.

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2017

CAM Engineering—Fast Turn-Around

09-11-2017

Time-to-market has been the mantra for every successful technology company. The best among them have strong and integrated supply chains that march to the drum of the OEMs and EMS providers that bring that technology to market. A big part of that success, especially in North America and Europe, is the ability for PCB manufacturers to turn around complex PCBs very quickly. The hallmark of PCB production in these higher-tech, higher-cost regions is flexibility and responsiveness.

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2016

CAM Engineering – Automation

12-19-2016

As volume production in PCB has shifted significantly to Asia, manufacturers in Europe and North America have been focusing on high technology, quick-turn, prototype, and lower-volume production.

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A Case for Outsourcing CAM Engineering

04-29-2016

In the West, outsourcing is sometimes considered taboo and many believe it is one of the causes for shifting our manufacturing base to the East—specifically China and other lower cost Asian countries. In this series of columns, I will make a case in support of CAM outsourcing—especially for North American and Western European printed circuit board manufacturers.

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