The Laminate Market: What Will the Future Bring?


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Raymond_Goh.jpgPCBs have been manufactured more or less the same way since we entered the industry in 1972, but the circumstances surrounding the boards have changed. The PCB Norsemen have addressed the copper situation several times in our columns as well as the component crisis affecting the PCB industry. Now, we’re experiencing external factors—such as Brexit and the trade restrictions between China and the U.S.—that are affecting the industry and causing delays due to raw material demand and prioritization by huge market players. The PCB market in China is experiencing a slower growth pace since the beginning of the year. Many factors have affected it, including the U.S.-China trade war and its increased tariff and the expectation of a big ramp-up from the automotive or electric vehicle (EV) industry, which did not happen this year.

Take a Step Back and Look at the Figures
We read and hear about factories moving out of China in view of the China and U.S. trade war.

There had been some increase in capacity in neighboring countries in South East Asia. However, in the next 3–5 years, China will probably continue to be the largest PCB manufacturing country, as the overall network of the supply chain for the PCB ecosystem had been built and improved over the last decades will not be gone overnight.

Let's move back one step and take a look at the PCB laminate supplies. There had been significant growth in the global laminate value between 2015 and 2016 from US$24.3 billion to $25.8 billion. However, from 2016–2018, the growth had been unsubstantial with $26.2 billion and $26.5 billion in 2017 and 2018. It has been estimated that 2019 will close at about $26.7 billion.

This year, we cannot ignore the impact of the change in strategy of major players toward the supply chain. The U.S. trade restrictions imposed on Huawei Technologies, one of the world’s leading networking and telecommunication manufacturers from China, have drastically affected Huawei’s access to U.S. technologies, which includes raw materials. The U.S. trade restriction and warning to its allied countries have forced Huawei’s products to face project bans, business contract restrictions, security scrutiny, and even pushback in some countries. Huawei continues to make changes to its strategy to continue doing business.

The Race Toward the First 5G Rollout
To wean itself off U.S. suppliers for related IC products, since June, Huawei has moved to redesign its 5G base station IC modules and to cut orders for CCL for use in their active an-tenna unit (AAU) from a major U.S. supplier while seeking alternative Asian supply sourc-es. China has a huge domestic market and is also competing to be among the first to roll out 5G infrastructure. Huawei is the top provider in China in this aspect and had been ramping up circuit boards for 5G products.

Due to this surge in 5G demand, the PCB supply chain in Asia has been hit with a shortage of high-frequency and low-loss material for 5G. Major laminate suppliers are switching their production lines to produce such material to meet the demand. As a result, fewer FR-4 materials are being produced, which is what we are facing today. The shortage of high-frequency materials has been taken up by the major players. A longer lead time is needed for conventional glass-epoxy laminate FR-4 mate-rials because its production has been reduced.

Copper Foil Shortages: Lessons Learned
After the lessons learned over the past few years about copper foil shortages, laminate manufacturers are quick to implement rules to control the situation today by implementing scheduled production, where a certain model of FR-4 is produced on certain days of the week only. This means there’s no flexibility for PCB manufacturers to place an order and receive material with a short lead time. Laminate manufacturers are also defining allocation for PCB manufacturers, where the seller determines how much quantity the buyer can buy to prevent any single PCB manufacturer from taking all that has been produced. 

And how do we get through this period? Again, planning, planning, and planning. Spend your time wisely. Plan ahead, make an accurate forecast, and involve your PCB supplier. You know you need to make a reservation in advance for very popular restaurants; why are you not doing the same for your PCB purchasing? We consistently need to remind ourselves that PCBs are not off-the-shelf products; they are customized and take time. 

Conclusion
We know the PCB growth from now until next year will most likely be led by 5G products and the automotive segment. I hope this column has directed the spotlight toward the current situation and emphasized our recommendation of a timely disposition of PCBs to avoid unpleasant delays and surprises.

This column originally appeared in the October 2019 issue of PCB007 Magazine.

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