The good news for North American printed circuit board (PCB) makers is that slumping board sales that plagued the industry for more than a decade have bottomed out. The bad news is that there will be little growth over the next several years.
The North American printed circuit board market is expected to show “moderate” growth over the next three years, according to the Association Connecting Electronics Industries (IPC). However, the IPC said in 2014 the market is expected to total $3.4 billion, the same as 2013.
The North American printed circuit board market has fallen from $4.8 billion in 2006 to $3.4 billion in 2013.
Rigid boards account for the most of the North American market. Rigid board revenue in 2014 will be about $3 billion, compared to $401 billion for flexible circuits, according to the IPC.
The production value of boards made in North America totaled about $3 billion in 2013, down from the year 2000 when sales reached an industry-high of $12 billion, according to Dr. Hayao Nakahara, PCB industry consultant and analyst. He expects little growth over the next three years, but some volatility is possible. “It may grow 10 percent, but it may decline 10 percent. It is changing so rapidly,” Nakahara said.
He noted the North American board market represents only about 5 percent of the $60 billion global PCB market. Most board makers in North America are small with only three having more than $100 million in sales.
The offshoring impact
Sharon Starr, vice president of research for the IPC, said the migration of electronics manufacturing to China and other Asian countries is the reason for the decline of the North American PCB industry.
“The offshoring trend has affected OEMs and some EMS companies and printed circuit board companies," said Starr. “When the customers leave, the suppliers follow. That impacts the market for sure.” She noted that the number of PCB manufacturing facilities in North America has shrunk to 310 compared to 567 just 10 years ago.
The number of North American printed circuit board facilities has declined from 700 to 310.
Starr said the much-talked about trend of onshoring – the return of electronics manufacturing to North America from Asia – so far has not had a significant impact on the North American PCB market. She said only a “handful of companies” have decided to bring back manufacturing to North America.
Nakahara said when Apple announced that it would assembly some iMacs in the U.S, “the whole nation vibrated,” said Nakahara. “People thought everything was coming back. However, only a small amount of manufacturing is coming back.”
Starr said that the manufacturing that has come back involves OEMs and EMS companies. “There seems to be very little activity with PCB fabricators,” she said.
However, if more OEMs and EMS companies brought back manufacturing to North America, “that would be incentive for PCB manufacturers to stay here or expand here.”
Steve Bruton, executive vice president, PCB technology for electronics manufacturing services provider Sanmina, said his company has seen “a modest increase in business because of onshoring.” While Sanmina is an EMS provider building board assemblies and systems for customers, it also makes bare boards that it sells to other EMS providers.
Bruton said onshoring opportunities “are aligned with concerns pertaining to IP protection and higher level technologies with limited supply chain capability in Asia and South Asia Pacific.”
Starr said a recent IPC study also found that companies that onshore are doing so because of the high cost of transportation, concerns about quality control and the need to be close to customers.
Drivers of board demand
While much electronics manufacturing has moved to Asia, there's still demand for North American boards by the defense, communications, medical and industrial electronics industries.
“There is still solid demand in several areas, including high technology communications and network infrastructure equipment” including very high speed backplanes and line cards, said Bruton. He added that demand is healthy for fine-line aerospace PCBs and flex circuits, and PCBs for high risk (Class 3) medical devices, such as implanted pacemakers and neuro stimulation devices.
Bruton said the defense industry remains a key driver of North American board business despite government cuts to defense programs. “There are still many active programs associated with electronics upgrades for existing air and ground based platforms,” he said.
Systems such as satellite communications, military aircraft and ground defense help drive the North America board business. In North America the defense industry accounts for $820 million of the $3 billion board production value, said Nakahara. Defense/aerospace and communications combined represent about 57 percent of the total North America market, the IPC said.
Bruton added that the resurgence of the North American oil and gas industry is also helping drive the North American board market.
“The need for sophisticated automation and process control equipment has been increasing” which is contributing to board sales, he said.
In the North American market, a lot of companies in niche markets such as industrial and military applications need to have “close cooperation” with their customers, said Starr. “There is also a greater concern for quality control and reliability,” she said.
Because the North American board industry will have limited growth, it will remain very competitive and some consolidation is likely. A recent example is the announcement by board maker TTM Technologies, Inc. that it will acquire Viasystems Group in a deal worth $997 million.
The companies that are successful in North America need “to focus heavily on keeping their current customers and getting new ones,” said Starr. “They can’t rely on market growth to sustain their company growth.”
Nakahara added: “the focus for now for the U.S. board industry is just trying to stay alive.”