PCB manufacturers struggle to shift Chinese mainland operations

by Vianie Li & Cecile de Veyra

Most PCB manufacturers in Hong Kong SAR maintain factories in the Chinese mainland, with some operating as many as three. There are also a number that have expanded to Southeast Asia, including Vietnam, the Philippines, Malaysia and Thailand, and to India due to a range of factors including the mainland’s rising labor costs. The comparative lack of a skilled labor market and an incomplete industry chain, however, have proved a disadvantage, especially during the early months of the pandemic. This prompted companies to maintain their China operations over the past two years and a few are building more workshops.

Suppliers with multiple production facilities on the mainland have them in the Pearl River Delta and the Yangtze River Delta regions, where many electronics industries congregate. These two key growth areas continue to attract investment from domestic and multinational companies alike.

AKM, a major flexible PCB manufacturer with its headquarters in Hong Kong SAR, has built two factories, one each in Guangzhou and Suzhou. In 2021, it embarked on the second phase of its Suzhou project, with aggregate investment reaching $102 million. The facility, with a total area of 70,000sqm, can produce 1.2 million square meters of IC boards and HDI PCBs every year.

Olympic, meanwhile, has a new factory in Heshan in Guangdong, which has a PCB manufacturing capability of 3 million square meters.

The Hong Kong Special Administrative Region has seven of the mainland’s 50 entries included in the top 100 list of the world’s PCB manufacturers, released by NTI in late 2020. They were KB PCB, Ellington, Olympic, Redboard, Champion Asia, Onpress and Deweibao. Combined, these companies and their mainland peers realized a production value of $16.683 billion in 2019.

There are currently more than a hundred suppliers of PCBs in Hong Kong SAR, with most specializing in midrange and high-end HDI and rigid-flex types. All export their products in varying ratios of 50 to as much as 90 percent, with a few allocating their output entirely to overseas markets. The main destinations are Europe, North America and the Asia-Pacific region.

On the rise

The global manufacturing sector for PCBs has been expanding over the past several years, fueled by robust demand from the electronics industry. Despite the pandemic, it garnered $65.2 billion in 2020, achieving 6.36 percent YoY growth, according to Qianzhan Industry Research Institute.

Continuous product upgrades in consumer electronics, wearables, medical devices, industrial control and the automotive field will sustain this upward trend. By the end of 2022, the PCB market will be in the scale of $69.1 billion from $67 billion in the previous year. This is forecast to reach as much as $78 billion in 2026, according to the same source.

Asia-Pacific is the largest market and will remain the fastest-growing. In 2020, it had a 90 percent share, according to PR Newswire, with the Chinese mainland accounting for 53.8 percent and about 10 percent coming from Hong Kong SAR. North America and Europe trailed at 4.8 and 3.2 percent, respectively.

Because of the uptick in market requirement for PCBs, manufacturers in Hong Kong SAR are looking to increase their output further. Uniwell Electronic Ltd already benefited from this trend, realizing a total production value of $42 million after boosting volume by 30 percent in 2021.

Although the spread of the omicron COVID-19 variant early in 2022 has affected overall manufacturing, domestic companies are confident that recovery will happen in the months ahead.

Going for the high end

The rapid development of 5G communications has created a large market for HDI PCBs in recent years and that will persist in the next three years. Prismark projects that this category will reach a production value of $13.741 billion in 2025 from $9.954 billion in 2020, spurred by the smartphone, tablet PC, wearables and VR and AR sectors.

Eyeing prospects, PCB suppliers based in Hong Kong SAR will continue to focus on midrange and high-end products, specifically high-layer, HDI and rigid-flex boards. They will emphasize any-layer HDI and substrate-like or SLP PCBs and adopt the modified semi-additive process or mSAP to achieve 30µm or 1.18mil minimum line width and spacing.

These PCB manufacturers source copper-clad laminates, adhesive and base materials, including FR-4, CEM, RCC, PI, PET, liquid-crystal polymer, ceramic and aluminum, from the Chinese mainland or overseas. Shengyi, Goworld and Nuoya are their main domestic providers.

The cost of materials and components fluctuated many times in 2021, resulting in PCB price adjustments. This may stabilize in the coming months.