PCB makers battle surging material, labor expenses

Rebounding from a significant dent in total sales in 2009, China PCB suppliers are optimistic revenue will improve this year together with the recovering global economy. In fact, most have seen a 20 to 30 percent increase in orders in 1H10 compared with the same period in 2009. Buoying demand for the line are the consumer and automotive electronics, communication, medical and industrial fields. Statistics from electronics industry consulting firm Prismark reveal China’s PCB segment will have a CAGR of about 9 percent in 2008-13.

The rosy outlook, however, is not without challenges. Among the main concerns of manufacturers are the climbing raw material and labor costs. Copper, for example, has been increasing since 2H09, driving major copper clad laminate providers such as Nan Ya Plastics, Uniplus, ITEQ and TUC to raise quotes. CCLs account for 30 to 40 percent of total PCB production outlay. The rates for glass fiber yarn and cloth have also gone up by 20 and 35 percent early this year.

With the traditional buying season for PCBs in 3Q10, the increase in orders will spur demand for these materials, which may lead to a shortage in supply. This, in turn, will escalate costs further in 2H10.

Aside from battling rising material overhead, most PCB makers in the country are facing a scarcity in manpower.

Currently, coastal operations are experiencing a shortage of about 200,000 workers, according to Electronics Manufacture China. To address this, companies are offering better working conditions and attractive wages to draw in new employees, pushing up labor costs. Many suppliers did not increase prices in 2009 due to the worldwide financial downturn, which pushed down sales by 2 percent. In coming months, however, some will implement at most a 10 percent rise in quotes to offset upward adjustments in total outlay.

Others are reducing OEM and ODM shares in their business and are instead focusing on high-end types such as HDI boards to boost profits. They are also upgrading performance and increasing layers of certain models to attract orders.