A case for collaborative research and development. (Between the Conductors).(Industry Overview)

The current economic recession has had a significant impact on the printed circuit industry. When supply exceeds demand, consolidation inevitably follows. We have seen the consequence of the recession in the form of layoffs, plant closings, plummeting PCB equipment and materials sales, and weak sales in the electronics sector in general (Ref. 1). As sure as night follows day, however, we will come out of the recession--but the North American PCB industry will have lasting bumps and bruises. Some plants will remain closed, and many of the unemployed will have to find jobs elsewhere. And, some manufacturing business will be lost to offshore fabricators permanently due to lower prices.

The basis of the present downturn is twofold--the world recession, and the shift of high-volume production of low- and medium-technology PCBs to Asia. Economics are the primary driving force leading to increased manufacturing in Asia, particularly China. Direct labor costs in Hong Kong are $7.58 per hour, less than half the direct labor costs incurred by PCB manufacturers in the U.S. Direct labor costs in other regions in China (including Shanghai, Shenzhen, Guangzhou, Doumen, and Wuxi), however, are less than $1 per hour. When coupled with lower construction costs, tax incentives, subsidized loans, minimal environmental policies, and an enormous emerging market in China, the decision to manufacture PCBs in China is clear cut.

Manufacturers of low- and medium-technology PCBs made in North America cannot compete with Asian fabricators on price. North American fabricators are offering low prices in an effort to cover their fixed costs, while operating at approximately 50% capacity (Ref. 2). Two niche markets are expected to provide protection to North American PCB fabricators. The first includes prototypes and low-volume, high-mix designs with short lead times that can be fabricated by quickturn shops. The second market is for high-volume high-technology circuit boards and back planes that require capability not widely available in Asia at this time. As new facilities ramp up in China, however, their capabilities to manufacture higher technology circuit boards will improve, which will further erode the North American niche.

Clearly, then, the key to an extended North American PCB manufacturing presence is ongoing R&D. For years, the strength of the printed circuit business in North America has been high technology: mass-produced high layer count, fine line, small-hole multilayer boards and back planes. However, we are playing catch-up in the blind via HDI business. We cannot compete with the low cost of labor and relaxed environmental regulations in developing Asia. To maintain market share, North American fabricators must offer added value (albeit at higher prices) to the GEM/CEM/EMS community.

Added value is not free! The capability to provide added value in the past has come, in part, from significant investments in research and development. The future will require similar commitments--but from where will they come? Years back, when many printed circuit shops were captive, the owners (AT&T, IBM, Texas Instruments, to name a few) provided R&D funding to develop and implement new technology so that increased interconnection capabilities were possible. In the early 1990s, prior to unloading their factories, many large corporations entered into a collaborative research program, spearheaded by the National Center for Manufacturing Sciences (NCMS) with funding from the Advanced Technology Program (ATP) of the National Institute for Standards and Technology (NIST). The Printed Wiring Board Interconnect Systems program, spanning a five-year period from 1991 to 1996, consisted of big players including AT&T, Digital Equipment, Hamilton Standard, Texas Instruments, AlliedSignal, Sandia National Laboratories , Hughes Electronics, and IBM. The total cost of the project was $31.8 million (Ref. 3-4), with ATP providing 40.6%, the ...