PCB industry “Chaos”: Emission limitation, Rising price and Expand production,M&A and Elimination aggravated the industry migration

Wednesday, February 28, 2018
Rising price is becoming a major tone in the market of electronic components, PCB as a component carrier connection is also continuing to rise in price. However, along with the "spring breeze" of environmental protection, the entire PCB industry in the Yangtze River Delta and Pearl River Delta are facing new problems. From the end of 2017 the emission limitation in Kunshan, Jiangsu to the emission limitation in Zhuhai, Shanghai, and now Shenzhen investigate strictly ,the whole PCB industry will come into a new situation after this wave of price increase, and many PCB manufacturers will also go away with the "wind".
Reporters learned that at present, the percentage gain of PCBs is 20-30%. At the same time, the entire Yangtze River Delta, the Pearl River Delta PCB many factories have to accelerate to the inland (Jiangxi, Hunan, Hubei, Chongqing Etc.) area transfer, many of the old or substandard PCB production capacity will gradually be eliminated because of the affects of emission limitation.
Through the investigation it is found that the market for the PCB industry is just like  "chaos fighting" among the industry. The price increasing of raw material, nonidentity supply and demand, the process of upgrading, tight production capacity, environmental restrictions and other factors all cause the increasing components price.
Emission limitation
The emission limitation in Kunshan swept over Shanghai and Shenzhen, and environmental taxes have increased PCB costs.
On December 24, 2017, Kunshan City issued a emergency notice of comprehensive stoppage requiring 270 enterprises in the city to be completely discontinued. The news after caming out, caused an uproar in the industry, especially led to a rebound in Taiwan manufacturers in Kunshan. Two days later, Kunshan City announced once again that the previous notice of suspension of work was not implemented and the next step was to require "emission limitation." Insiders told that the reason why there was just rectification and emission limitation requirement with no comprehensive shutdown implemented was that Kunshan Taiwan Business Association and the Kunshan municipal government conducted consultations. If a single solution was done, many enterprises in the industrial chain would die,coupling with unemployment to the panic-stricken workers. So there is finally just emission limitation and rectification implemented.Taiwanese manufacturers account for nearly half of the companies that were asked for a shutdown. Due to heavy pollution, PCB factories are the hardest hit by the rectification work.
Liu Sheng, general manager of New Silk Road Technology knows well the inside story of the industry. He told that increasing the environmental protection requirements on PCB factories is an inevitable trend in the industry. At present, environmental protection standards for PCB manufacturers are divided into green cards and blue cards. These two are relatively high environmental standards.No green card or blue card PCB manufacturers will certainly be checked and need to be rectified. Liu Sheng further said that at present it is the first step to rectify the East China's PCB business environmental restrictions and rectification on South China PCB plants is only a matter of time. PCB industry can not be completely rectified at once, otherwise the impact on the entire industry chain is very large.
This is true. After the emission limitation in Kunshan, Zhuhai also released an emission limitation notice. Subsequently, Shanghai also began to do emission limitation and spread it to the Pearl River Delta where represented by Shenzhen. On 5th Jan, Shanghai issued the "List of Key Discharged Units in Shanghai in 2018" and carried out screening work on five major key pollutant discharge units in the city including water environment, atmosphere environment, soil environment, sound environment and others.
According to information, the entire Baoan Shenzhen major industrial zones have also been polluted by the environmental protection department, the industrial zone often was forced to stop production by water-break and electricity-break since the beginning of 2018. Shenzhen PCB Industry Association staff also confirmed that now PCB manufacturers in Baoan Shenzhen major industrial areas have been investigated. If the PCB manufacturer is not up to the environmental standard it will be rectified.
So what are the pollution of PCB factory? PCB board design requires plating, etching, imaging technology and many processes are used chemical syrup. All these can bring heavy pollution.
In addition to emission limitation in Kunshan, environmental taxes is also a big move for the PCB industry. Since 1st Jan,2018, "Environmental Protection Tax" has been implemented. PCB factories will increase their taxes according to the specific conditions of their sewage and exhaust gas. Expenses for waste water and gas emission will increase by 3-5 times or more. The operating costs are undoubtedly aggravating for PCB manufacturers by this .
Rising price and Expand production
Rising Price can be traced back to 2016, the analysis of several major causes of PCB capacity consumption as below.
Facing the industry's environmental restrictions and the impact of the new environmental tax, for the PCB industry, on the one hand, PCB production capacity of the Yangtze River Delta and Pearl River Delta will be reduced, supply and demand imbalance will lead to price increases; the other hand, the tax burden is heavier so the price rises seems to be reasonable.
Zhu Rongwei, director of enterprise development in King Brother said that rising prices can be said that a price transfer. Because the price of upstream copper foil, glass fiber and other raw materials is increasing. Another reason is that the lithium industry broke out in 2016, it ate a lot of copper production capacity. The price of raw materials rose more than 100% in 2016, but dropped back in early 2017, and then started to focus on price increases. Copper foil as a conductor of PCB precipitation on the circuit board substrate layer and the CCL occupies about 37% of PCB costs. It is reported that since 2016 the electronic copper foil has been in short supply. This phenomenon intensified, it came to the peak in the fourth quarter of 2016 and there has been no fundamental improvement. Thus promoted the rising prices of PCB in 2016.
The rising prices in 2017 is more driven by the growth of demand. Liu Sheng said that PCB industry began to decline from the peak season in July 2017, price was adjusted many times from July. Among them, the surge in orders from domestic smart phone manufacturers is the main demand-driven.
The surge in mobile phone orders also easily lead to problems. Because of the mobile phone customers’ large-scale orders, when the first and second tiered PCB large factories have not enough capacity, they will send low-end orders to the third and fourth tiered PCB factories. After receiving the order, the third and fourth tiered PCB factories began to make relatively high-end products, and their original low-end orders were also sent to the fifth and sixth tiered PCB  factories, which resulted in the problem of the increasing of the outsourcing of the PCB factory. More and more outsourcing plus the green check, if there is no output for some factories, it will have a great impact on the entire industry, because the entire industry chain is interlocking. In addition, tight capacity and multiplied delivery result in more panic orders.
In addition, drove by the mining machine in 2017, PCB capacity consumed is also very large, many large PCB capacity has been eaten by mining machine. The mining industry which drove by bitcoin soared in a straight line in 2017 and the direct PCB capacity consumption was unexpected.
The percentage gain is 20-30%, the new capacity will be released in March-June this year.
Based on the above-mentioned multiple factors promoted,how the PCB market price increases now? Liu Sheng revealed that from July 2017, after the peak season, the increasing is around 5%. With the adjustment of multiple rounds, the percentage gain of PCB is 20-30% now.
In the largest mobile phone PCB market, iPhone, Huawei, OV and Lephone have different requirements on PCB board, the corresponding price and percentage gain are also very not the same. Liu Sheng revealed that at present each PCB price of feature phone is more than 1 yuan (including tax), low-end smart phone PCB prices are 3-5 yuan, mid-range PCB prices are 5-10 yuan. The high-end PCB board is 10-20 yuan, and the higher-end PCB board will exceed 20 yuan, the difference is still very large.
Liu Sheng further said that iPhone8 PCB is 12 layers straight-through, the cost is higher than 20 yuan; Oppo / Vivo and other mid-end PCB are 10 layers ,the price is about 12 yuan; Lephone and other low-end smart phones is 4 or 8 layers, the cost is about 6 yuan. Through the mobile phone PCB prices, we can see that the cost of the entire PCB product prices are not high while limited by many factors PCB board percentage gain is 20-30%. It seems reasonable in the industry. In addition, some PCB factory rising prices are only 10%, and it do not rule out malicious competition for the order. But it is no exaggeration to say that the current PCB market is very chaotic, the current price and delivery cycle are not uniform.
Due to the relatively tight PCB production capacity in the fourth quarter of 2017, the delivery cycle was extended to 90 days. This resulted in a lot of panic orders. Many solution providers prioritized orders for three months, but now they encountered terminal manufacturers canceling orders. That led to the relatively chaotic market.
Facts have proved that many terminal manufacturers in the first quarter of 2018 began to cancel orders, but this is also the traditional off-season PCB market. Liu Sheng said that many industrial chain companies will die because of the PCB market. Now a lot of PCB factory make the product that come to be unable to move, the downstream manufacturer does not pick up the goods or inform slowly to mention, in fact is there is no order. More importantly, the capacity will be released for many new expanded PCB factory in the first half of 2018, which will have a huge impact on the post-price PCB market. New capacity will be gradually put into operation from March to June of this year, these new capacity will be doubled on the basis of the origin. If the production capacity of Kunshan is not be stopped ,PCB prices will begin to decline after March this year. Coupled with the impact of environmental protection, it will make many unprofitable enterprises close down gradually.

M&A and Elimination
Behind the great industrial relocation, domestic PCB enterprises will welcome the golden development period.
Overall, after the release of new capacity in 2018, the entire PCB industry will welcome a greater change by the environmental protection,policy, raw material prices and other factors. The capacity of small and medium-sized PCB factory will be eliminated or mergers and acquisitions. The market concentration of PCB factory will also be further improved. In the new capacity of this year, the Yangtze River Delta and Pearl River Delta is not the main force of PCB manufacturers expansion. Affected by environmental restrictions, PCB manufacturers have already transferred to jiangxi, hubei, chongqing and other central regions. These regional government will provide policy support, rather than the status in some areas such as the pearl river delta (which already does not welcome such high-polluting manufacturers), the entire PCB market will welcome a large industrial migration.
Industry transfer, really is the current situation of PCB industry. On the one hand, Kunshan, Shenzhen and other cities are indeed "drive away" these PCB companies; the other hand, like Jiangxi, Hunan, Hubei, Chongqing and other areas are indeed "bring in" PCB companies to support economic development.
According to industry data, the global PCB output value in 2016 is about 60 billion U.S. dollars, and the global PCB output value is expected to reach 70 billion U.S. dollars in the next few years. Coupled with the support of the local manufacturing industry, the Chinese PCB manufacturers will successively grab the market share and welcome the gold Development period. "Liu Sheng believes that 70% of the global PCB output will come from China in the future. The current moment  is the best time for the development of the domestic PCB industry.
Zhu Rongwei also believes that PCB industry is now the golden age of Chinese enterprises, investment will be more and more, competition will be more intense, coupled with the impact of environmental restrictions, the concentration of the domestic PCB industry will gradually increase after industrial transfer. In addition, industrial mergers and acquisitions are inevitable. It will be difficult for small firms to survive, collapsing or being merged will become the norm.
On the whole, opportunities will outweigh the challenges for the development trend of the domestic PCB industry this year. "In 2018, the domestic PCB industry will be half the flame and half of the sea water, because the trend of migration within the PCB industry is very obvious. Especially the promotion of capital power in the past two years, more domestic PCB manufacturers listed. PCB factory must will gradually expand production to enhance market share under the blessing of funds. "Zhu Rongwei said that with the release of production capacity and the impact of environmental protection, it is certain that a new round of shuffling of PCB manufacturers will be caused. The strength of the company decided to survive on their own, so that the PCB industry is still changing in 2018. The price of the PCB market also depends on the production capacity release and the overall situation of the industry.
But it is worth emphasizing that under the influence of environmental protection policies, the newly expanded PCB factories in the inland areas should take environmental protection as a very important factor when planning to start construction. Because if environmental protection is not up to standard, rectification or closure will be an inevitable trend. Well, in order to avoid the old road, PCB manufacturers should strengthen supply chain management, improve technology, pay attention to the environmental protection of low pollution. The domestic PCB industry migration is not an industry upgrade? Conform to this megatrend, our factory in Fujian is constantly upgrading and investing to continuously improve our competitive advantage and product cost competitiveness to provide our customers with competitive products, stable delivery and high quality service.
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