EIPC's decision to make the keynote topic of its Winter Conference in Amsterdam "China's PCB Industry: Friend or Foe? How to build partnership and to minimise risk and surprises" provoked some controversy. Why was Europe's primary PCB industry association apparently promoting China?
EIPC Technical Director Michael Weinhold put a perspective on the extent to which the European market for PCBs has come to depend upon imports from China to balance the shortfall between demand and supply, with figures that showed how, since the burst of the Internet bubble and the IT downturn in 2000, the Chinese contribution to the European PCB demand of around 5Bn Euro had grown from less than 10% to more than 50% by 2007, and was forecast to remain near 50% through 2011.
The migration of PCB production to China, and the consequent impact of Chinese prices on western manufacturers, had dramatically changed the shape of the global PCB industry, and China had now overtaken Japan as the world's largest producer. Low pricing had drawn many OEM PCB buyers to China, but brokers and traders continued to cause most of the damage to the Western world's PCB industry, and were able to offer little in the way of added value.
Weinhold remarked that the EIPC recognised a responsibility to its members to make them aware of the opportunities and risks involved in trading with Chinese manufacturers, to understand the supply chain and how to manage it to ensure the supply of good PCBs, and how to build partnerships with Chinese suppliers and use these partnerships to complement their value-added service to their European customers.
EIPC has already conducted six Technology and Information tours to China, and will be embarking on the seventh in March this year, but these could only give a comparatively brief glimpse into the nature and culture of the Chinese industry. Ivan Ho, who had for several years assisted in the organisation of these tours, was recently appointed EIPC's Director for Asian Pacific Activities, with the objective of improving communication and liaison and bringing to EIPC members a better understanding of Chinese PCB fabrication resources, trends and ongoing changes, to the benefit of the electronics industries in both areas.
In his keynote address, Ivan Ho emphasised that he was by no means promoting Chinese PCBs. He was more concerned with helping the survival of European and North American PCB industries by providing an insight into the Chinese industry and mindset, pointing out the real problems faced by Western-world PCB fabricators, and helping them to rethink and reformulate their business models to take advantage of their position to win in their own market. Ho was also keen to provide advice on how to find the right business partners in China, how to minimise risks, and how to beat brokers and traders at their own game.
He briefly reviewed the history of PCBs in China, the growth from small beginnings to $14Bn in 2007, the geographical distribution of production in the south and the east, and an analysis of ownership of the capacity: state-owned, Taiwanese-owned, Hong Kong-owned, foreign-owned and private enterprises. He gave some illustrations of the enormous scale of investment and operation of a few of the leading manufacturers, with the comment, "They're not bucket shops any more!"
But looking at the realities of China's current position in the global economic crisis, the short-term outlook was gloomy. In 2008, the stock market crashed by 60%, and real estate by up to 50%. Export business has shrunk dramatically; thousands of small-medium enterprises have closed down; in some cases business owners had fled leaving huge debts and unpaid wages.
Unemployment soared. Massive layoffs, pay cuts, factory shut-downs and extended holidays left some industrial cities ghost towns. During November and December 2008, PCB orders were down 40% on average, in some cases by as much as 70%. There have been some factory closures; others were operating on reduced staffing and reduced hours, some operating only at night to save on power costs. Expansion plans were cancelled or deferred and consolidations were expected up and down the supply chain.