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The Big Picture: The Shift From China to Southeast Asia

The forecast for PCB growth over the next 10 years is strong. As an indispensable interconnect electronics part, PCBs are currently in high demand for several industries and will be for the foreseeable future. As the PCB industry grows, a significant trend is the gradual relocation of manufacturing facilities from China to Southeast Asia. This shift is driven by several factors, including:

• Rising labor costs in China
• Trade tensions
• The need for diversification of supply chains

While China is still a big player, companies in the United States and others are pouring significant amounts of money into chip factories outside of China, most notably in Southeast Asia.

Benefits of Manufacturing in Southeast Asia
Southeast Asian countries, including Vietnam, Thailand, and Malaysia, offer lower labor costs, favorable government policies, a growing infrastructure, and a burgeoning skilled workforce. This makes them more attractive destinations for PCB manufacturers looking to reduce costs and mitigate risks. 

Southeast Asia's strategic location also seems to provide easier access to key markets, including the U.S. and Europe, thereby reducing lead times and transportation costs over working with China. As a result, many PCB manufacturers are establishing new facilities or expanding existing ones in Southeast Asia, leading to a gradual but noticeable shift in the industry's manufacturing landscape.

The Demand for More Advanced PCBs
The continued advancement of technology, particularly in sectors like consumer electronics, automotive, and telecommunications, will continue to fuel the demand for more sophisticated and compact electronic devices. This will drive the need for more advanced PCBs with higher component density, faster speeds, and greater reliability.

The increasing adoption of IoT devices and the ongoing digital transformation across the industries I’ve mentioned will further boost the demand for PCBs. These trends will require PCB manufacturers to innovate and develop new materials, processes, and designs to meet the developing requirements of the market. The growing focus on sustainability and energy efficiency will also drive the demand for more environmentally friendly PCBs, leading to the development of greener manufacturing practices and materials.

The global push for 5G technology will be a significant growth driver in the PCB industry over the next decade. The mass implementation of 5G networks will require a greater increase in base stations and other network infrastructure, all of which will rely on advanced PCBs. This will create a substantial demand for high-frequency and high-performance PCBs, presenting a significant growth opportunity for PCB manufacturers that can meet these requirements.

Every PCB part is unique and engineered to order, and the complex chemical process to build PCBs involves 30+ steps, allowing them to carry the components and chips required for devices to function. The key drivers of PCB demand currently include:

• EV and PHEV
• Cloud computing
• AI
• Consumer electronics
• IoT
• Telecom/smartphones
• Medical devices

The 10-Year Forecast
According to a June 2024 study by Precedence Research, with a compound annual growth rate of 5.8%, the PCB industry has been predicted to grow to $152 billion by 2033, from $82 billion in 2023. It’s clear from the report that Asia-Pacific companies had nearly 50% of the market by the end of 2023.

Figure 1: The PCB market is predicted to grow at an accelerating rate over the next 10 years¹.

The shift away from manufacturing in China and back to the U.S. was strengthened by the passing of the began the U.S. CHIPS Act. Intel, Micron and Taiwan Semiconductor Manufacturing Company have led the way by investing in new chip factories in Ohio, New York, and Arizona. Today, over 35 companies have invested over $270 billion into chip factories across the U.S². We’ve also seen OEMs, and PCB and chip manufacturers increasing look at India as production sites.

I’ve seen major PCB customers, including Apple, Dell, HP, and Motorola, demand sourcing outside China. Large PCB companies and factories are also moving out of China and building new facilities in other countries (Figure 2). TTM Technologies is building a $200 million factory in Penang, Malaysia, and AT&S is investing $2 billion in Kulim Hi-Tech Park in Kedah, Malaysia. More than 20 Chinese and Taiwanese companies plan to build new factories in Thailand.

Figure 2: Companies are moving out of China toward Southeast Asia.

The Appeal of Thailand
According to a December 2023 article in DIGITIMES Asia³, since 2021, “Thailand has become a hub attracting investments from PCB firms looking to diversify their risks by embracing a ‘China+1’ strategy. Many PCB manufacturers from China, Japan, and Taiwan have set up plants in Thailand.”

This move over the past few years is designed to decrease geopolitical risks and respond to an increase in demand from the automotive industry. The Thai government has also been attracting investors with incentives, making the country one of the top alternatives to China for PCB manufacturing.

“With extra support from the Thai government in the form of incentives, Thailand has become a favorite destination for PCB manufacturers and upstream industries, and a PCB industry ecosystem is being formed there.”

The Thailand Electronics Circuit Asia 2024 trade show in Bangkok, July 22-24, is strong evidence that Thailand’s influence is growing. The show is meant to foster stronger connections with PCB manufacturers and other key players in Thailand and share information about recent developments and incentives.

A Proactive Approach to Growth
With many PCB factories moving to Southeast Asia, we must partner with factories that are taking a proactive approach to growth. Such partnerships are essential to providing customers with the best options for PCB manufacturing in the global marketplace.

References

1. “Printed Circuit Board Market Size, Share, and Trends 2024 to 2033, Precedence Research.
2. “U.S. Pours Money Into Chips, but Even Soaring Spending Has Limits,” by Don Clark and Ana Swanson, The New York Times, Jan. 1, 2023.
3. ‘”PCB makers moving production to Thailand to lower geopolitical risks and for orders from automative industry, says DIGITIMES Research,” by Molf Lai, DigiTimesAsia, Dec. 25, 2023.

Mehul Davé is the chairman of Linkage Technologies.