Looking at the overall condition of the Printed Circuit Board (PCB) market in 2023, efforts to reallocate and adjust the electronics supply chain are palpable amidst the decline in demand for consumer electronic products and the economic impact of high inflation. However, these endeavors seem powerless in reversing the domino effect created by the risks in a recessionary environment. Even though the economy has been relatively conservative, several trends reveal some optimistic news from an analytical standpoint. First, the industry is excited over the robust demand capacity for IC substrates, strongly reflecting the long-term need for advanced IC substrates brought about by Beyond fifth-generation (B5G), Artificial Intelligence (AI), High-Performance Computing (HPC), and ADAS automotive chips. These potentially high-growth segments can be seen as new blue oceans for Taiwan's PCB industry.
Maurice Lee, the chairman of the Taiwan Printed Circuit Association (TPCA), stated in an exclusive interview before the TPCA Show 2023 that despite the estimated downward revision of the total production value of the domestic PCB industry chain (PCB, equipment, and raw materials) to TWD $1.09 trillion in 2023, a yearly decrease of 18.9%, he still sees positive aspects in several developing industries. Firstly, the market demand and the main direction of technological development remain the same as predicted at the beginning of the year. The downturn in operation rates has led to a conservative investment in capital expenditure (Capex), causing a slowdown. PCB manufacturers are trying to enter new markets such as AI, automotive, and satellite, and are actively setting up new locations to disperse risks, setting up cornerstones for future growth as part of their transformation strategies.
Taiwanese PCB Manufacturers and Supply Chains Actively Expanding into Southeast Asia
In a turbulent geopolitical environment, the global electronics technology industry faces a "China + 1" trend. Key component PCBs cannot remain aloof, triggering cross-strait PCB manufacturers to move and set up in new countries such as Thailand. More than ten Taiwanese PCB companies have already chosen to set up factories in Thailand, at least eight of which are indicative manufacturers ranked within the global top 20. This wave of expansion southward also includes locations in Vietnam and Malaysia, with upstream PCB materials and process equipment manufacturers joining in. The clustering of PCBs encourages equipment manufacturers to establish service points close to their customers. The pattern of Taiwan's PCB industry and supply chain moving into Southeast Asia is apparent.
For Taiwanese businesses, this Southeast Asian expansion differs significantly from the westward strategy of 2001. The shift to Southeast Asia mostly stems from pressure from customers. Amid the tense atmosphere of global geopolitics and U.S.-China tech competition, decisions for transformation to disperse risks are urgently needed although PCB still suffers from incomplete inventory destocking and lack of new demand. Challenges created by this southward investment include local personnel training, rising wage costs, an incomplete supply chain, and management impact due to linguistic and cultural differences. These are all operational challenges directly faced by Taiwanese PCB manufacturers and the supply chain.
Innovation in High-end IC Substrates and Manufacturing Techniques Generate Remarkable Growth Momentum of AI Servers and Automotive Boards
Furthermore, Maurice Lee observed several key growth areas with IC substrates being an important growth engine. BT substrates used by CSP or tiny BGA chips are expected to see a reduction in the supply-demand imbalance until 2024. As for ABF substrates currently receiving a lot of attention, present demand mainly relies on high-grade cloud servers and robust growth driven by booming AI servers. The supply-demand gap needs to wait until at least 2026 for alleviation. Notably, although servers contribute only 6.8% to the overall production value of Taiwan's PCB industry, this kind of product is what Taiwanese companies excel in, and the high-growth prospects brought about by the AI market are just around the corner.
The size of these high-end ABF substrates has quickly grown from approximately 20mm x 20mm to an area size of 110 mm x 110 mm, containing up to 24 layers of multilayer boards. The key to success for Taiwanese IC substrate manufacturers lies in yield as manufacturing technology thresholds and product unit prices are both high. Maurice Lee boldly predicts that the production value of AI servers will surpass cloud servers. The demand for AI servers is apparent with growth exceeding 30% in 2023, and it can maintain an annual growth rate of over 20% for the next few years. The explosive growth of AI servers and related applications could generate great production value, surpassing the production value of cloud servers as early as 2025 or 2026.
Outside the strong development of AI servers, the performance of the automotive PCB market is also impressive. With the gradual increase in demands such as vehicle electrification, Autonomous Driving Assistance Systems (ADAS), and vehicle networking, a new car will grow from its past usage of 500-600 chips to over 1000 chips. Flexible Printed Circuit Boards (FPCB), HDI boards, and substrates all equally stand a good chance of achieving higher growth. Overall, automotive PCB is trending towards miniaturization and high functionality with major growth in applications such as millimeter-wave radar for ADAS, automotive sensors, etc. All the applications require advanced HDI technology, as well as soft, bendable FPCBs that can replace some automotive wire harnesses. The small size and high-density characteristics will gradually expand the application of automotive boards, making automotive PCBs an area where Taiwanese manufacturers can release their full potential.
Maurice Lee emphasized, "The reason why Taiwan's PCB industry can stand out in the fiercely competitive international market is that we have the strongest supply chain globally." He encourages the industry to participate in the 24th TPCA Show 2023 and the 18th IMPACT International Packaging and Circuit Board Symposium. These exhibitions have great knowledge value. Participants can explore IC substrates, high frequency, high-speed PCB material developments, and focus on 5G-related applications such as semiconductor packaging, substrates, zero carbon emissions, smart factories, etc. One can also attend the International Electronics Exhibition, the AIoT Exhibition, and the Optoelectronics Exhibition besides the TPCA Exhibition, which altogether provides a technological feast, allowing the guests to grasp the complete dynamic of the PCB industry. The official website for TPCA activities is as follows: https://tw.tpcashow.com/
