Taiwan-based PCB industry navigates sustainability demands amid SEA expansion

Approaching the final quarter of 2024, major PCB and IC substrate manufacturers are expanding operations in Southeast Asia to reduce dependence on Chinese production. Needless to say, geopolitical tensions are poised to impact the PCB and IC substrate ecosystem in 2025. In addition, environmental concerns are pushing PCB makers to address carbon reduction demands from key clients lest they lose orders in an increasingly eco-conscious market.

Thailand's PCB production to exceed 5% of global value by 2026

Beyond Thailand's leading PCB manufacturers like Apex, Chin Poon, and APCB expanding their Thai capacities, many companies have been actively setting up new facilities in the region since mid-2022. Some firms such as Tripod Technology and TPT Technologies, have opted for Vietnam, while others like Passive System Alliance's (PSA) subsidiary GBM and CCL leader EMC have chosen Malaysia for their new plants.

Chang-Ming Li, Chairman of the Taiwan Printed Circuit Association (TPCA), reports that between January 2023 and April 2024, Taiwanese and Chinese companies have made over 30 PCB investments in Southeast Asia. A quarter of these new facilities are expected to begin trial production or full-scale operations in 2024, with the majority to begin operations in 2025. As a result, Thailand's share of global PCB production is projected to reach 4.7% by 2025 and potentially exceed 5% by 2026.

The primary motivation for this shift is the need to diversify production risks in response to the ongoing US-China trade tensions. Clients are increasingly demanding alternative manufacturing locations outside of China and Taiwan.

It's worth noting that PCB manufacturers are known for their high energy and water consumption, often labeled as a high-pollution industry. In the face of global net-zero emission trends, PCB suppliers have noted a growing reluctance from Chinese officials to welcome them into China. Combined with client demands, this has spurred Taiwanese and Chinese PCB makers to expand operations in Thailand.

Looming uncertainties of electricity and water supply sufficiency

The next concern for the industry goes beyond the competition for labor, land, and orders that Li pointed out. The availability of electricity is also a major concern for many manufacturers.

For instance, the Prachinburi Province in Thailand, where PCB manufacturers like Zhen Ding, Gold Circuit, and Dynamic are expanding, will see the addition of 10 new factories, attracting other related businesses as well.

An internal TPCA source with connections to Thai factory officials revealed to DIGITIMES that since 2023, there have been ongoing discussions with Thai authorities about the sufficiency of power and water supplies.

The Thai side seems to underestimate the severity of the situation. As Taiwanese and Chinese PCB giants gradually start production in their new Thai factories in 2025-2026, early phasing of the construction of energy facilities is paramount.

Li also emphasized that the PCB industry must develop in three key directions: stability, sufficiency, and green energy. Power shortages could cause significant production losses for the industry, with even a minute of downtime having substantial impacts.

Sustainability disclosure policy accelerates corporate transformation

To enhance corporate accountability, the Taiwan Stock Exchange announced in early 2024 that listed companies must submit sustainability reports by the end of August each year. Simultaneously, most companies update their previous year's carbon reduction results on their websites by the end of September.

In other words, major Taiwanese businesses are striving to achieve their annual operational goals and increasingly viewing "net-zero carbon emissions" and "sustainability policies" as key corporate priorities.

Major brands such as Apple, Microsoft, and the rapidly growing wearable device maker Garmin are all closely monitoring their supply chains' carbon reduction plans. This scrutiny extends to the supply chain itself, with upstream material and equipment suppliers also being expected to align with net-zero emission trends.

Companies are now pulling their supply chains along to achieve net-zero emissions across their operations and value chains. Concrete actions range from sharing energy-saving and carbon reduction concepts to providing power usage assessments and suggestions for green manufacturing. This extends to assisting supply partners in developing new carbon reduction, fixation, and removal technologies, as well as improving equipment efficiency.

Many Taiwanese PCB manufacturers are suppliers to global consumer electronics giants, with most listed companies having long been part of Apple's supply chain.

The main PCB suppliers for Apple products are likely to feel the pressure first. This includes the "Big Three" substrate manufacturers, as well as major PCB producers like Zhen Ding, Compeq, Tripod, FLEXium, Taiflex, and EMC.

Despite being long considered an inconspicuous component, PCBs are essential for the functioning of all electronic products. Without them, no electronic device would work, and their absence would even affect the development of the semiconductor industry.

Major companies' efforts and measures to steer supply chains toward carbon reduction

In the AI boom, even industry leaders like NVIDIA and Microsoft are beginning to scrutinize how "green" their supply chains are in terms of carbon reduction planning. This implies that PCB manufacturers must transition towards green energy and circular economy models.

Industry experts familiar with carbon reduction believe that 2025-2030 will bring a series of carbon reduction tests for supply chains. Companies unable to keep pace with carbon reduction efforts will inevitably face elimination.

At the Net Zero Summit Forum, Sammy Su, Head of Sustainability Strategy at TÜV Rheinland, noted that while past market discussions focused on Apple's supply chain, the diverse applications driven by generative AI have led to companies actively vying for a place in the "NVIDIA supply chain."

According to NVIDIA's 2024 supply chain list, 82 Taiwanese companies are included. Beyond continuous improvement in R&D technology, NVIDIA's plans for net-zero carbon emissions are crucial for the supply chain.

Su further elaborated on NVIDIA's 2024-2026 plans. Firstly, 93% of suppliers will need to pass audits by the end of 2024, with 90% of GPU packaging using recyclable materials. Secondly, all data centers and office spaces should achieve RE100 energy standards by the end of 2025. Thirdly, 67% of Scope 3 carbon emissions from suppliers should adopt SBTi standards by the end of 2026. Su aptly remarked, "Carbon reduction is a race between your old self and your new self."

Governments are also actively participating in net-zero initiatives convened by various countries and taking concrete actions. These include the EU's Carbon Border Adjustment Mechanism (CBAM), which began its trial run in October 2023, the U.S. Clean Competition Act (CCA) that's expected to take effect in 2024, the establishment of a "carbon credit exchange" in various Asian countries, and global companies joining renewable energy initiative organizations like the RE100.

Major flexible PCB manufacturer Flexium officially joined RE100 two years ago, becoming the first PCB manufacturer globally to join the initiative. Flexium aims to establish green electricity usage goals to lead the group in completing energy transition within the target timeline while cascading carbon management goals down the supply chain to perfect the group's carbon management.

In addition to Flexium, upstream material supplier Taiflex, a Taiwanese flexible copper-clad laminate (FCCL) manufacturer, is also building its new Thai factory as a RE100 green factory.

Flexium spokesperson Arthur Hsiung once pointed out that the three major trends of ESG, green electricity, and carbon neutrality are irreversible. By joining RE100 and establishing renewable energy usage goals, they hope to complete the energy transition within the target timeline while communicating carbon management goals to the supply chain, and optimizing the group's carbon management.

TPCA and industry peers provide guidelines on achieving low-carbon

TPCA's advice to industry players is worth considering. Low-carbon factory operations cannot be achieved overnight, and many implementation methods require careful examination. Companies can divide their low-carbon strategies into three phases, including the initial, middle, and late phases.

TPCA suggests completing the detailed tasks of each stage methodically and ensuring smooth transitions between stages. This approach not only allows for a thorough understanding of each task but also enables timely review of imperfections in earlier stages and consideration of whether to revise later directions, increasing the likelihood of success for low-carbon factory projects.

Although progress in "carbon reduction" has been uneven across the PCB supply chain in recent years, there are noteworthy examples from both upstream and downstream:

Source: DIGITIMES

Model 1: CCL Giant, Taiwan Union Technology (TUC) seizes digital transformation

As AI applications flourish, demand for high-end copper-clad laminates (CCL) is rising, challenging CCL manufacturers' production capacities. Customers are also watching to see if supply chains can keep pace with the transformations brought about by generative AI and increased computing power.

Ivon Huang, Vice President of TUC, states that as we enter the 6G communication era in 2030, the company will continue to invest in future 5G & 6G application materials, new technologies, new processes, and develop more environmentally friendly halogen-free green products and low-carbon PCB application materials.

The combination of EPS and ESG to achieve sustainable operations has become an industry consensus in recent years. TUC aims to achieve carbon neutrality before 2050. As a major greenhouse gas emitter monitored by the Environmental Protection Administration, the company places great emphasis on energy and greenhouse gas management.

Currently, as production capacity increases yearly, so does electricity consumption, necessitating effective energy utilization and waste reduction.

Huang mentions that the company sets annual energy-saving and green electricity carbon reduction plans to achieve energy-saving and carbon reduction goals. Over the past three years, they've saved 1,820.04 kWh of electricity.

According to the annual power emission factor published by the Bureau of Energy, this translates to a reduction of 925.9 tons of carbon dioxide emissions, equivalent to the carbon sequestration of 84.9 hectares of forest.

Model 2: IC substrate giant, Unimicron's hydrogen fuel cell investment

Unimicron Chairman Tzyy-Jang Tseng not only has unique insights into new industry technologies but has also been diligently cultivating the ESG field in recent years, becoming the company's ESG spokesperson.

Whether it's shareholders inquiring about sustainability policies at shareholder meetings or the recent collaboration with Bloom Energy, America's largest fuel cell manufacturer, to launch a "large-scale stationary hydrogen fuel cell" ceremony, Tseng personally takes the spotlight.

After the government previously introduced 12 key strategies for net-zero, including layout plans for renewable energy fields, hydrogen energy has become one of the carbon neutrality options for enterprises.

Unimicron plans to invest about NT$4.041 billion (US$127.08 million) in hydrogen energy within 5 years, with an additional NT$3-4 billion in the middle phase (2026-2030). It's estimated that by 2030, the total investment will reach NT$7-8 billion, with the current power generation potentially accounting for over 10% of total electricity consumption.

Additionally, Unimicron's recent approach to resource utilization of corporate waste is also worth referencing.

Model 3: PCB giant, Apex: first to establish a foothold in Thailand

Apex, which has been deeply rooted in Thailand for three decades, is one of the most proactive PCB manufacturers in sustainability policies. From Apex's recently released 2023 sustainability report, the proportion of renewable energy use in 2023 has already exceeded 2%.

To achieve corporate sustainable development goals, Apex launched the GREEN Project at the end of 2021, aiming to increase the proportion of renewable energy substitution and strengthen water resource management to meet future factory water and electricity demands.

As of 2023, the installed capacity of Apex's self-built solar power generation system has reached 5.1 MWp, with an annual carbon reduction of over 3,700 tons. Moreover, factory energy-saving schemes and internal energy-saving targets are progressing smoothly as planned. In 2023, energy consumption from related equipment operations has decreased by 11%, saving about 14,904 MWh of electricity annually.

It's worth noting that in the corporate governance evaluation results announced in April 2024, Apex was selected among 952 listed companies, entering the top 5% for the first time.

In the electronics category with a market value between NT$5 billion and NT$10 billion, it rose to the top 5% tier for the first time, becoming the only listed PCB company to make the list.

Source: DIGITIMES