President Donald Trump issued an executive order in March that introduced an often-threatened but rarely used measure to the world economic picture: tariffs.
Trump’s edict, which as of this writing was due to go into effect on Mar. 23, places onerous taxes on imports of steel and aluminum – 25% and 10%, respectively. The moves, the president said, were to reset trade imbalances and protect domestic metal producers, which have been decimated over the past two decades.
Or have they? The adjusted domestic steel production year-to-date through Mar. 10 was 17.2 million net tons, at a capability utilization rate of 74%. That is down 0.2% from the 17,221,000 net tons during the same period last year, when the capability utilization rate was 74.6%.
By comparison, total and finished steel imports over the same period were a combined 7.6 million NT net tons. The estimated finished steel import market share is 25% year-to-date.
Between 2006 and 2015, North American steel-making capacity shrunk 0.5%, and the number of major mills fell to nine from 13 between 2000 and today.
Now compare that to the US printed circuit board industry. In 2000, the US bare board industry was peaking. Annual revenues were north of $10 billion, and we were neck-and-neck with Japan for global dominance. Taiwan was an up-and-comer. China was not much more than a rounding error.
In any mature industry, consolidation takes its toll, of course. In the 17-plus years that have followed, the number of US shops dropped by more than half, while the number of domestic companies ranked in the top 100 worldwide by revenues has plunged from 20 to four. Overall domestic US production is on the order of $2.7 billion today, or 4% of the world market.
As manufacturers disappear, so goes the supply chain. The base for laminates, raw materials such as copper and other plating metals, solder masks, and equipment suppliers has slipped away. It goes without saying that, should the US be faced with a long-term, large-scale war effort, we lack the domestic capacity not just for PCBs but all the supporting equipment and materials to survive.
Thanks to some stellar work by the US Department of Commerce, significant data to support the erosion of the electronics supply chain have been compiled and are being broadcast to the industry and – more important – in Washington. Smartly, Commerce is making the case that PCB capacity issues are not just a military problem, but one for all critical sectors of the electronics industry, including medical, automotive and telecom. A strategy is needed to position the industry as vital to all of the chain, not just defense.
Years ago, Congress passed a resolution designating printed circuit boards as an industry critical to the competitiveness of the country. Then, naturally, it sat back and watched as that “critical” industry shrank to the size of a CSP.
Talk at IPC Apex Expo involved the potential introduction of a term called a Trusted Provider. Such a designation would, it was said, permit offshore companies to supply critical products to the US military. That sounds like a sucker’s bet.
It’s been more than 70 years since the US fought a war that required a mass-shift of factory capacity from their native products to ones for the military. We can safely say no person working in the Capitol today has first-hand experience with that switchover. In the event a major war erupts, one of two outcomes will result: Nuclear weapons will be employed, decimating population centers and rendering conventional warfare unnecessary. Or, more likely, a massive land battle will involve lots of missiles, planes, and of course, munitions. Supply lines will be crucial. Even if a country is friendly, the US is situated such that shipping products from factories in the UK or Israel, for instance, might be treacherous. Doubtlessly, such a conflict would assuredly involve China, either directly or indirectly. As such, product sourced from Taiwan or Hong Kong (or China, of course) would dry up. Fast.
No matter what you think of the current administration, there is a new emphasis on our domestic house. That includes the electronics industry supply chain. We strongly encourage industry leaders to strike while the mood is right. Come November, the window could close.