The CPCA Show ended on the afternoon of March 18 on a cautiously optimistic note. Last year was the first time the Chinese printed circuit industry had been hit by recession, and like the rest of the global industry, it was hit hard. Orders evaporated, and the ruthless expansion of the Chinese industry threatened to be its demise. Massive numbers of layoffs and plant closures and an almost complete lack of new orders led to the worst show since its inception in 1992.

This year, exhibitors were cautious rather than shell-shocked, and even with a wobbly recovery underway, they have seen a marked increase in business. In speaking with suppliers and printed circuit manufacturers, there has been an increase in orders for PCBs across all industry sectors, but there is no consistency and no long-term window on future business. Overall factory utilization is hovering at 68 to 72%, with the exception of high-end manufacturers – such as those building packaging substrates and high-density interconnect – some of which are back to 85 to 90%.

Presently, orders are strong, with demand for very short lead times to fulfill specific obligations rather than the steady, long-term contracts of the past. PCB manufacturers are reacting by ordering equipment and materials specifically to fulfill these contracts, with lead times paramount. These are capacity buys, not technology, for the most part. It's about the number of spindles available, etcher throughput, and the like.

However, with the tremendous fallout of the second-tier supply base, subcomponents are now the bottleneck. Some subcontractors went bankrupt. Others were in survival mode. Now that business is coming back, the parts are in some cases simply unavailable. Example: One major distributor received an order for 40 CNC drilling machines, but must deliver within a few months. With spindle lead times out to August, meeting this timetable will require feats of imagination and persuasion. The same holds true with many other parts. Thus, the question is not pricing and discounts, but delivery. Time is money.

Another major issue is labor. When the recession hit, most manufacturers were forced to initiate significant layoffs. Those workers have not returned. A combination of factors is at work. First, the pay for factory work is no longer attractive, especially with the risk of future layoffs. Second, much of the workforce came from the inland provinces of China. These same provinces have been targeted by the national government for significant development, so now more jobs are available closer to home. Finally, with the Lunar New Year holiday, there is always significant attrition as workers elect to change jobs. Thus, at a time when skilled labor is in the highest demand, it has become unavailable.

This scenario has led even small manufacturers to consider a higher degree of automation. Materials handling and labor-saving technologies were especially popular at the show this year.

The lack of equipment on the floor in the main hall was also notable. With economic uncertainty and the constraints of limited budgets, many industry leaders significantly cut back on displays. Again, because of the recession, new technology introductions were very limited. One exception was Hitachi’s lightweight CNC drill, which will be built in its China factory beginning later this year.

The atmosphere in the second hall was very different. The bulk of exhibitors there were local Chinese manufacturers of virtually every type of equipment on the factory floor. In drilling, inspection, wet process, lamination, test, and automation, numerous options were available. While many systems are not exported, the quality level is improving to a point where one can see the day when some of these companies could become global players.

One company to watch is Kingboard. Originally a circuit board and laminate manufacturer, it is now vertically integrated, with materials, chemical, and equipment divisions. It will be interesting to watch its progress.

On the technical side, the conferences were well attended. Chinese engineers hungry for knowledge of the latest trends and technologies packed the sessions. One concern raised was the apparent withdrawal of IPC from some of the international standards functions. These are critical to the definition of new specifications for embedded active and passive components, high-density interconnect, LED printed circuit boards, optical PCBs, and packaging standards. It is slowly becoming a free-for-all, with many proprietary architectures – much like the industry was when IPC was founded in the late 1950s.

The trend toward materials and equipment manufacturing in China has accelerated with the shift of the industry center of gravity. As technology has climbed the ladder, so too has the sophistication of the infrastructure.

Colocated with the CPCA Show was Silicon China. As semiconductor sales typically lead those of PCBs by approximately six months, this was an excellent opportunity to gauge future demand. While the halls at CPCA were crowded, those on the semiconductor side were packed and business was booming. Hopefully this is a positive harbinger.

In summary, the mood of the show was fragile optimism. The global economic picture is followed just as closely in Shanghai as on Wall Street, and while companies are seeing a short-term surge, it will take months to know if this is a long-term recovery.

Matthew Holzmann is president of Christopher Associates Inc. (christopherweb.net); matt@christopherweb.net.

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