“Without capacity, there is no growth.”

As I write this column, the duty rate for 2- and 4-layer rigid printed circuit boards manufactured in China stands at 145%, while 6-layer and above – along with all other technologies, whether rigid, flex or metal – remains at 170%.

The first half of April brought a whirlwind of changes in tariff policies. I couldn't update my customers and LinkedIn followers fast enough; tariffs changed daily.

Customers were (and still are) calling to confirm the current tariff rate. They are also calling to dispute invoices, such as receiving a mid-March invoice with the additional 20% IEEPA duty applied at that time, while that same shipment in mid-February was only subject to 10%, and their January shipment had none!

I understand their confusion.

Now I spend my days reviewing my firm’s freight bills to ensure the appropriate tariff applies at the time of shipment and disputing an increasing number of incorrect duty charges, which has me functioning more as an accountant than as a PCB sales representative.

Without a doubt, the tariffs have disrupted the PCB supply chain, and they are not necessarily driving manufacturing back to the US.

As industry veteran Hayao Nakahara says, “without capacity, there is no growth.”

Without that necessary capacity, our limited number of domestic PCB manufacturing facilities will undoubtedly become highly selective of the work they take. The law of supply versus demand will then drive-up domestic pricing. And with that will come longer lead times.

Currently, the average waiting time to receive a quote from a US board fabricator is three to five days, and that’s only if you can secure a quote. Quoting departments face overwhelming inquiries and must choose which accounts to quote and which work to pursue. One US-based PCB salesman mentioned they will “no bid” on accounts they are not already actively engaged with.

Despite the 145% or 170% tariffs, domestic prices and lead times remain higher and longer compared to quotes for the same boards from China. That is the reality.

Other PCB manufacturing countries appear promising, but like the US, their capacity lags behind China’s. Quote performance is slower, pricing is 15-20% higher than China’s, and quotes come with longer lead times. Additionally, while their tariffs are currently lower than China's, these countries still maintain reciprocal tariffs.

From my perspective, orders for PCBs manufactured in China have slowed considerably, while there’s been in increase in requests for quotes from other manufacturing nations and from the domestic industry as well. But from what I have seen, there has been no mass exodus from China’s PCB manufacturing. If anything, there is a “wait and see” attitude.

Is that a reasonable display of cautious optimism that tariffs will decrease to a tolerable amount and allow board buyers to continue using their current sources? Or is it wishful thinking?

Moving business from one established and trusted supplier to another can be costly, and I’m not talking about tooling costs. Rather, it is the overall cost of having to relinquish that hard-earned and smoothly functioning partnership.

When a buyer engages a new supplier, they often lose some of their negotiating power. This process typically requires more support and guidance, from the initial quote to the receipt of the order, to ensure that everything discussed is accurately delivered. The shared knowledge that exists in a long-standing customer-supplier relationship can disappear, posing a risk to the quality and reliability of PCB orders and their delivery.

Giving up a supplier in China also means having to compete with all the other PCB buyers pursuing a China+1 strategy. Will that new supplier give your company the same priority you are used to? Or will your business get pushed aside in favor of a larger customer?

With the reality being that there is no “drop-in” replacement for the manufacturing capacity and technology of China, what’s a board buyer to do?

Here are some suggestions:

• If your boards are now coming from China, make sure your company is paying the tariff as it relates to the Ex Works (EXW) price of the PCB. This means the tariff applies only to the cost of the product at time of export. The cost of your supplier’s overhead, the freight to get it to your dock and their profit are not subject to any tariff. If your company is accustomed to a delivery price for bare boards, expect a tariff rate of around 15% less than the published rate.
• Ask those in our industry and other buyers what they are doing.
• If working with a PCB broker, ask for solutions to offset the current tariff rate to include looking at other manufacturing nations.
• Get an NDA in place and ask for references for that potential supplier.
• Quote out your larger runners to include freight costs. If the order is large enough, ask for tooling costs to be waived. Ask for samples to be built and, if acceptable, blend those boards of the new supplier with that of your present supplier.
• Until a new supplier is established, there’s no need to move any small or one-off orders as you will spend more time and energy doing that than the cost of the tariff itself.

While doing all this, remember it is very hard to disengage from China PCB manufacturing completely. If the tariffs remain as they are now, then it makes sense to invest time and energy in finding another supplier outside of China.

I will be in Thailand this month visiting with new and prospective suppliers. I will also be in China visiting my longstanding manufacturing partners. I will report my observations from these visits in my next column.

Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of DirectPCB (directpcb.com) and can be reached at greg@directpcb.com.

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