Driven by the domestic and overseas market and policy changes, the increasing requirements of environment protection, as well as China’s policy changes to industry development, China’s electronic circuit industry is entering a changing phase for adjustment and relocation in which environment and standards are the key for sustainable development.

China’s PCB industry developed fast in recent years and strong growth of output in China is also one of the main drivers for world development. However, for the China PCB industry, the challenges facing today, especially in environment and standards, should be solved for further development.

The Turning Point for the PCB Industry

According to CPCA information department statistics, in 2007, the total output of China’s PCB industry reached 150 million m2, a production value of USD 15.5 billion (with an exchange rate from RMB 7.5 to USD 1). According to the Administration of Custom General, the import and export total reached USD 20.37 billion with deficit USD 1.23 billion. The output of China takes as high as 30 percent of the world total. However, since 2007, China’s PCB industry has reached a turning point compared to traditional development and growth.

Presently, the global green industry is the trend. After the EU released RoHS, WEEE, and REACH directives, China RoHS was released, with energy saving, emission reduction, consumption saving, and efficiency improvement the primary objects. China enforced a strict currency policy, which reduced the cost advantage of processing trade industry of China.

In 2008, the global oil price is increasing quickly and exceeded USD 140. Weak USD and strong RMB increased the raw materials prices. Domestically, the increased requirement for waste treatment, tax reform, new labor law, and salary increase increased production costs. In the first half of 2008, many enterprises including PCB and CCL increased their sales revenue, but the profit is dropping significantly. This is a general condition, which has serious impacts upon the industry as whole.

Recently, the manufacturing companies communicated with CPCA that raw material prices are driving the internal cost largely with profit drop. The enterprises are in the critical condition for survival and development.

Facing the increasing cost condition, China production enterprises should make immediate active strategies and communicate with the upper and lower level of the industry chain. Factories should have a clear understanding of the cost and impact, change the product structure, and develop competitive and innovative technology and products with management improvement to be competitive in global market. Meanwhile, the price of product should be flexible according to the cost change environment.

Sacrificing enterprise-sustainable development to compete in the low-level, low-technology market is not applicable today. Polluting the environment to develop the China PCB industry is a dead end.

We believe that, with domestic and overseas changes and environment requirement increases as well as China’s industry policy change, the China PCB industry is entering a restructuring period. The technology level will grow, the self-developed technologies will increase, the management level will be increased, the profit will reach a reasonable level, and waste treatment will reach international high level.

Environment Protection and Standards Are the Key Points

Contradictory standards are the capital issue. China national standard GB/5479-2006 for drinking water requires the Cu content to be less than 1.0mg/L (the same standard in the U.S. is 1.3mg/L). However, the PCB industry effluent discharging water Cu content standard is less than 0.5mg/L. This means that if the PCB shops discharge the drinking water as sewage, they will be fined for exceeding the standard. The discharging standard is twice of drinking water.

For developed countries such as Japan, the U.S., and the EU, the Cu content standard is much higher than that of China, and we did not see any serious pollution issue caused by discharged Cu.

The consumption of material, equipment, manpower, and energy to treat water to reach the 0.5 mg/L standard is several times of 1.0mg/L. The standard is not only unrealistic but is also against the energy saving, emission reduction, consumption saving, and efficiency improvement policy.

The industry relocation should be considered in a broader view of all China. Presently, 77 to 78 percent of China’s electronic circuits industry (including PCB, CCL, material, and equipment) is distributed in Zhujiang Delta and Yangtze Delta. In Guangdong Province, such as in Shenzhen, some PCB factories were forced to relocate or shut down because of the environmental concerns. The PCB industry is not a heavy-polluting industry but has certain level of pollution. We are taking active steps to reach zero discharge. New technologies such as additive or semi-additive technologies are developed. Presently we have to make better and continued efforts to reach clean production.

For relocation of industry, from the all-China view, the industry should be located in coastal areas or the area far from rivers or lakes.

Recently, the governments and development zones of Shantou city of Guangdong, Suzhou city of Anhui, Jian city of Jiangxi, Changde city of Hunan, Tengzhou city of Shandong, and Yangzhou city of Jiangsu have contacted CPCA, expressing their desire to take PCB migrated factories and set up electronic circuit industry parks. We think whether these places are suitable for PCB factory building should be considered in an all-China view and should be supported by the Administration of Industry and Informationization Department of China as well as province government. For the building of electronic circuit industry parks, we think the local government should consider the following three parts: design and treatment of wastes should be at the world advanced level; build an electronic circuit college to train labor forces and management; and support the building of industry research center.

Currently, in some places, the local governments take only their own interests into consideration and asked the PCB shops to set up factories there and make unrealistic promises, which will lead to serious potential crisis if these places have no government and environment quota; the waste treatment could not reach advanced standards; the small and medium enterprises could not treat the waste in concentrated center; the treatment companies are not qualified for technology and equipment; and the government policy is not open and just, etc. The results are beyond imagination.

By referring to foreign environmental standards, in general, China’s standard level is higher than advanced countries such as Japan, the U.S., and the EU. But the pollution is much more serious than those countries. This should cause deep thought.

Efficiency Improvement for Private Enterprises

The Chinese electronic circuit industry is connected to world industry and affected by the global industry environment. The China PCB industry plays an important role in connecting the China electronics and information industry and will inevitably be influenced by China industry policy changes. The following issues deserve our attention.

First the production efficiency is critical both on the industry and factory level. According to statistics, China enterprise average production efficiency is only 1/30 of the U.S., 1/16 of Japan, and 1/7 of Korea. The production efficiency improvement is one of the most important topics, especially for private enterprises. Secondly, we must attach high importance to industry information, including technology and process, environment, training, research and development, management, government policy, as well as the supply chain upper and lower level environment. Thirdly, we should create and develop new markets and cultivate special technologies or enterprises to increase competitiveness to stand out in global competition.

We are concerned about those old private enterprises. If they have no special features, do not improve their management, research, and product as well as waste treatment, they will fall into desperate conditions because the government and industry market do not allow low level, low efficiency, polluting enterprises to exist in fast development.

Therefore, we must take immediate action to fight for survival and development We have to be cautious to the earthquake in our industry.

PCB Industry Price Increase Statistics
Regarding 2008 cost increases, the CPCA information department surveyed dozens of representing PCB and CCL manufacturing companies. According to the survey results, the PCB manufacturing materials increased significantly: FR-4 CCL, which takes up about 40 percent of raw material cost, increased by 7 percent; cooper foil, copper, prepreg, nickel, tin and lead, and gold take up 25 percent raw material cost and increased by 12 percent; chemicals with 10 percent cost increased by 9 percent; labor cost increased by 14 percent; and currency change, tax change, and others increased by 3 percent. CCL is also faced with cost increase pressure. The net cost increase reached 7% in the first half of 2008.

In summary, PCB manufacturing net cost increased by 8.5 percent! It is predicted that the net cost of manufacturing will continue to grow in 2008.