The 2019 revenues of cross-strait Taiwanese PCB manufacturers increased by 1.7% to NT$662.4 billion (approx. US$21.426 billion) from 2018 at NT$651.4 billion, the highest over the years, as announced by the Taiwan Printed Circuit Association (TPCA) after reviewing the industry’s annual performance. According to the TPCA, growth in 2019 was mainly bolstered by the amelioration of the cloud computing market in Q3-4. In particular, apart from the reduction by 0.9% of the smartphone PCB recession, the demand for Bluetooth headsets and increase in phone lenses from “2” to “3” have boosted the annual growth rate of rigid-flex PCBs to 40.4%. The revival of the semiconductor industry and the continuous development of advanced computing applications (e.g. 5G station deployment, AI, and GPUs) also escalated the demand for IC substrates and ABF boards. As the fall of smartphone sales stopped in Q3-4, the annual growth of IC substrates reached 4.1%.

In terms of the proportion of production, about 63.4% of outputs were from China. Compared to competitors in Japan and South Korea which have distributed production to South Asian countries, the overseas production distribution of Taiwanese PCB manufacturers is low. As this proportion is just second to that of the local Chinese PCB manufacturers, the flexibility in the response to the epidemic is extremely limited. According to the TPCA’s survey on the impact of COVID-19 on the PCB industry, except for Hubei Province where work resumption was deferred to March 11, most Taiwanese PCB manufacturers have acquired the permit for work resumption to recover orderly production. Although material supply was bumpy in some Taiwanese PCB manufacturers, normal production remained unaffected. Due to production design and customer verification, Taiwanese PCB manufacturers with factories in both Taiwan and China may face limitations in capacity arrangement in the short run. Fortunately, as Q1 is the low season of the PCB industry, this can be remedied by capacity adjustment or overtime work. The effects of order switch in Q2 will depend on the epidemic conditions and the acceleration of customer verification.

Since COVID-19 broke out in Wuhan in early December 2019, the Chinese government has implemented such measures as city lockdown, closed-off management, work resumption deferment, and school resumption deferment, to stop the epidemic from spreading. In addition, with the ongoing epidemic development in Japan, South Korea, Europe, the USA, and Southeast Asia, transportation of both people and cargo has been restricted, messing up the order of global semiconductor and PCB supply. The epidemic anxiety in consumers has also inhibited the momentum of global economic growth. So far, this has deeply affected the global electronics supply chain and economic growth of different countries in the world.

The epidemic has upset the tempo of global economic growth, including the expected escalation of PCB demands in 2020 boosted by the consumer electronics benefitting from the 5G infrastructure and terminals. As a result, worldwide market survey organizations have begun to mark down the global demand of terminal products. Based on the current epidemic situation, most organizations believe that the epidemic will completely end in Q2, and impacts are concentrated on Q1 only. In this respect, including the influence of reduction in utilization and terminal demand since February, the Q1 revenues of cross-strait Taiwanese PCB manufacturers will be NT$131.2 billion, according to TPCA’s conservative estimates, and the delivery of orders for Q1-2 will be deferred to Q3-4, thriving the already high season of the PCB industry to create an overall 2020 revenue up to NT$681.1 billion.

The epidemic crisis is not yet over. Through the concerted effort in epidemic control, the work resumption rate in each region rises gradually. Although industries will need to overcome problems at different levels after work resumption, it takes time for a full recovery. For example, the uncertainty of delivery time for personal protective equipment (PPE), raw materials and finished products due to the movement control of people and cargo transportation, and the staff return-to-work rate and self-imposed quarantine period will affect the operating stress caused by short-term low utilization. Although the work resumption rate is better in some manufacturers with full order load at the beginning of the year requiring overtime work during the lunar new year, the existing scheduling has been upset by the bumpy logistics. In the next few months, the recovery speed of vertical supply in the electronics supply chain on the supply side and the recovery time of the global consumption momentum of terminal products on the demand side should be the focus of observation. After all, top-down connection of the supply chain is so close that the PCB industry as a key component supplier cannot avoid it.

COVID-19 has been confirmed as a factor of future global economic recession and the optimistic demand momentum from 5G and various terminal electronics will be delayed. The US-China trade war started in 2019 has made electronics assembly and PCB manufacturers reconsider their deployment, while the COVID-19 epidemic has impelled them to make strategic adjustments of risk dispersal. In the short run, manufacturers will review the flexibility of their existing capacity deployment and materials supply sources. In the long run, they will accelerate industrial upgrading and capacity distribution to avoid putting all eggs in one basket and strengthen the constitution of smart manufacturing to prevent the tempo of business growth from being upset by unpredictable macro-environmental changes.

Like what TCPA Chairman Maurice Lee said in the letter to members, this is a critical and chaotic moment and the best timing to sharpen our reasoning ability. He hopes that members within the supply chain can show mutual understanding for Taiwan’s PCB industry to stand firm in adversities for a brighter future.