Four major entry barriers in the PCB industry

Printed circuit board is the key electronic interconnection of electronic products and is known as the "mother of electronic products". The current global printed circuit board market has reached more than 65 billion US dollars. In terms of regional distribution, the Asia-Pacific region led by China has become the main market for printed circuit boards in the world; in terms of product segmentation, multilayer boards and flexible boards are still the main products of printed circuit boards.

In general, there are four major barriers in the PCB industry:

(1) Technical barriers

The PCB industry is a technology-intensive industry with complex manufacturing processes. The process flow covers multiple processes such as drilling, electroplating, etching, and soldermask, involving materials, electronics, machinery, optics, chemicals and other multi-disciplinary technologies, which require PCB manufacturing companies to have strong process technology.

There are many subdivided industries in PCB application fields, and the product types are also very diverse. The technical requirements of PCB products used in different fields or with different functions are quite different, and it is necessary to provide solutions according to customized requirements. The technological level of PCB enterprises not only depends on the configuration of production equipment, but also comes from the continuous accumulation of production experience and technical foundation of the enterprise.

With the increasing development of electronic products in the direction of intelligence, lightness and thinness, and precision, their requirements for technological advancement and stability of PCB products are increasing. Manufacturers must have advanced production equipment, exquisite production technology and continuous innovation in production technology to respond to the continuous technological innovation of the industry. Therefore, the technical barriers to entering the PCB industry will increase day by day.

(2) Funding barriers

The PCB production process is complicated and the process is long. The production process requires a large amount of machinery and equipment investment, and the capital demand is large. An advanced production line equipment investment is as high as hundreds of millions of Dollars. At the same time, in order to maintain the continuous competitiveness of products, it is necessary to continuously upgrade production equipment and processes to meet the needs of customization and technological advancement. It is necessary to maintain a high R&D investment in order to maintain a continuous competitive advantage. The PCB industry is also a capital-intensive industry, and its initial investment and continuous operating investment have higher requirements for corporate financial strength, and have formed a higher financial barrier for new entrants.

(3) Environmental barriers

PCB production processes are many and the process is complicated. Pollutants such as waste water, solid waste and exhaust gas will be generated in the production links such as electroplating and etching. With the increase in China environmental protection efforts, measures such as shutting down and ordering rectification within a limited time for companies that do not meet environmental protection standards have been taken. 

In the future, PCB manufacturers need to increase investment in environmental protection equipment on the one hand, and continue to invest in environmental protection operating costs on the other. For companies with poor profitability in the industry, increased environmental protection supervision may lead to increased operating costs. Enterprises with poor management will lack a competitive advantage in future competition and even face the risk of being eliminated.

Therefore, due to the high attention paid to the procurement of environmental protection equipment, the construction of environmental protection projects and the continuous investment in environmental protection in the production of PCB industry, enterprises will consume a large amount of manpower, material resources and financial resources of the enterprise. The increasingly stringent environmental protection requirements of the China PCB manufacturing industry promote the healthy development of the industry, and at the same time raise the industry's entry barriers. A large amount of environmental protection investment constitutes an environmental protection barrier for new enterprises in the industry.

(4) Customer barriers

PCB is the basic component of electronic products, and its product quality is directly related to the performance of final electronic products. Therefore, downstream customers, especially large downstream customers, have extremely high requirements for the quality of PCB products. In order to maintain product quality and stability, downstream customers usually formulate strict certification systems for suppliers, and set a 1-2 year inspection period for new suppliers. Only after passing their strict supplier certification inspections, will they start formal cooperation with PCB manufacturers. 

It is precisely because of the complex certification process, long cycle, and strict standards that downstream customers have relatively high switching costs and long cycles to change suppliers. Under normal circumstances, customers will not easily change suppliers, and both parties will maintain a long-term cooperative relationship. Thereby forming a higher barrier to customer recognition.