BPA just delivered its latest report for the PCB industry. "The indications are that the electronics industry is set to enter another four-year period of growth." Whew! That's good news.

As the economy improves, companies are beginning to act on strategies and plans to position themselves in the geographic markets that make the most sense for the next decade. Thirty years ago, this was pretty simple for most companies. The U.S. and Europe were it. Like today, Japan's markets were pretty much closed, so focusing on that market wasn't on the list for many. The Four Tigers (Taiwan, Korea, Singapore and Hong Kong) were the exception but they were just emerging. Twenty years ago it was still the U.S. and Europe with the Tigers continuing to gain ground. Ten years ago, China jumped into the fray and garnered the lion's share of the attention of the suppliers and manufacturers for most of the last decade. It's been quite a ride for those courageous enough to tackle the Chinese Dragon. For some, it was a great move, for others a disaster. One thing is for sure: With China's entry into the global marketplace, the center gravity for manufacturing has shifted to Asia.

The Next China

So, today, as the global economy gets back on its feet, what's the next great "Factory to the World?" China still holds great attraction for many. Its command and control government and 1.3 billion people have been attractive to manufacturers--first, to manufacture products more cheaply for export to the U.S. and Europe and, then, to also be in a position to serve a domestic Chinese market with all its potential. But, as the low-cost manufacturing hub, China is starting to lose it allure.

The Chinese industry will likely not get too much bigger as manufacturers look for lower-cost solutions elsewhere. The rapid, crazy growth we saw from 2000 to 2008 is probably finished for a couple reasons. First and foremost: The Chinese cost of doing business has been steadily on the rise and will continue to rise as the standard of living improves for at least some of the Chinese population. Next, going forward, the rest of the world won't and can't tolerate China's unfair trade practices--currency manipulation, lack of protection for intellectual property and huge trade imbalances. The only way I can explain the last decade is as a reward from the developed world to China for moving away from a closed command-and-control economy and into the global free-market system. Of course, that gift spelled doom for many U.S. and European companies, but integrating China into the global economy was more important (I guess).

Then, where next? I ran into an article discussing emerging markets: The Next China: Five Emerging Markets To Watch. I won't go into it here, but it listed many countries that are up-and-coming players in this decade and the next. The article is more oriented toward investing, but it will give you a good sense of where the money is flowing now, and where it will flow in coming years. Really, the only country out there with the potential to become another China is India, but the "N11" as the author calls them, collectively, along with the other three "BRIC" countries (Brazil, India and Russia) will probably give China a run for its money over the next decade.

India

India has reached the billion people mark. The government is beginning to see the light when it comes to its need to participate in the global economy. Still mired in tedious, multi-party democratic politics and corruption on top of its tremendous poverty, the only way out seems to be an opening of the flood gates. The Indian electronics market is valued at US $32 billion today and is expected to grow in excess of 500% within the next five years, to reach US $160 billion by 2015. This may even accelerate if the government can enact new business-friendly policies, reduce corruption and invest in infrastructure. Plenty of potential exists in India, with its solid, well-educated work force. A recent EE Herald article said, "This year's budget has reduced basic customs duty on LCD panels from 10% to 5% to support indigenous production of LCD televisions." The government is keenly aware that a domestic manufacturing base is a key component in the effort to create jobs and to strengthen the Indian economy in the long run.

Russia

Russia has tremendous potential with an educated population, huge amounts of natural resources and an autocratic government. The industry there seems to be on a steady rise and capitalism has taken hold.

Rest of the World

Other areas of the world that seem to be attracting more and more attention are Malaysia, Indonesia, the Philippines and Turkey, among others. Eastern Europe, sandwiched between the prosperous rich west and Russia, is looking better and better, sort of like Mexico to the U.S., with lower costs of doing business and proximity to large markets. Here's one example of how this market is evolving: Ukraine: An Emerging EMS Haven in Eastern Europe. South and East Africa are beginning to percolate as well.

So, where do you go and what do you do? Is there another "China" on the horizon waiting to take off? The China experience has been an example to many developing countries and has laid out a model for development, which can help solve many of the social ills facing countries and the planet. But is any one country going to be able to pull off what China did? Besides India, there will be some China-like efforts by smaller countries (again, Vietnam), but they won't have the kind of impact China had on the PCB and larger electronics industry. But, having said that, 20 to 30 of the small China-like efforts in Asia, Eastern Europe, South and East Africa and South America will certainly affect places like China. Combined, they will have the impact of another China, and they're about to take off.

Certainly, the center of gravity for electronics manufacturing has shifted to Asia and will remain there for some time. Eventually, though, as always, we'll start to see a leveling of manufacturing as new markets emerge and countries push for product manufacturing bases of their own. We may see this first with India and possibly Brazil for PCBs. India has not wanted to, or been able to, compete with China's cost of manufacturing, but since that's on the increase, we may see more of the multinationals begin to build circuits for cell phones and the like in India since they can consume all that can be produced. Keep in mind that the middle class in India is larger than the U.S. population. We already see this starting and it will continue to increase. Next will come boards for other consumer electronics, then computers, sophisticated mil/aero electronics and more. Watch for a company like Foxconn to build a mega-PCB factory in India, and then you'll know it's happening.

So, in summary, the PCB industry could go in many different directions in this decade, both geographically and technologically. China will remain the dominant player, but will begin to give some ground to others like India, Brazil and Russia. I believe that the elephant in the room is printed electronics. If this industry does as I expect, all bets are off. The PCB and assembly industries will disperse very rapidly to the four corners of the globe and leave empty factory shells all over China.

Ray Rasmussen
I-Connect007

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