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Board Buying

Greg Papandrew

How to respond to supplier price increases.

Demand for printed circuit boards is going up. But so are production costs.

Raw PCB material pricing has jumped about 40% since June, with the exact increase dependent on material type. This price increase was inevitable and is, in fact, overdue.

During the early months of the Covid crisis, most PCB suppliers were hesitant to pass on their already-increasing material costs. But as China has rebounded faster from the Covid slowdown than the US and Europe, demand for production has escalated. PCB vendors are now more willing to pass higher material costs onto their customers. And the price increases are by no means over.

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Greg Papandrew

Government incentives are just part of the formula.

Government-led directives of late are aimed squarely at bringing manufacturing back to the US. President Biden recently signed an executive order requiring the federal government to buy more goods produced in the United States and limiting the ability of federal agencies to issue waivers on overseas purchases.

Earlier, then-President Trump had approved regulations that increased the share of a product’s components that must be produced domestically to qualify as US-made. He also imposed a 25% tariff on goods imported from China.

The $740 billion 2021 National Defense Authorization Act (NDAA), which took effect in January, includes a provision forbidding the purchase by the Department of Defense of printed circuit boards manufactured in potentially adversarial countries such as China, Russia, North Korea and Iran. Many in our industry have welcomed this new directive as a means of rebuilding the once-robust PCB manufacturing climate in the United States.

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Greg Papandrew

American manufacturers are throwing away business opportunities. Are you?

According to a recent statement by US Undersecretary of Defense for Acquisition and Sustainment Ellen Lord, national electronics procurement is at a crossroads.

“[America] can no longer clearly identify the pedigree of its microelectronics,” she said. “Therefore, we can no longer ensure that backdoors, malicious code, or data exfiltration commands aren’t embedded in our code.”

According to Lord, a variety of price pressures – ranging from government regulations to labor costs – have driven manufacturing of electronics offshore and created not only an economic imbalance but a security threat as well. “That’s what we need to reverse,” she said.

Like the Defense Department, American consumers also support bringing manufacturing back onshore. They believe the “Made in USA” slogan means saving American jobs and, often, superior quality of goods. They support “reshoring” – bringing the manufacturing and assembly of goods – back to the US.

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Greg Papandrew

Being ready to pivot offers flexibility and keeps vendors honest.

What is your company’s PCB buying strategy as we emerge from the confines of the Covid-19 pandemic shutdown? Do you have one?

Those responsible for corporate procurement need to understand supplier diversification is the key to remaining competitive in this challenging economy. Yet, many OEMs and EMS companies have invested too much of their annual PCB spend with only one vendor. That could prove to be a costly mistake.

I understand and appreciate vendor loyalty, but are you leveraging your vendor, or are you being leveraged by your vendor?
The truth is companies that stick with this one-vendor approach will have a harder time remaining competitive in the post-pandemic world. “We have used this vendor for years” is not a viable strategy.

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Greg Papandrew

Understand what the transaction means for customers.

Your PCB supplier has been acquired. Will this acquisition benefit you as a board buyer? Or will it lead to higher prices and a reduced level of service?

 The answer may depend on how you react.

Vendor acquisitions can cause supply-chain disruptions, especially when the acquiring firm has a competing product line. What is troubling about these transactions is few PCB buyers seem to understand the real economics involved, or why they happened in the first place and what it means to them as customers.

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Greg Papandrew

Or will the West continue to risk exposure?

The massive disruption caused by Covid-19 has revealed the fragility of the global supply chain. With proper leadership, however, many companies are adjusting (or will adjust) to the changes made necessary by this pandemic.

Predictably, this unprecedented disruption has prompted calls for nations to onshore their manufacturing. It’s an argument that pops up periodically. And on the surface, it does make sense. Why leave a domestic market so vulnerable to what’s going on in the rest of the world? Why not build all we need here?

But here’s some straight talk: It is simply not realistic to think we can bring all manufacturing – including printed circuit boards – back to Western shores.

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