Analysis on the influence of rising price of raw materials on PCB industry

The Printed Circuit Board (PCB) is essential in electronic products, which are used either for domestic use or for industrial purposes. PCB design services are used to design the electronic circuits. Apart from electrically connecting, it also gives mechanical support to the electrical components.

However, it is reported that the recent surge in raw material prices has led to rising costs in the PCB industry.

The general price of raw materials rose sharply

It is reported that since last June, domestic bulk commodities continued to rise. According to CCTV financial report: copper rose up 38%, paper 50%, plastic 35%, aluminum 37%, iron 30%, glass 30%, zinc alloy 48%, stainless steel 45%, IC 100%. Entering the end of February, raw material prices completely out of control, crazily jumped by 20%-30%.

The price of raw materials is one price per day, which leads to the enterprises' inability to control the cost, and the production and operation are in chaos. For the current Chinese manufacturing industry, which has a serious shortage of domestic consumption demand and high corporate debt, it is devastating, and many PCB enterprises are also complaining about this.

The cost ratio of each main material of PCB

There are many kinds of raw materials needed for PCB production, mainly including copper clad plate (CCL), semi-cured sheet (PP), copper foil, copper ball, gold salt, ink, dry film and other materials. Generally speaking, in the cost composition of PCB, about 37% is the copper clad plate, 13% the semi-cured sheet, 8% the gold salt, 5% the copper foil copper ball. The ratio of labor cost is relatively high, about 11%, and the ratio of raw materials of different types of products is slightly adjusted. According to the different thickness of copper clad plate, the cost of glass fiber cloth accounts for 25% ~ 40% of the cost, the cost of resin accounts for 25% ~ 30%, and the cost of copper foil 30% ~ 50%.

The rising price puts enormous pressure on PCB companies

Data show that the Shanghai copper index has risen by more than 32% since 2021, and is now up to more than 70,000 points, at a new ten-year high position. In addition, glass fiber and resin prices are also at a high level. It can be said that the increase in the price of raw materials copper, which directly led to the rising cost of the PCB industry.

As the copper clad plate industry has a high concentration, strong bargaining power and smooth price transmission to the PCB industry, the overall view is that the cost of PCB enterprises is sensitive to the price of the main upstream raw materials such as electrolytic copper foil, glass fiber cloth and synthetic resin, etc. The price rise effect will bring great pressure to the profit of PCB enterprises.

In this national raw material price crisis, epoxy resin recently increased by more than 50%, polyester resin up 45%, titanium dioxide up 35%, the price will continue to soar. On the other hand, copper prices continue to soar to a new nine-year high, which also puts more cost pressure on PCB, IC board and other applications that rely on copper foil as the main material. According to media reports, upstream CCL manufacturers, from big company like Kantao, Nanya, to Taiwan Sanxiong Lianmao, Taioptoelectronics, Taiyao and niche CCL manufacturer Tenghui, have been raising prices for specific specifications. As the price of copper foil continues to hit a new high, the possibility of PCB upstream operators raising prices again is also increasing.

It is widely believed that upstream CCL plants are likely to have to raise prices again in the first half of the year if the LME rally continues unabated and end demand remains robust.

Orders are difficult to schedule

Under the changes induced by 5G communication technology and non-mobile phone market application demands such as NB, tablet and wearable devices driven by the residential economy and the development of new energy vehicles, the demand for PCB will increase greatly.

In this context, the price rise of PCB raw materials has led to a delay in the scheduling of new orders, especially for HDI and FPC in the middle and high-end fields. For PCB industry, there have been many price rises last year, and the impact of order scheduling may last for a long time. It is still unknown how the impact will be. Some said their order deliveries had been extended from the original half-month period to one and a half months, with some orders booked into the second quarter.

In the last three months after the price of copper clad several times, its capacity shortage also began to occur frequently. According to the data, since the beginning of Q4 last year, the price of copper cladding, the increase space of 25%-30%, and the delivery period has also been extended to 8-10 days.

The industry is accelerating the reshuffle, small businesses are struggling

PCB enterprises overall profit is meagre, especially in the middle and low-end products of small and medium-sized enterprises, risk resistance ability is insufficient, the price rise tide, these enterprises may be blown away by the rain. The PCB industry has been reshuffling in recent years. Now the rising price of raw materials is fierce, and the reshuffling speed of the industry continues to accelerate! According to some industry analysis, the PCB industry reshuffle first from the price fluctuations of raw materials, followed by the acceleration of the capital market, then the environmental protection rules, all these multiple factors are accelerating the industry reshuffle, and eliminate unqualified small businesses, make the industry concentration greatly accelerated.

But what is distressing is that costs are rising across the country at a furious pace, it's more like someone is blindfolded and shooting people at random. Among them too many "innocent people" unfortunately "shot down", they are very likely to have the technology and potential of small enterprises, in this huge wave of price rise they suffered a devastating disaster.

The upstream and downstream industry chains keep watch and help each other, and advance and retreat together

In this national material price crisis, no enterprise can stay aloof. If we want to get out of the storm, the upstream and downstream enterprises of PCB industry should try to get together and get through the difficulties.

The price system between PCB downstream enterprises and PCB manufacturers, as well as PCB manufacturers and PCB CCL manufacturers, should be based on the break-even point of both sides. When the break-even point cannot be established at the moment, the price method of floating discount can be adopted. That is to say, the price is not determined first, and first delivery discount, more refund less supplement, to ensure the operation of downstream enterprises.

The upper, middle and downstream industrial chains should complement each other and share information. The competition in the future will no longer be the competition between enterprises alone, but the competition between supply chains. Therefore, enterprises in the entire industrial chain are closely related. If any party falls into difficulties, it will bring devastating blow to the other party.

In fact, making steady profits every year is far better for the long-term growth and sustainability of the business than making one year of fat profits and losing money for several years. We should put an end to speculation about the price of raw materials. As usual, the higher the price, the faster it falls. Faced with such a crazy price rise of raw materials, it is worth sitting on the sidelines to avoid becoming cannon fodder after the price rise bubble burst.

However, when the market is irrational, it is still necessary for the national management to take actions to curb market speculation faster and more effectively, so as to safeguard the steady development of China's entity economy. After all, such a violent price rise will severely impact China's entity economy and magnify domestic systemic risks.