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Material Insight: Diversifying PCB Manufacturing Through Nearshoring

In recent years, there has been a notable shift in the electronics manufacturing supply chain landscape. However, the global supply chain for the domestic PCB industry has been steadily shifting since the 1980s, when the United States began offshoring PCB manufacturing to other countries. But because of the quality control issues, rising international tariffs, and unclear intellectual property protection involved in offshoring, reshoring has become a particularly hot topic.

Reshoring refers to the process of bringing manufacturing operations back to one’s home country. In addition to higher quality control and IP protection, reshoring also reduces reliance on foreign entities for production.

For the U.S. PCB industry, there are now several government incentives to reshore PCB manufacturing. In May 2023, Congressman Blake Moore introduced the Protecting Printed Circuit Boards and Substrates Act to the U.S. Congress, which would provide a 25% tax credit for the purchase or acquisition of American-made PCBs. If passed, the PCBS Act would also establish a financial assistance program and appropriate $3 billion toward American facilities manufacturing or researching PCBs.

Other recent initiatives include “Onshoring Advanced Packaging and Assembly,” a joint workshop held April 29–May 1, 2024, by IMAPS and IPC. The purpose of this workshop was to bring together government agencies, the Defense Industrial Base, and industry members in the advanced packaging and assembly sector to discuss strategies for onshoring manufacturing of advanced electronics packaging. Within the private sector, Calumet Electronics has recently announced substantial upgrades in its PCB manufacturing capability at its Michigan campus: a 200,000-square-foot facility boasting state-of-the-art PCB manufacturing equipment.

From government initiatives to manufacturing advancements made in the private sector, onshoring PCB manufacturing remains a critical priority. However, because 100% onshoring of PCB manufacturing would be difficult to achieve in the immediate future, one tangible goal is “nearshoring,” or diversifying to where manufacturing and assembly are happening. To this end, nearshoring involves relocating production facilities to neighboring countries or regions in proximity. Benefits to nearshoring include reduced transportation costs, shorter lead times, higher quality control and protection of intellectual property, and reduced reliance on imports from one particular foreign entity.

Because of this, Mexico has become a stronger candidate in recent years for nearshoring electronics manufacturing. Mexico’s close geographic proximity to the United States and competitive labor costs make it an attractive option for corporations that aim to diversify their manufacturing operations.

In 2020, Mexico also signed the United States–Mexico–Canada Agreement (USMCA), a trade agreement that granted higher IP protection than its predecessor (the North American Free Trade Agreement or NAFTA) and continued the barring of import tariffs between Mexico and the U.S.

Finally, the ongoing geopolitical tensions between the U.S. and China are expected to solidify Mexico’s status as a prime nearshoring destination in the coming decade. In fact, for the first time in 20 years, Mexico has surpassed China as the largest supplier to the United States. As of 2023, U.S. imports from Mexico rose to $475.6 billion while imports from China fell to $427.2 billion1. Some global market intelligence projects that the trend will continue, projecting that U.S. imports from Mexico will surpass $600 billion by the end of this decade.

One PCBA manufacturing company that has already hopped onto the nearshoring train is MacroFab. Leveraging facilities across North America, MacroFab offers a complete solution for electronics manufacturing, including prototyping services, full-scale production, sourcing, and aftermarket services. Their recently expanded 45,000-square-foot facility near Guadalajara, coupled with nearly seven years of experience navigating Mexico’s trade laws, ensures a smooth and hassle-free experience.  “MacroFab’s strength lies in the combination of our comprehensive technology platform combined with our North American factory network,” says Muirae Kenney, content manager at MacroFab, who explains that MacroFab’s technology platform is analogous to an Amazon experience in that it allows external partners to control the entire PCB design experience while MacroFab connects their customers’ jobs with the right factory line from over 100 factory lines across North America. “Our platform empowers companies to maintain complete control over their design as they bring it back home, while at the same time, our network facilitates a seamless transition to the optimal factory line with the necessary capabilities—no matter how specialized—without the typical research time burden.”

Nearshoring electronics production can offer significant benefits, but it also presents unique challenges. One of the biggest hurdles companies face is regaining control over their designs after years of overseas manufacturing. As Kenney explains, "Over time, changes get made, and while the product works, the original design files and bill of materials (BOM) might not reflect the reality of the product coming off the assembly line.” MacroFab seeks to bridge this gap. “We work with customers to rebuild their original BOM while assessing their existing product, deciding whether to continue with the current design or redesign for better functionality before nearshoring to Mexico."

Kenney highlights another key challenge: "Finding the right factory in Mexico can be a complex task,” she says. “The infrastructure, labor force, and overall factory capabilities need careful consideration. This is a time-consuming process, and in fast-paced industries like the ones we serve, time is precious. MacroFab takes care of all that for our clients."

These challenges aside, it is clear that Mexico continues to emerge as a beneficiary of the changing manufacturing landscape, and bears watching in the future.

References

1.  “Mexico Is Now the Top Exporter to the U.S. Is There Room for Growth?” BCG.com, Feb. 20, 2024.

This column originally appeared in the June 2024 issue of SMT007 Magazine.

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