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The Big Picture: Geopolitics and the PCB Supply Chain

When I first entered the PCB industry in 1982 (I can’t believe it was that long ago), I rented a 10’ x 10’ booth at the NEPCON West Show in Anaheim. I had a small card table to showcase the beginnings of a budding software program designed for PCB fabricators. I had no idea what to expect, and I hardly knew anyone in the industry. 

Being a technical/software guy, I didn’t know anything about sales. Looking back, maybe that was an advantage. Nonetheless, I came back with several hundred leads for my fledgling software business. At that time there were over 2,000 PCB shops in the U.S. alone. As the industry made its way to China starting in the mid-1990s, I followed the herd. It was a good move as I ended up with some of the largest PCB companies in China as customers and got to know so many more people in Asia. 

The shift to Asia, and specifically China, made a lot of sense at the time. Everyone was investing in China—the U.S., Japan, and Taiwan were leading the pack. They still own factories with a major share of the PCB market while local Chinese owned companies continued to invest and have now become major players in the market. In fact, that shift worked so well that if you combine Chinese and Taiwanese non-captive PCB production, I wouldn’t be surprised it if didn’t account for over 90% of the world’s PCBs. Keep in mind, I’m talking about non-captive production. There is still quite a bit of captive production in Japan, South Korea, and other places. We are so dependent on that market that I find most PCB factories here in the U.S. themselves buy PCBs from those Chinese and Taiwanese factories while they remain focused on ITAR, quick-turn, and other specialty products. The result is almost total dependence on China and Taiwan for any volume production. 

What happens if (more like when) China decides to make a move on Taiwan? In the past, the U.S. position has been to defend Taiwan in such a scenario, but is that still the case? Look at what’s happened in Hong Kong—lots of talk, but at the end of the day China got what it wanted. Recent developments in Afghanistan certainly don’t give one a warm and fuzzy feeling about Washington’s ability to get things right. A move by China on Taiwan may create a supply chain tsunami the likes of which the world has never seen, especially if the U.S. and Western nations retaliate either militarily or economically. Either way, it will be tough. We can sit here and blame all kinds of people, but we did this to ourselves. At least Japan and South Korea have maintained quite a bit of captive capacity. 

Given China’s need to continue to grow its economy, one would hope that the lure of the American market would entice them to cooperate and maybe slow down the move toward Taiwan. However, the recent assault on China’s tech industry by China’s leaders would suggest that they are willing to take drastic measures to impose their ideology even if it is likely to prove self-defeating. For example, Alibaba hosts twice as much e-commerce as Amazon. Tencent runs WeChat, the world’s most popular super-app with over 1.2 billion users. Their tech advances have allowed them to get into AI and digital healthcare—a much sought-after shift from the traditional manufacturing prowess. Their tech industry has the potential to be a foundation to challenge American supremacy. 

So, why has China’s leadership launched such an aggressive assault on its $4 trillion tech industry? I think the answer is that China’s ruling party wants, above all else, to have total control and wants to redesign the tech industry according to its blueprint. Its recent regulatory actions against its tech industry have reduced the combined market cap by over $1 trillion. 

Having billionaire tech tycoons being worshiped by the masses does not fit the Chinese ideology. Make no mistake: The crackdown on China’s unruly tech is a demonstration of the party’s unparalleled power. It is this power that will eventually propel them to make a move on Taiwan. Hopefully the shiny object that is the American market will allow trade to continue and avoid a supply chain tsunami. 

Mehul J. Davé is CEO and chairman of Entelechy Global Inc. and chairman of Linkage Technologies Inc.