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Pricing Strategies With Michael Carano
September 13, 2022 | I-Connect007 Editorial TeamEstimated reading time: 2 minutes
We recently spoke with longtime I-Connect007 columnist Michael Carano, vice president of quality at Averatek, about pricing strategies for PCB fabricators. We’re seeing some movement in this segment as fabricators, already dealing with some of the tightest profit margins around, find themselves having to either raise their prices or trying to massage more revenue out of their already streamlined processes.
We asked Michael for some pricing strategies for fabricators, and he shared a range of options for today’s manufacturers who aren’t afraid to rethink their processes and try new ideas. And, as he says, people will still pay good money for a quality, reliable PCB.
Nolan Johnson: Let’s talk about pricing strategies for fabricators. What are you seeing?
Michael Carano: Let’s step back and think about the price per square inch, or the selling cost. For example, with substrates, people are talking about paying $6 per metal square inch per layer, and that’s pretty darn good money. Now the question is, can you get the yields? If you put these chips up, let’s say 300 on an 18"x24" four-layer, that panel could be an $1,800 to $2,400 panel and be only four layers if you make it in high yields.
Your material cost is about $200 or $300; there’s some labor in that, and you can get pretty good margins on that. Now eventually at higher volumes, if you’re building a hundred million of these a year, obviously it’s going to go down to a dollar per square inch somewhere. But for the mid-range, which could be done here with the DoD, and then some of the high end, you can get $5 or $7 per metal square inch per layer. So, if you have all that in an 18"x24", you just add it up and have $7. It becomes pretty good stuff.
Johnson: Under these current circumstances, for a long time, the fabs have basically had their margins squeezed down to the bare minimum. With this much demand, this much production, everybody this busy, and the supply chain the way it is, is this the time to start to claw back margin?
Carano: Yes, they’re grabbing margin. I think that’s happening because the chemical cost around materials has gone significantly higher in the last year and a half too. That has to translate all the way down to laminate materials, photoresist, and what have you. A lot of times folks want to commoditize a circuit board and they want to get it priced that way, but it is not a commodity. It is a highly functional, critical device and, as I have said, chips don’t float.
Those chips have no circuit board. You can make all the billions of chips you want. They’re not going to go anywhere. Those packages are reliable and when that chip is attached to a BGA substrate that goes on the circuit board, the circuit board has to be reliable, and I think that the message here is we’ve got reliability. We can do higher layer counts, tighter tolerances, and give the OEM more functionality and greater reliability than they’ve ever had before. That has to cost something and you’ve got to pay something for that. It’s time to get those margins back, especially now.
To read this entire conversation, which appeared in the August 2022 issue of PCB007 Magazine, click here.
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