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Tsoi: I think the greatest challenge is on the financial side, but fortunately, I think you can understand from the past months’ cycles it is due to a stock market problem. But now we know that some of the PCB shops are leaving the Chinese stock market, and we understand many more of the big PCB suppliers are also going to probably leave. And that is a very important phenomenon. They can sell in order to have more money to strengthen themselves, and then buy more machines and invest more in order to have increased sales revenue.
They're also not producing the low-end product; they're producing the high-end product. I can say that there is very strong competition from China to compete against overseas PCB shops or other areas in Asia like Korea, Japan, or Taiwan. I think China's market is very energetic and still a good place for investment.
Matties: The labor rates have gone up here in China. That's part of the drive for people to work for other suppliers. But the drive for automation here is to lower the cost, right?
Tsoi: That is a very good question. We’ve looked into India, Vietnam, Malaysia, and Indonesia, but we don't see a good enough market to compete with China yet, and now with PCBs we’re not talking about a labor intensive industry. China, apart from the low-cost model and low-end PCBs, needs to be innovative and go to high-end PCBs to compete with Japan, Korea, or Taiwan. We can see that with the mobile market, as more than 50% of mobile is here in China; that is quite a big number that is still growing as more people go into HDI and rigid-flex. The other part is the supply chain, which is very important. In China, it is quite complete and quite good, but in other places we don't see the supply chains being as good as China.
The other thing is now people are talking about Industry 4.0, and not just with automation, test, and sophisticated machines for high-end products, but they’re also talking about the machine's traceability, and how it fits into the factory to produce consistent quality and high-end PCBs for our customers. This is quite a good trend and other places can’t compete against China PCB shops in this regard. You can see in the top 100 PCB factories that China is going up instead of going down, and on one hand that is almost proof.
Matties: I do see that pollution in China is still a big issue.
Tsoi: I think the China government now understands the importance of environmental control or pollution control, and now we see them putting a lot of energy, a lot of commitment, and a lot of work towards it, even down to the local government level. They also are driving the PCB industry in the right direction to have better facilities and to move away the low-end PCB shops, or push them to go into more regulated control and more strict requirements. And I think in the coming years more PCB shops will consider this area, and not just the low-end labor work, but also the pollution control. Otherwise, they cannot survive because of the human workforce regulation by the China government.
Matties: The air quality might be getting better, but I don't see it. Not this week anyway. I know in Beijing it is at record levels.
Tsoi: In Beijing it's worse, but it is not all coming from the industry, it might be coming from too many cars.
Matties: It could be the cars, but it's all connected. It's a big problem for everybody in China.
Tsoi: I can say that if you look into the Guangdong area, the local government counts how many sunshine days per week, per month, per year, and you can see that it is not just the local government making the effort. The people are telling the government how many sunshine days happen per year. So I think they are not just making money and then polluting the environment. They're also making an effort because the people have the government’s attention that we need to consider a better environment for our next generation.
Of course maybe China is the number one polluter, but United States is number two, and the leaders of the different countries all committed to doing better in the past year at the worldwide conference. We expect this kind of commitment to be carried out for the coming years, hand-in-hand, and that is very important.
Matties: It has to be a global, cooperative effort. Is there anything that we should share with the readers about China and the PCB industry that we haven't talked about?
Tsoi: I still see China PCB shops going in the right and healthy direction. There is still continuous growth, and every year we join the biggest PCB shops at HKPCA in Shenzhen and CPCA in Shanghai, and we are very happy this year. I have been to JPCA, KPCA, TPCA, and also CPCA; both HKPCA and CPCA are the most attractive shows in Asia. People are bringing a lot of new, sophisticated and very sharp machines to the China market. I have seen at productronica that we are producing high-end, but we have bigger volume and our investment environment is still the best in the world. That is very important for us, so we hope we still can continue another 25 years.
Matties: Well, congratulations on your first 25 years. It's quite a success, and the analogy that comes to mind for me is that you've seen this industry transform from dirt floors to skyscrapers. Congratulations, and I appreciate you spending so much time with us today.
Tsoi: Thank you, Barry.
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