Industry Outlook 2025-2027: Printed Circuit Boards

Printed Circuit Boards

Printed Circuit Boards

Industry Outlook 2025-2027: Printed Circuit Boards

12 November 2024

EXECUTIVE SUMMARY


The printed circuit board (PCB) industry is expected to see an improved outlook from 2025 to 2027 due to several factors: (i) investment support schemes from the Board of Investment (BOI) aimed at the electronics and electrical appliance sectors, which will boost capital inflows into PCB production and its supply chains; (ii) a steady increase in electric vehicle (EV) sales, driving demand for PCBs used in EV manufacturing; (iii) the beginning of a new replacement cycle for personal computers and mobile phones, following the surge in purchases during the Covid-19 pandemic; (iv) gradual growth in both domestic and global economies; and (v) increased investments in semiconductor production capacity by major global manufacturers, which have alleviated previous chip shortages.

However, industry players will face several challenges, particularly a shortage of key inputs and increased competition from other sectors competing for these resources, notably EV manufacturers. As a result, input prices are expected to become more volatile and trend upward, potentially driving up production costs and squeezing profit margins. Additionally, the growing trend of manufacturers relocating production facilities to the ASEAN region will intensify competition. On top of this, tightening ESG regulations will require companies to overhaul their business practices and improve the quality of their production processes to remain competitive in the long term.


Krungsri Research view


Companies with integrated manufacturing supply chains—from upstream production of inputs to the final assembly of PCBs—will have a competitive edge over those lacking such integration. However, overall revenue performance will largely depend on the growth in demand from downstream industrial consumers and the level of competition within the various product markets.

  • Manufacturers of PCBs for telecommunications products, PC components, and electrical appliances: Players can expect a modest increase in revenue, driven by the gradual expansion of both domestic and global economies, as well as the need to replace PCs and smartphones following the surge in purchases during the Covid-19 pandemic. However, the entry of new competitors will intensify the already strong competition, likely reducing players' ability to maintain profitable margins.

  • Manufacturers of PCBs used in automotive assembly and medical device production: Players are likely to see strong revenue growth, driven by steady demand for PCBs in the production of EVs and medical equipment. Furthermore, competition in this market remains relatively limited, allowing companies to focus more on product quality than on price.


Overview


Printed circuit boards (PCBs) are a fundamental component in the electronic devices that consumers rely on daily, including smartphones, tablets, Internet of Things (IoT) devices, telecommunications equipment, and computers.

The PCB supply chain consists four primary components (Figure 1):

1) Upstream production involves the creation of the base materials used in all subsequent manufacturing processes. This includes preparing copper foil, as well as fiberglass yarn and fabric, to the required specifications.

2) Midstream production focuses on the design and layout of circuits, including the production of paper phenolic copper-clad laminate (CCL), composite board material, and FR4 laminates (FR4-CCL).

3) Downstream production involves the actual fabrication of PCBs, where various components are combined into layers and then customized through processes such as drilling, baking, and laminating.

4) Industries supporting these processes include manufacturers of the equipment and materials used in PCB production, such as drills, ovens, and various chemical products.


 

PCBs can be divided into four main subcategories (Figure 2).

1) Single-sided PCBs are the simplest type of printed circuit board. They consist of a single base layer with low circuit density, allowing manufacturers to produce them quickly and in large quantities. As a result, lead times for orders are shorter compared to more complex PCBs, making single-sided PCBs a popular choice for manufacturers of affordable electronic goods, such as calculators, toys, digital cameras, and audio devices.

2) Double-sided PCBs can mount conductive materials and components on both sides of the board. They are also equipped with traces that connect the two sides, enabling easy communication between components. As a result, double-sided PCBs are moderately complex and suitable for a wide range of applications, particularly in cases where single-sided or multi-layer PCBs would be unsuitable, such as in power supply monitoring, amplifiers, and testing equipment.

3) Multi-layer PCBs are printed circuit boards with at least three layers of conductive material. Due to their larger conductive surface area relative to their total volume, they are typically smaller than single- and double-sided PCBs. Multi-layer PCBs are also more durable and generally of higher quality, making them ideal for use in compact, complex applications, such as computers, tablets, and smartphones. As of 2022, they accounted for 43.4% of the total market value of PCBs (Mordor Intelligence, 2022).

4) High-density interconnect (HDI) PCBs are distinguished by their higher wiring density compared to other types of printed circuit boards. Currently, they represent the most advanced form of PCBs, typically found in the most demanding applications, such as touchscreen devices, computers, smartphones, EVs, aeronautical electronics, and medical devices, particularly implantable and laboratory equipment. Additionally, because HDI PCBs use fewer inputs, their production costs can be lower than those of other PCB types, contributing to an anticipated demand growth of 6.2% annually from 2023 to 2028.

In addition to the above, PCBs can also be categorized based on the substrate used in their manufacture, with three basic types: (i) flexible PCBs, which, as the name suggests, are flexible and can be bent, twisted, or folded to fit the shape of the electronic device; (ii) rigid PCBs, which are stiff and cannot be bent or twisted; and (iii) rigid-flex PCBs, which combine both rigid and flexible technologies and are often designed using 3D modelling to fit the specific shape of the device. Among these three types, rigid PCBs are by far the most commonly produced, accounting for 79.4% of demand in 2022. However, rigid-flex PCBs offer the most desirable combination of qualities and are forecast to grow at the highest rate of all market segments, with an anticipated growth of 9.7% from 2023 to 2028


 

A total of 26 manufacturers are active in Thailand's PCB industry1/. These companies can be divided into two groups: (i) 16 large corporations (61.5% of the total), most of which are international companies, primarily from Asia—particularly China, Japan, and Taiwan—countries that are global leaders in electronic goods production. These companies have easy access to advanced technology and capital, and typically operate as original equipment manufacturers (OEMs), producing goods in large quantities according to customer specifications, with quick turnaround times. Major Thai players have increasingly focused on the automotive sector, particularly in response to rising investments in EV production, and are producing high-density interconnect (HDI) PCBs for EVs. (ii) 10 SMEs (38.5%) act as subcontractors. These smaller players have limited capacity for technology development and lack the financial resources to support in-house research and development. As a result, compared to the larger producers, SMEs are slower to adapt to changing market conditions. Moreover, SME manufacturers face a disadvantage both downstream, with limited bargaining power from their buyers, and upstream, with little leverage over suppliers. These challenges help explain why, in 2023, 98.9% of industry revenue went to the major manufacturers (Figure 3). In fact, the high market concentration is evident, with the five largest players accounting for around two-thirds of industry revenue.

 

The Thai PCB industry is heavily concentrated in the downstream segments of the supply chain, meaning that manufacturers rely on imports for large quantities of upstream and midstream inputs. In fact, only a few large players are capable of producing their own inputs, such as laminates and prepregs (fiberglass impregnated with resin, used as an insulating material).

Thai PCB manufacturers primarily produce for export, with overseas markets absorbing around 70-75% of output by value. As of 2019-2020, multi-layer PCBs accounted for 30.2% of total PCB export value, followed by single-sided PCBs (6.8%), double-sided PCBs (1.3%), and other types of PCBs (61.6%)2/. The largest export markets, in order of importance, were China (16.2% of total PCB export value), the US (13.2%), Japan (12.5%), Vietnam (10.1%), South Korea (5.3%), and Germany (5.2%) (Figure 4). The remaining 25-30% of production is consumed domestically, where it is used alongside other intermediate goods in the manufacture of final products, such as communication devices, automotive equipment, electrical appliances, medical devices, and industrial goods. However, domestic production is insufficient to meet demand, and thus PCBs are also imported, with China being the largest source (40.7% of the value of all PCB imports), followed by Vietnam (13.6%), Hong Kong (10.5%), Japan (9.0%), South Korea (8.9%), and Taiwan (7.3%) (Figure 5).



 

The global value of PCB exports grew by just 0.7% from 2019 to 2023. During this period, however, Thailand's share of global PCB export value declined (Figure 6). (i) Thai manufacturers, especially SMEs, generally lost competitiveness during these years, primarily due to limited funding for research and development. As a result, these companies have struggled to adapt to a rapidly evolving technological landscape, particularly when compared to peers in Vietnam and Malaysia. In contrast, manufacturers in these countries have boosted their competitiveness by leveraging support from both domestic firms and international companies that have established production facilities there. For example, in Vietnam, Samsung Electronics has increased its investments by capitalizing on the country’s low labour costs, while in Malaysia, manufacturers have upskilled their workforce to produce more advanced PCBs. As a result, the value of PCB exports from Vietnam and Malaysia rose by 17.0% and 13.5%, respectively, over the five-year period, while Thailand’s PCB exports contracted by 0.2% (Figure 7). (ii) Some Thai manufacturers have continued to focus heavily on producing PCBs for hard disk drive (HDD) assembly, even though these are being increasingly replaced by more efficient solid-state drives (SSDs) in many applications. Additionally, disruptions to domestic PCB supply chains caused by the 2011 floods in Bangkok and Thailand’s central region, along with the pandemic-era lockdowns, have prompted many manufacturers to shift investments to countries like Indonesia and Vietnam, where labour costs are lower.

Situation


COVID-19 Pandemic (2020-2021): After contracting by -9.6% in 2019 (Figure 8), PCB output rebounded with a growth of 3.0% in 2020, followed by a substantial increase of 32.3% in 2021. This rapid growth was driven by the social distancing measures implemented during the pandemic, which forced employees and students to work and study from home, leading to a surge in demand for electronic devices.

Post-Pandemic (2022-2023): Output declined in both 2022 and 2023, contracting by -9.3% and -14.7%, respectively. This slump was driven by two primary factors: (i) The global economy slowed, and a surge in inflation worldwide reduced consumer spending power, which in turn cut demand for electronic goods and computers—key applications for PCBs. This decline in demand was reflected in a -14.8% drop in the global distribution of personal computers in 2023 (source: Gartner). (ii) The closure of production facilities during the pandemic triggered significant supply chain disruptions. Shortages of key inputs, such as copper foil and chips, delayed production of electronic products. Furthermore, the outbreak of the Russia-Ukraine war led to higher global crude prices. As energy costs rose, manufacturers shifted from production to a destocking cycle.

8M 2024: Output contracted by -1.4% YoY through the first 8 months of 2024, driven by continued sluggishness in both domestic and international markets, with demand for electronic goods particularly affected by the global economic slowdown. However, after a decline in the first 7 months, output returned to growth in August, rising by 19.2% YoY. This rebound was driven by two main factors: (i) Exports of PCBs strengthened, partly due to the start of a new global electronics replacement cycle, which is expected to continue through the rest of 2024. (ii) A rise in the number of PCB-related projects approved for investment support by the Board of Investment (BOI) during 2019-2023 is helping Thai manufacturers respond to growing export demand, particularly from China and Japan. As a result, domestic PCB output is expected to grow by 0.5-1.0% for the full year in 2024.


 

Domestic sales of PCBs have fluctuated in line with output, falling by -10.1% in 2020 and then surging by 54.6% in 2021 as demand for electronic goods increased both domestically and internationally. However, with the Thai economy and consumer purchasing power recovering slowly compared to the earlier rebound, sales were down by -23.3% in 2022 and -10.3% in 2023. These declines have continued into 2024, with domestic sales falling by another -5.5% YoY through the 8M 2024 (Figure 9). Compared to the pre-pandemic period, domestic sales are down -11.7% for the 8M 2024, although overall output has increased by 2.0% relative to 8M 2019. In addition to the global economic slowdown’s impact on domestic incomes, slower sales into the Thai market have been compounded by structural challenges in downstream industries that are key consumers of PCBs, such as automotive assembly, and the manufacturing of HDDs and electronic components. These sectors, in particular, are facing declining competitiveness, ongoing difficulties in accessing semiconductors, and technological shifts, such as the replacement of HDDs with SSDs (source: Bank of Thailand’s Economic Pulse: Issue 4). Looking ahead, domestic sales are expected to remain under pressure from these structural challenges in the manufacturing and export sectors. As a result, sales for the full year are forecast to decline by between -5.0% and -4.0%.


 

Export value has shown signs of improvement, moving in the opposite direction of domestic sales. In 2020 and 2021, PCB export value grew by 7.2% and 24.2%, respectively, driven by a surge in demand for electronic goods during the Covid-19 pandemic. However, the slowdown in the global economy weakened demand for downstream products, leading to a contraction in export value by -9.3% in 2022 and -11.0% in 2023. These declines continued into the 8M 2024, with export value dropping by -0.3% YoY (Figure 10). However, this overall decline masks a more positive trend in the latter half of the year: from June to August, PCB export value returned to growth, rising by 10.4% YoY. This turnaround was driven by a cyclical upswing in global demand for electronics, with particularly strong growth in China (+16.4% YoY) and Japan (+63.2% YoY). This increase mirrors the rise in approvals for investment support related to PCB production from the BOI over the past few years, especially from Chinese and Japanese companies manufacturing in Thailand for export back to their home countries. Data for the 7M 2024 (the latest available) show that Thai exports are heavily concentrated in the HDI and multi-layer PCB segments, which together accounted for over 80% of total PCB export value. 

However, in terms of growth, single-sided PCBs have performed the best, with export value surging by 159.3% compared to pre-pandemic levels in the 7M 2019 (Figure 11). These products have been mainly sold to Japan, where they are used in the production of basic electronic goods (e.g., audio equipment, digital cameras). Demand for single-sided PCBs has surged in line with consumer spending power beginning to recover. Additionally, exports have benefited from increased investment by Japanese manufacturers in Thailand-based production facilities for this type of PCBs. Going forward, export will continue to benefit from strengthening demand in the Chinese and Japanese markets, as well as other export targets, which will also be supported by the expansion of Thai production. However, ongoing weakness in the global economy will temper this growth. As a result, PCB export value for 2024 is expected to increase by just 0.5-1.0% overall.



 

In some regards, changes to the structure of PCB export markets have benefited Thailand. As a result of the US-China trade war's impact on sales of electronic goods, trade diversion has helped to boost Thai exports to certain markets. For example, in 2023, receipts from exports to the US jumped 51.8% compared to their 2018 level, while exports to Vietnam increased by 68.0%. The latter growth has been fuelled by ongoing investment in Vietnam’s electronics industry, much of which has come from Chinese investors seeking to circumvent escalating trade barriers. However, Thailand's export value to China dropped by -37.8% in 2023 compared to 2018 (Figure 12). This decline is attributed to China’s self-sufficiency policies, which have led to an increase in domestic PCB production capacity. As a result, China’s share of global PCB production has grown from 40.7% in 2012 to 57.0% in 2021, reducing demand for Thai PCBs in the Chinese market.


 

Revenue for the 5 largest Thai PCB manufacturers grew by just 0.1% over the period from 2019 to 2023. Despite these modest overall gains, these companies have been able to maintain net profits, which reached 4.2% in 2023. This contrasts with SMEs, for which average revenue contracted by -0.6% (Figure 13), and which incurred significant net losses from 2021 to 2023 (Figure 14). The strong profitability of the largest domestic players can be attributed to several factors: their large capital base, efficient production management, and advantageous bargaining position with suppliers. These advantages enable them to mass-produce PCBs and achieve economies of scale, thereby reducing marginal manufacturing costs. Additionally, some of these larger manufacturers also handle in-house design and circuit board printing, which reduces reliance on external suppliers and facilitates easier access to necessary inputs. This control over production processes allows them to better manage production costs compared to smaller competitors.



 

Approvals for BOI support for PCB manufacturing investments saw a significant increase from 2019 to 2023. The value of approved investments jumped from THB 19.7 billion in 2022 to THB 87.1 billion in 2023, representing a rise of 343.2% (Figure 15). As a share of total capital inflows into the production of electronics and electrical appliances, the percentage of approved investments directed toward PCB manufacturing rose from 16.3% in 2019 to approximately one-third in 2023. The main sources of these inflows were China, Taiwan, Japan, and Thailand itself.


 

Outlook


Production: Domestic production of PCBs is expected to grow by 2.0-3.0% annually from 2025 to 2027 (Figure 16). This growth will be driven by increasing foreign direct investment (FDI) inflows and higher spending on the expansion of PCB production facilities, which will benefit from more favorable BOI investment support schemes. Expanding production capacity will enable manufacturers to achieve economies of scale, enhancing the competitiveness of Thai players and positioning them to better meet rising demand for more complex and technologically advanced products.


 

Domestic Sales: Sales into the domestic market are expected to strengthen gradually, growing at an average rate of just 1.0-2.0% per year. Several factors will contribute to this moderate growth: (i) An increase in investment by major global suppliers in new manufacturing facilities has resolved earlier supply chain disruptions, particularly with semiconductors. This will support the production of automobiles, electronic equipment, and electrical appliances, all of which will drive domestic demand for PCBs. (ii) In 2023, the value of projects approved for BOI investment support in the electronics and electrical appliances sectors3/ surged by 101%, reaching a total of THB 110 billion. This will boost production in these industries, and the increased need for PCBs will positively impact domestic demand. (iii) The Thai automotive industry is rapidly shifting to EV production, partly due to government incentives that will continue through 2024 and 2025. These policies require automakers to replace earlier imports of EVs with domestically produced models, and since EVs contain more electronic components than traditional internal combustion engine (ICE) vehicles, this transition will further benefit the PCB market. (iv) Gradual growth in both the Thai and global economies will support demand for products downstream from the PCB industry. However, certain domestic sectors that rely on PCBs are losing importance globally, notably the HDD market. Thailand has been a major producer of HDDs, but these are being replaced by solid-state drives (SSDs), driven by rapid technological advances.

Export markets: Overall, exports are expected to outperform the domestic market, with annual export value projected to grow by 3.0-4.0% per year (Figure 17). Two key factors will drive this improvement: (i) The EV market is set to expand rapidly, supported by the ongoing development of full driving automation technologies. According to the International Energy Agency (IEA), global demand for EVs is expected to increase at an average rate of 18.9% per year from 2023 to 2030. This growth will drive a significant rise in PCB sales, as EVs require more advanced electronics than traditional vehicles. (ii) A new replacement cycle is underway in the global markets for PCs and smartphones. Gartner forecasts a 3.5% increase in PC sales and a 4.2% rise in smartphone sales in 2024. Additionally, the upcoming release of AI-capable PCs, expected in 2025 and 2026, is anticipated to further boost global PCB demand (Figure 18) (Source: Canalys PC analysis).


 

Potential challenges facing the industry


Input shortages: Over the past 4-5 years, the PCB supply chain has faced ongoing shortages of critical inputs, such as FR4 laminates, copper, cabling, and other materials. This has resulted in price volatility and upward trends in costs. While the situation has improved somewhat, these challenges persist. For instance, global copper prices averaged USD 9,256 per tonne from January to July 2024, marking a 54.1% increase compared to the pre-pandemic average of USD 6,005 in 2019.

Competition for Inputs: The supply of copper, in particular, is likely to be impacted by competition, as copper is used not only in PCB manufacturing but also in rapidly growing industries such as EV assembly and lithium battery production. As these sectors expand, the demand for copper will increase, potentially causing periodic disruptions in PCB supply chains. With tightening supply, copper prices are expected to rise, which will likely put pressure on the profitability of PCB manufacturers.

Intensifying competitive pressures: This is due to two main factors: (i) a growing trend among Chinese manufacturers to relocate production facilities to the ASEAN region, including Thailand. This shift has led to a sharp increase in the value of PCB exports from ASEAN countries, particularly Malaysia and Vietnam, over the past 2-3 years; and (ii) the rise in the value of BOI investment support for PCB-related projects, which has fuelled the expansion of production capacity among domestic manufacturers. As new players enter the market, competition will likely heighten, particularly in the sectors serving telecoms, computer components, and electrical appliances. However, competition in the automotive PCB market will be less focused on price and more on product quality.

ESG-related risks: These will include the need to transition to more environmentally friendly inputs and technologies, reduce greenhouse gas emissions, and improve waste management in manufacturing processes. While these changes are likely to increase production costs, companies that fail to meet new ESG standards may see their competitiveness decline and risk missing out on future market opportunities.

 




1/This includes only companies that have submitted full financial statements for five consecutive years, from 2019 to 2023.
2/ Given that there are four primary types of PCBs, "other" exports will primarily consist of high-density, highly interconnected PCBs.
3/ This does not include PCBs, printed circuit board assembly (PCBA), semiconductors, and integrated circuits.

 
ประกาศวันที่ :12 November 2024
Tag:
Back
Press keyword to search