A friend of mine got me thinking the other day when he asked me what I thought the North American PCB industry would look like five years from now. That’s an intriguing question, isn’t it? I decided to really think about this for a few days.
Certainly, the next few years will be the most transitional years in the long history of the North American PCB industry. This industry began in 1951 when America’s first independent board fabrication company, Photocircuits, was opened its doors. Think of some of the other big names in the industry, companies that had once dominated, but now are gone. That list is obviously quite long, since we have gone from well over 1,000 shops (some say as high as 1,800, while others say the number was 1,200) to just around 200 shops left in North America.
The list includes Photocircuits, Maine Electronics, General Circuits, Capital Circuits, ACI, The Bureau of Engraving, Altron, Zycon, Hadco, Pacific, Diceon, Advanced Quick Circuits, Tingstol, Coretec, Bartlett, ASI, Continental Circuits, Circuit-Wise, and many others. There are too many to remember, and they're all gone, existing only in the memories of those of us who worked for them.
So, where is our industry going? What will it look like in five years, or even three? Well, here are a few things I know:
Some of our more prominent companies are on buying sprees right now. At least three American companies are buying everything they can get their hands on, with an end-game of a big payout in the next few years. These companies have three things in common:
- They have an aging management team looking for that last payout.
- They have venture capital money behind them.
- They are more interested in the top line than the bottom line. Don’t get me wrong, the bottom line is still important since a company’s selling price is determined by a multiple of their EBITA. But, that all-important top line is what attracts buyers and their investors.
So, watch these companies keep buying and growing. They are the ones I am talking about. This means that there will be fewer and fewer shops as the small ones get vacuumed up, or as I prefer to call it, “TTM-ed.”
Who is Buying?
So, who is going to buy these companies? Who is going to spend those big bucks on these American-based companies? Well, think for a minute…what country in the world has big bucks? Ummm, let me think. Yes, that’s right, China. The Chinese are coming, and they are coming with their dollars and their global ambition. Some of the big Chinese companies have already bought companies in Europe and they are now setting their sights on North America. This is a not a prediction; this is a fact. In the next 12 months you are going to see a Chinese company swoop in and buy an American PCB company. It will not be a large acquisition at first, but it will be the beginning of a trend.
Growth in a Different Way
Sadly, we will continue to lose North American shops. Those who refuse to change will choke on their own immobility. They will go down, and the last thing we will hear from them will be the dying words, “But I never had to do any sales or marketing in the ‘70s and had all the business I needed.” It will be too bad, but it is inevitable as these companies hold on to the past and refuse to adapt to the times.
The North American market will continue to grow. Right now, the North American market is rising to over $11 billion and growing every day. At this time, barely $3 billion worth of PCBs are being built in this country, while $11 billion are being purchased; obviously, that means that $8 billion are built offshore. That will change with global acquisitions on the horizon; a larger percentage will come back to be built here in North American—but by foreign owned (fully or partially) companies.
Mexico will start to be a factor as the Mexican demand for PCBs increases at a steady rate. This will also contribute to the growth of North American PCB fabrication.
In Five Years
Finally, combining these trends, here is what I believe the North American PCB industry will look like in five years. First, we will be part of the global PCB marketplace as the world gets flatter. Our companies will be larger and multinational. The number of shops will diminish but the capabilities and capacities of the American shops will grow. The North American fabricators will be part of multinational companies with locations all over the world.
Take the automotive market, for example. The prototypes and pre-production phases of a part number will be fabricated in the U.S. and then the production will go to Asia. But the difference will be that the part number will remain in the hands of the same company for the life of that part number. The same will apply to other markets as well.
These are exciting, if not outright historic times; but it is inevitable that the North American market will go in this direction. As the great economist Thomas Friedman continues to advise us, commerce dictates the flow of the world economy, and there is really nothing that governments and politicians can do about it. Commerce, like water, always rises to its own level. And. yes, that will be demonstrated by what happens here to our own PCB industry; the world is indeed getting flatter.
It’s only common sense.