In 2023, the United States authorized the use of Chapter 3 of the Defense Production Act, a domestic industrial investment plan. This move suggests that companies involved in PCB procurement will begin to see its impact at some point in 2024. The decision could potentially affect Asia's position in the market.
This initiative is part of a strategic effort aimed at revitalizing domestic production in the United States, aimed at enhancing the ubiquity and consistency of American manufacturing. According to estimates by the Department of Defense (DoD) for the fiscal year 2024 (FY), total spending on packaging and printed circuit boards (PCBs) will reach approximately $85.76 million, up from $43 million in 2023 and $27.3 million in 2022.
The Department of Defense justifies the increase in procurement budget, pointing out challenges faced by industrial, military, and consumer electronics sectors due to the inability of the U.S. to sustainably acquire or produce these technologies. Today, much of its PCB supply chain has shifted overseas to leverage cheaper labor and less regulation.
While domestic U.S. suppliers have expressed hesitation about collaborating with the Department of Defense—potentially prioritizing government contracts over other commercial opportunities—recent incentives, tax exemptions, and unconditional funding have convinced many. This increased interest comes at a time of surging consumer demand and emerging technological applications.
Demand for thinner, lighter, and smaller electronic products is growing in the consumer electronics sector. Meanwhile, industries such as automotive and healthcare are adopting advanced technologies like entertainment systems and medical wearable devices. These trends have spurred the emergence of HDI PCBs.
Similarly, as devices continue to shrink in size and customer demands become increasingly complex, there is a rising need for multi-layer PCBs. With growing digital dependence in telecommunications and defense sectors, there is a desire to increase layer counts to save space, enhance performance, and reduce weight.
Advancements in multi-layer PCB technology have made it possible to use new materials, driving demand for flexible boards. While most PCB manufacturers produce rigid boards, many are shifting some production capabilities to accommodate the increasingly compact and intricate designs of flexible boards.
The market size for flexible PCBs is projected to increase from approximately $19.7 billion in 2022 to $56.7 billion by 2032, indicating an expected compound annual growth rate of 11.2% over the decade. The thriving consumer electronics industry is a major driver of this trend.
It's noteworthy that consumer demand is rising in tandem with electronic waste—increased production is not without consequence. In fact, electronic waste has nearly doubled in just a decade, from around 33.8 million metric tons in 2010 to approximately 62 million metric tons in 2022. Therefore, PCB recycling is emerging as a trend.
This development is likely to have significant implications for design, logistics, and supply. It is estimated that by 2032, the global electronic waste recycling market will reach $94.2 billion, surpassing $30.4 billion in 2023, with a compound annual growth rate of 13.4%. Emerging applications of HDI and multi-layer PCBs may soon need to consider disposal strategies.
This shift carries significant implications. Firstly, American manufacturers must adjust their processes—manufacturing HDI PCBs presents unique challenges. For instance, their trace widths and spacing are typically less than 0.002 inches, complicating the manufacturing process, which could impact downstream suppliers, distributors, and sellers.
Similarly, multi-layer PCBs face analogous issues as higher layer counts increase assembly steps, prolong completion times, and raise manufacturing costs. While increased funding in the 2024 fiscal year under the Biden administration may mitigate these challenges, supply chain delays and obstacles related to the transition may still be unavoidable.
Furthermore, despite recent appropriations of millions of dollars for U.S. PCB and packaging solutions, the number of domestic companies remains low. As of 2024, there are only 150 PCB suppliers in the U.S., down from over 2,000 in the early 2000s. These figures indicate a decline in supply capacity of 30% to 4% relative to PCB demand.
The transition to multi-layer and HDI boards could permanently alter procurement patterns, triggering chain reactions in procurement, logistics, and manufacturing. Additionally, efforts in domestic production to meet demand may lead to market shifts for these technologies.
