The United States has imposed tariffs. How can PCB manufacturers break through and respond?
At a time when the global trade pattern is changing, the move of the United States to impose tariffs has brought unprecedented challenges to many PCB manufacturers. PCB (printed circuit board), as the core component of electronic products, is widely used in many key industries such as communications, data centers, automotive electronics, medical equipment, industrial control, aerospace, etc. The changes in the US market have undoubtedly had a huge impact on PCB manufacturers that rely on exports. So, how should PCB manufacturers break through and respond?
The impact of the US tariffs on PCB manufacturers
The US tariffs have directly increased the export cost of PCB products. Taking some companies as an example, the price advantage of products originally exported to the United States has been weakened, and the profit margin has been greatly compressed. Some companies with a high degree of dependence on exports to the United States are even facing the dilemma of reduced orders and declining market share. For example, due to the US tariff policy, some electronic manufacturers have been asked by US importers to reduce prices by Chinese companies, otherwise they will reduce orders or turn to other countries for procurement, which has compressed corporate profits and even faced a survival crisis for some small and medium-sized enterprises.
From the industry perspective, the overall supply chain of the PCB industry has also been affected. The rising prices of raw materials and the instability of the supply chain have become more prominent, the procurement cycle of high-frequency boards has been extended, and the gross profit margin of the packaging substrate business has declined due to the increase in raw material prices. At the same time, the risk of exchange rate fluctuations has increased, and the export business faces more uncertainties. Some companies that rely heavily on exports have accelerated the transfer of production capacity to low-cost regions such as Vietnam and Mexico, further exacerbating the competitive pressure on domestic PCB manufacturers.
Breakthrough strategies for PCB manufacturers
Optimize supply chain and procurement strategies
PCB manufacturers can optimize the supply chain layout and find more cost-effective procurement channels. For example, import raw materials or semi-finished products from countries or regions with lower tariffs to reduce procurement costs. With its global strategic layout, Xinjingfu Technology takes the production capacity advantages and tariff preferences of the Thai PCBA factory as the core breakthrough point to provide customers with a "cost reduction + risk avoidance" dual-track PCBA solution. Its Thai PCBA factory covers an area of 20,000 square meters and has a production capacity of 9 million points. Customers can take full advantage of the trade agreement between ASEAN and the United States and significantly reduce the pressure of export tariffs.
Companies can also negotiate with suppliers to seek more favorable prices and more flexible payment methods. At the same time, adjust the procurement strategy, stock up more goods at one time to reduce unit costs, or purchase in advance to avoid the price increase after the tariff takes effect. In terms of logistics, optimize the logistics transportation mode. For example, sea transportation is much cheaper than air transportation, and bonded warehouses and overseas warehouses can be used to reduce the impact of tariffs.
Adjust product structure and market strategy
According to the impact of tariff policies, companies can adjust their product structure, reduce the production of products that are more affected by tariffs, and increase investment in more market-competitive products. In the field of 5G communications, develop high-performance PCBA products suitable for 5G base stations, use advanced materials and manufacturing processes, and improve the signal transmission performance and stability of products. These high value-added products can not only meet customers' demand for high-performance PCBA, but also alleviate the price pressure caused by trade frictions to a certain extent.
Companies should also expand new sales channels and reduce their dependence on a single market. In addition to the US market, markets such as Europe, Southeast Asia, and Africa have huge potential. For example, Shenzhen South Circuit has diversified its risks by expanding markets such as Europe and Southeast Asia. Its packaging substrate business has been deployed in Saudi Arabia to reduce its dependence on a single market. In 2024, Shenzhen South Circuit's orders in the domestic communications and data center fields increased significantly, especially the demand for AI servers, which drove the PCB business revenue to increase by 29.99% year-on-year.
Strengthen technological innovation and brand building
Increasing tariffs may intensify market competition, so PCB manufacturers should focus on technological innovation, improve product quality and added value to enhance market competitiveness. For example, Shenzhen Jiechuang Electronics pays attention to intellectual property protection, actively applies for patents, and protects the company's core technology and innovation achievements. By strengthening intellectual property protection, the company's technical barriers can be improved and the company's competitiveness in the international market can be enhanced. At the same time, by taking advantage of intellectual property rights, technical cooperation and exchanges with international companies can be carried out to enhance the company's international influence.
Strengthening brand building and enhancing brand awareness and reputation will help companies stand out in the fierce market competition. Companies can establish a good brand image and attract more customers by providing high-quality products and services.
Reasonable use of trade agreements and preferential policies
Companies should pay attention to trade agreements and preferential policies signed with trading partners, such as free trade agreements, tariff reductions, etc. By making reasonable use of these policies, companies can reduce tariff costs and improve export competitiveness. For example, according to the relevant provisions of the "Regulations of the People's Republic of China on Import and Export Tariffs", enterprises can understand and apply for applicable tariff reduction and exemption measures.
Actively communicate with the US government and relevant departments
In the face of trade protectionism measures such as the US tariff increase, PCB manufacturers should actively communicate with the US government and relevant departments. Through strengthening dialogue and consultation, enhance mutual understanding and trust, and seek mutually beneficial and win-win solutions. At the same time, we must also prepare for long-term challenges and formulate response strategies and plans.
Expand diversified markets and domestic demand markets
While strengthening international cooperation, enterprises should also actively expand diversified markets. By exploring emerging markets and deepening cooperation with traditional markets, we can reduce dependence on a single market and enhance market stability and risk resistance.
In addition, cultivating the domestic demand market has become an important way for enterprises to enhance economic resilience. The government can encourage enterprises to increase R&D investment, improve product quality and service levels by formulating relevant policies, such as reducing taxes and fees, and optimizing the business environment, thereby stimulating domestic demand potential. Enterprises can also follow this trend and increase investment in the domestic market to meet the needs of domestic consumers for high-quality, high-value-added products.
Case Analysis
Take Shenzhen South Circuit as an example. Its sales revenue in the United States will account for a relatively small proportion in 2024, and the scope of direct impact is limited at this stage. The company's main business is printed circuit boards (PCBs), packaging substrates and electronic assembly. Its main markets are concentrated in the fields of communications, data centers and automotive electronics, and its dependence on the United States is relatively low. After the United States announced an additional 34% tariff on April 2, Shenzhen South Circuit's stock price only fell by 4.5%, while the stock prices of companies in the same industry such as Luxshare Precision and Goertek fell to the limit, reflecting that it was less affected by the tariff policy.
Shenzhen South Circuit has diversified its risks by expanding into markets such as Europe and Southeast Asia. For example, its packaging substrate business has been deployed in Saudi Arabia to reduce its dependence on a single market. In terms of domestic demand growth, the company's orders in the domestic communications and data center fields will increase significantly in 2024, especially the demand for AI servers, which will drive the PCB business revenue to increase by 29.99% year-on-year. In terms of R&D investment, the proportion of R&D investment in net profit in 2024 will increase, focusing on breakthroughs in core technologies such as high-density interconnect (HDI) to enhance product competitiveness. The company has reserved 3 months of buffer inventory to cope with the surge in short-term tariff costs, and has reduced risks by negotiating solutions with customers. Although the US tariff policy has put pressure on the industry as a whole, Shenzhen South Circuit has maintained profit growth (net profit increased by 34.3% year-on-year in 2024) by relying on domestic market demand, technology accumulation and diversified layout.
Summary and Outlook
The US tariff increase has brought many challenges to PCB manufacturers, but it has also prompted companies to accelerate the pace of transformation and upgrading. Through the strategies of optimizing supply chain and procurement strategies, adjusting product structure and market strategy, strengthening technological innovation and brand building, making rational use of trade agreements and preferential policies, actively communicating with the US government and relevant departments, and expanding diversified markets and domestic demand markets, PCB manufacturers are expected to maintain competitiveness in the complex and changing international trade environment.
Looking to the future, with the continuous development of the global economy and the continuous advancement of technology, PCB manufacturers will face more opportunities and challenges. Enterprises need to continuously improve their core competitiveness, strengthen international cooperation and exchanges, jointly respond to the challenges of trade protectionism, and promote the healthy development of the global PCB industry.
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