The Taiwan Printed Circuit Association (TPCA) announced that the 2022Q1 output value of cross-strait PCB manufacturers totaled NT$209 billion (approx. US$7.466 billion), a new quarterly high over the years and the first Q1 output value exceeding NT$200 billion, a significant increase by 20.6% of NT$173.4 billion YoY. It was the quarter with positive YoY growth over the last 12 consecutive quarters from 2019Q2. Taiwanese PCB manufacturers maintain about 63% of production in Mainland China. As the macro-environment keeps changing, the 2022Q2 output value is projected at NT$209.2 billion, 14.8% higher YoY.
According to TPCA, benefited from the value-added advanced application market in 2022Q1, Taiwanese PCB manufacturers will experience an annual growth in all PCB products, particularly the IC substrate alone with an annual growth up to 39.9%, when revenues are boosted by the fully booked capacity and product price increase due to the ongoing under-supply of substrates. A growth of up to 20% is also expected in HDI products due to the rigid demand from the expansion in the application of end-user products. The 2022Q1 growth of flexible printed circuit (FPC) also reached 17.9% due to the increasing demand from smartphones, laptops, consumer electronics and automotive applications. It is noteworthy that although rigid-flex PCB sales dropped when consumption declined after an advanced TWS design change, an increase of 12.3% was noted in Q1 following the hot sales of the low-price AirPods and the sales increase in various end-user products.
Looking out to 2022, the 5G digital dividends and EV penetration were expected to put global economic development back on the right track as the COVID-19 curve was flattened, and alongside the substrate capacity of Taiwanese PCB manufacturers, a great opportunity is hoped for the Taiwan’s PCB industry. Unfortunately, when Mainland China imposed maximum crowd and materials control under the “dynamic zero-COVID” policy in early 2022Q2, the electronics industry either lowered or suspended capacity utilization, leading to another global undersupply of electronic components. Alongside the interest hike for suppressing inflation that has brought negative influence on the global economy and the faith of consumers, it is thus afraid that the stock of end-user products will be raised in 2022Q2 by the downfall of buying power. Despite the support of current chip shortages, the demand of end consumers is expected to turn conservative due to various factors. Even though the trend of developing products of high value continues, the suppression effect on the PCB output value in 2022Q2 still persists.
Although the geopolitical effects of the Russo-Ukrainian War, materials shortages and high inflation seem to impact Taiwan’s PCB industry in 2022, the strong chain effect of the US Dollar is expected to bring good news to the NTD revenues. As the progressive rate hike cycle of the US Dollar will overturn the NTD appreciation trend in the last two years, the electronics industry that trade with the US Dollar is expected to offset the unfavorable impacts with this exchange rate hike. Benefitting from the ongoing global semiconductor demand, a promising future is foreseeable in substrates. Following the expansion of the three giants and the entry of newcomers in the PCB industry, new substrate capacity will start operations progressively in both Taiwan and Mainland China this year to increase the global substrate market share of Taiwanese PCB manufacturers. Additionally, when competitors in China, Japan and South Korea keep entering the substrate market, it is necessary to keep an eye on the changes in the global supply and demand of semiconductors and substrates. In terms of risk dispersion, besides constantly expanding capacity in Taiwan and mainland China, Taiwanese PCB manufacturers have made active deployment in Southeast Asian markets, such as capacity expansion or investments in Malaysia and Thailand, to bring new opportunities to Taiwan’s PCB industry. In fact, Thailand has become the Southeast Asia production base of Taiwanese PCB manufacturers in addition to Taiwan and Mainland China.
A positive annual growth rate in the quarterly output value for 12 consecutive quarters is noted in Taiwan’s PCB industry. Despite the crises from geopolitics, materials shortages and the pandemic, manufacturers could overcome difficulties one after another with technological advantages, mass production capability, balanced portfolio and application structure, capacity dispatch and management capability. Additionally, the added value from technological upgrading is the key to success of Taiwanese PCB manufacturers. However, manufacturers are advised to keep track of the stock consumption speed of end-user products and inflation trends as the short-term indicators of market changes. In the long run, manufacturers should pay attention to the effect on the supply chain structure and global deployment of the intensity of customers’ demand for carbon neutrality of the supply chain. Looking back at the past, Taiwan’s PCB industry could always face and cope with the challenges in the micro-environment with its flexibility and resilience and there will be no exception for this time.