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Jabil's Global Commodity Intelligence Archive
Global Commodity Intelligence
Q2 2024 | APRIL- JUNE
Jabil's Global Commodity Intelligence Archive
Global Commodity Intelligence
Q2 2024 | APRIL- JUNE
PCB COMMODITIES
PRINTED CIRCUIT BOARDS
OVERALL DEMAND OUTLOOK
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2023 witnessed a significant downturn in the global production of Printed Circuit Boards (PCBs), with output dropping by over 10% to around USD 70 billion despite the growth in certain sectors like EV, AI server, military, aerospace, and the seasonal demand surge for cellphones.
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Looking ahead to 2024, cautious optimism prevails within the PCB industry. Despite the setbacks of the previous year, many suppliers are forecasting a modest recovery with a projected growth of a few percent. This anticipated uptick is underpinned by expectations of inventory depletion, continuous electrification and development of autonomous driving in the automotive industry, acceleration in incorporating artificial intelligence (AI) and analytics functionalities into cloud and server storage platforms, and digitalization of consumer healthcare products.
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In 2024, the emergence of new PCB manufacturing capacity in Southeast Asian countries such as Thailand, Malaysia, and Vietnam will be noticeable. However, most of it is expected to be released in 2025. Thailand stands out as a focal point for investment, with participation from more than 30 PCB manufacturers and other key players in the supply chain, including copper-clad laminate (CCL) makers and PCB manufacturing equipment suppliers.
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The market is still overcapacity. Considering the release of new out-of-China capacity, the situation will continue unless there is a significant surge in overall demand.
SUPPLY
- The general lead time remains stable, typically five to eight weeks. Some suppliers in China have extended theirs by one to two weeks due to the Lunar New Year holidays.
- The market continues to exhibit softness, with China PCB suppliers maintaining a relatively unchanged capacity loading, averaging around 70% compared to the previous quarter.
- There is also overcapacity for CCL, resulting in a stable lead time. Standard FR-4 materials usually have a lead time of one to two weeks, whereas special materials such as high speed/high frequency may require longer, approximately three to four weeks.
- Overall, there are currently no constraints on PCB materials or production lead time.
MARKET DYNAMICS
- 2023 marked the first decrease in global PCB output since 2019, with a drop exceeding 10%, one of the largest declines observed.
- The Q1 and Q2 of 2024 outlook appears to be stagnant, leaving suppliers banking on a turnaround in the latter half of the year.
- Some suppliers are now reevaluating their pricing strategies due to the intense competition and aggressive pricing in previous quarters.
- Suppliers' strategies regarding out-of-China investment vary. While some investors are scaling back due to a weak market, others prioritize investments in response to customer pressure. New capacity in Southeast Asia is expected to come online in the second half of 2024, with the majority anticipated operational by 2025. Thailand is poised as a central hub for this expansion.
MARKET UPDATE
- Automotive: Demand growth for EVs has slowed. Some pushouts in the first quarter of 2024.
- Communication: Struggling, mainly due to insufficient investment in infrastructure amid a turbulent global economy.
- Cloud and Server: Continuing its momentum, integrating AI and analytics functionalities into cloud and server storage platforms will accelerate significantly in 2024.
- Consumer: Still weak. Although the cellphone sector is holding up well, the chance is that it may decline after Q1 2024.
- Industrial: Q1 appears to be stagnant, with a noticeable deceleration in the growth of renewable energy-related products.
- Medical: Remains stable, with the consumer healthcare sector flourishing due to digitalization.
PRICE
- The strong USD against RMB continues to benefit Chinese PCB suppliers trading in USD. However, suppliers worry that this advantage may diminish when the U.S. Federal Reserve follows through with anticipated interest rate cuts.
- The ongoing Russia-Ukraine war and conflict in the Middle East have raised concerns about potential price increases in crude oil and resin -- a major raw material for copper-clad laminate (CCL).
- Some CCL suppliers have implemented price increases, albeit to a modest extent, as weak market conditions and subdued demand constrain them. In contrast, PCB suppliers are hesitant to pass on the rise to their customers, wary of potential repercussions.
- Amid persistent market weakness, suppliers have consistently resorted to price undercutting for quarters, resulting in thin margins for all competitors. Considering the factors mentioned above, there's a general sense that suppliers are proceeding with increased caution and conservativeness when offering cost reductions.
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