As the world zooms on Taiwan’s outsized role in global semiconductor supply chain, especially the indispensable role of the foundry TSMC, until recently, few have noticed the equally indispensable role of Taiwan’s printed circuit board (PCB) industry within global electronics supply chain. However, as Intel CEO Pat Gelsinger specifically noted, substrate shortage plays an important role in the supply chain crisis. In fact, if it were not for the ongoing chip shortage, nobody would have thought that a linchpin of global high-tech industry sits in the 30 km radius with Taoyuan, a northwestern Taiwanese city, at its center.
Despite Chinese efforts to catch up, as of 2020 Taiwan still had the world’s largest PCB value chain, with top players like Unimicron Technology Corp. Including equipment providers, material suppliers, processing plants and the substrate makers themselves, the total output value of the industry within this 30 km radius surpassed NT$ 1 trillion last year.
The country’s PCB industry can be traced back to the American electronics company Ampex, when it set up its factory in Taoyuan back in 1968, followed by Japanese companies such as Hitachi Chemical. Together, they trained Taiwan’s first generation of PCB professionals. The highly complex processing stages of PCB manufacturing also drove these early talents to create factories of their own, sometimes focusing on just one processing stage. A hub slowly took shape.
An unique ecosystem difficult to replicate
By now, Taiwanese PCB industry leads the world in several markets, including High Density Interconnects (HDI) and IC substrates. Overall, at 34%, Taiwan’s PCB industry has the largest global market share. According to an estimation, Taiwanese makers make up of 40% of a smartphone’s PCB cost. In high-end smartphones, the percentage can reach up to 70%. When it comes to computers and autos, Taiwanese PCB industry on average make up 30-50% of PCB cost.
Up until now, 63.2% of Taiwanese PCB production capacity has actually been located in China. 37.3% of which are multilayer boards, 26.7% are flexible PCBs, and 19.1% are HDI PCBs. Gradually, however, Taiwanese PCB industry has switched its focus back into Taiwan, and for the first time, the expansion rate of Taiwan-based production capacity has overtaken that of China, partly driven by the recent power outrages in China.
As China steps up efforts to achieve the autonomy of its high-tech industry, its PCB sector has also become a source of competition for Taiwan. At 28.4%, Chinese PCB industry has the second largest market share. However, driven by low cost competition, it currently tilts toward mid-range and low-end products. In addition, Taiwan’s uniquely closely knitted PCB ecosystem is difficult to replicate in the short term.
According to a Taiwanese PCB maker, the industry itself nevertheless faces a mounting challenge, coming from none other than TSMC. Substrate makers have been perpetually catching up with TSMC as it moves further down more cutting-edge process nodes. “When we reach the point where we no longer can catch up, we will need to reflect on where the PCB industry stands.”