Ever since the lockdown to contain the spread of COVID-19 earlier this year, there has been a conflict between demand and supply. As some of you are aware of, raw materials of PCB have been uprising.
Accounts for 30% of the PCB cost structure, CCL is the major material cost. KB (Kingboard) is the world’s largest CCL manufacturer with a market share of 14%-16%. KB recently published a price up statement on Dec. 3rd, which is the 5th in year 2020, making a total of 40-50% price up in FR-4, the most frequently used material in PCB manufacturing. Other raw materials manufacture is following up.
Don’t panic, let’s see its impact first.
To Large-sized PCB factories are the most important strategic clients of CCL manufactures, which leaving them good negotiation capabilities. They are barely affected from these rounds of uprising prices. So they have not transfer the extra costs to their clients to maintain the stable cooperation.
To Medium-sized PCB factories: Medium-sized PCB factories are also important to CCL manufactures, enjoying only limited extra cost from these rounds of uprising prices. These factories intends to transfer partial extra cost to their customers.
To Small-sized PCB factories: Small-sized PCB factories are subject to these uprising prices. Because they are small, they have limited negotiation capabilities, leaving them no options but to accept the extra costs. They have to transfer the extra cost to their customers. However, their customers may leave them for suppliers with better prices. In the end, they are eating most part of the extra cost themselves.
KB is the major supplier of high-speed CCL, not high-frequency CCL. The priceup are mainly applies to high-speed CCL. The major supplier of high-frequency CCL are Rogers, Shengyi and more.
The whole industry is enjoying a prosperous development right now for below reasons:
Raw materials prices are uprising.
Traditional Year-end peak season, companies/brands are stocking up products.
The delayed demands accumulated in the first half of this year when pandemic hit China greatly are now started.
Some overseas demands had to move to China as they are suffering from pandemic right now.
When will this be normalized?
Based on our research, we think this peak season will extend to the end of Q1, 2021 and is likely to slow down in Q2, 2021 for below reasons:
From production schedule: Although some of the factories claim that their production capacity is booked till June, 2021, what they received are intended orders, not solid POs. We estimate that their production capacity is fully booked to march, 2021 and the capacity will gradually be released from April, 2021.
From Lead Time: Major large-sized PCB factories are maintaining a 20-25 days delivery for multilayer boards and 30-35 days for HDI boards. These are very common each year around the same period.
From Raw material: The price up and demand-supply conflict of CCL seems to have little impact on large-sized PCB factories.
We conclude that the current prosperity of the PCB industry will continue so through Q1 of 2021 and will stablize in Q2. But it is always a good idea to plan ahead.
To know more about how Chinese New Year will impact your business, please click this article: https://www.linkedin.com/pulse/why-should-i-care-chinese-new-year-bo-wang/