Woven into almost every economic story these days is “reshoring,” a word most Americans had never heard just 18 months ago.
For decades, market pressures and foreign subsidies drove manufacturing of everything from socks to semiconductors overseas. Policymakers and economists called this “offshoring.” This shift was the natural consequence of an increasingly interconnected world, new trade agreements, and a period of unprecedented global peace and security.
Consumers reaped the benefits of offshoring in the form of inexpensive goods. But as the COVID-19 pandemic made clear, we paid a price for sending the production of critical technologies overseas. Disruptions to unpredictable supply chains and dependence on technology in far-off locations led to sudden price surges and empty store shelves. This should be a real wake up call for both government and industry. Chasing the low-cost option without considering the broader long-term implications brought us to where we are today.
The effects of offshoring have been especially dramatic for the PCB industry. Two decades ago, nearly 30% of the world’s printed circuit boards were made in America. Today that number is just 4%. The number of PCB companies fell from 2,000 to fewer than 150. And while the loss of manufacturing is alarming, we have also lost intellectual property, capital assets, and the accumulated knowledge of thousands of U.S. employees.
The good news is that policymakers have acted to reshore select microelectronics by passing the CHIPS and Science Act, which will invest more than $50 billion through grants and tax credits into building new facilities in the United States.
Now we need to take the next step. Making chips in America doesn’t solve the supply chain security and resiliency issues. Why not? Because when the new chips are made here, they will still rely on PCBs and advanced packaging done almost exclusively in Asia.
How can we restore domestic production of microelectronics? Here are three places where government and industry need to act:
Just as chips have evolved, PCBs have become highly complex microelectronics constructed with custom combinations of woven glass, copper foil, resin, and other highly engineered materials. PCBs are modern marvels, but as semiconductors evolve, so must the PCBs that support them. PCB manufacturers must invest in R&D to stay current. This past year, Congress started to address R&D for PCBs through HR 7677, the Supporting American Printed Circuit Boards Act, a bill that will re-emerge in the 118th Congress. Government support for R&D is important because the U.S. competes against countries that have been incentivizing innovation and low-cost production for decades. It is time for the U.S. to step up and do the same.
The men and women who design, build, test, and inspect PCBs are the most impressive people I’ve had the pleasure to work with. Unfortunately, their ranks have thinned as the industry contracted over the past two decades. When manufacturing and R&D migrated overseas, so did much of the know-how. As a nation, we need to invest in the manufacturing and scientific skills we need to be competitive. This is a long-term issue. If we don’t address the shortage of qualified workers now and provide them with clear career pathways, we will have a hard time attracting the next generation to this industry. The talent pipeline is just as crucial as any piece of machinery we might buy or any building we might erect.
Government incentives alone are not enough to scale up and sustain a robust and resilient microelectronics industry in the U.S. The present business case is challenging. To attract commercial investment, prospective investors need to see both the right conditions and a promise of future returns. Future returns depend on projecting aggregate demand. For example, if we were to put together the domestic demand for 5G, medical, finance/banking and telecommunications, and other critical infrastructure, I believe we would see a viable investment opportunity. Government and industry should agree on the critical infrastructure that requires domestically produced PCBs and other microelectronics. Then legislators and regulators could take coordinated action to support this industry and protect our nation’s critical infrastructure.
Reshoring microelectronics manufacturing has a multitude of benefits, all of which make a compelling argument for government and industry action. As the Printed Circuit Board Association of America, our efforts in Washington, D.C., haven't gone unnoticed. We continue to educate, advocate and lobby for more government cooperation. Join us today as we work toward a stronger future for this critical industry.
This column originally appeared in the December 2022 issue of PCB007 Magazine.