• +86 13556970745
  • service@pcbdog.com

TECH & NEWS

Many PCBs factory dissolution

May 30, 2018

On May 7, a PCB (printed circuit board) manufacturer in Foshan, Guangdong, was on the verge of failure due to high debt. In March of this year, an old PCB manufacturer in Panyu, Guangzhou, also announced its dissolution due to a broken capital chain.


The person in charge of the PCB manufacturer interviewed by the reporter revealed that the low-end PCB mainly depends on lowering the unit price to obtain customers, and the gross profit margin is mostly below 10%. Due to its weak position in the industrial chain, on the one hand, it has to provide downstream customers with ample billing periods, and at the same time it cannot obtain "convenience" from relatively strong suppliers. Once the funds cannot be recovered in time, the liquidity of the manufacturers will inevitably be under tremendous pressure.


The sudden new outbreak of pneumonia has plunged many small and medium PCB manufacturers into such a dilemma. But at the same time, PCB leading companies have attracted market attention because of their outstanding performance. With the continuous upgrading of technology and technology, the survival of the fittest is expected, but the epidemic has evolved into a catalyst, and the reshuffle of the PCB industry has accelerated.


Small and medium-sized manufacturers encounter liquidity problems


Mr. Pang currently operates a “plate factory” with a scale of more than 100 people in Guangzhou. He told reporters that he has been in this industry for more than 20 years and has operated factories for 13 years. Although the competition in the industry has been fierce, the impact of the epidemic especially made him feel that his life is not easy.


"Especially for overseas orders, because of the epidemic situation, many of them were stopped by customers. We took the raw materials and labor, but did not receive payment." Mr. Pang revealed that in the PCB industry, especially small and medium-sized manufacturers, the downstream The customer's billing period is relatively long. After the order is stopped, not only can the payment not be recovered, but also have to bear more than 1 million labor and factory rental costs every month, and the liquidity pressure is very large.


"PCB is an asset-heavy industry, and upstream raw material suppliers are very strong. Especially small and medium-sized board factories, they rarely get the suppliers' care. By the time of settlement, you will be granted a maximum of one week or 10 days. But The account period we give to our customers is very long, 6 or 7 months are common, and it is not uncommon to delay for more than 1 year. Once in the middle of the month, if there is no payment for the incoming goods, it cannot be paid to the supplier, and the capital chain is in trouble . "Zhang, the person in charge of a PCB manufacturer in Shenzhen, also revealed.


Mr. Zhang's PCB board is mainly supplied to customers in the two major industries of electronics and electrical appliances. He pointed out that the technical threshold of low-end PCB boards is low and the competition is fierce. Manufacturers can only obtain customers through unit price. "This has caused the gross profit margin of small and medium-sized board factories to be very low, usually below 10%," Mr. Zhang said that low profits and weak market discourse have made it difficult for small and medium-sized PCB board manufacturers to survive.


The sudden new pneumonia outbreak further exacerbated their operational difficulties. On May 7, the industry spread a "notice" issued by a PCB manufacturer in Foshan, Gaoming Haowang Circuit Board Co., Ltd., to suppliers and creditors. The manufacturer stated in the "Notice" that "due to the difficulty of fund recovery and the impact of the epidemic, the company's operations have been difficult, the debts are heavy, and it is facing bankruptcy." The reporter contacted an attorney responsible for his claims on the afternoon of May 11 and confirmed the news.


In March before this, a manufacturer named "Wannuo (Guangzhou Panyu) Circuit Board Co., Ltd." located in Panyu District, Guangzhou City announced its dissolution, which was also affected by the epidemic situation. . According to publicly available information, the company is an old PCB factory with a history of more than 20 years.


Epidemic accelerates industry reshuffle differentiation


PCB is a supporting body of electronic components, widely used in various electronic products, and it is also an indispensable component. At present, the commonly used classification method divides PCB into single panel, double panel, mult board, HDI board, IC package carrier board, flexible board, rigid-flex combined board, special board and other categories.


According to statistics from the China Electronic Circuit Industry Association, the output value of China's printed circuit board industry in 2019 is 227.499 billion yuan, of which mult boards account for 45.97% of the total output value, HDI accounts for 16.59%, packaging substrates account for 3.29%, and flexible boards account for 16.68%. Mult boards have become the main products for PCB applications, and HDI, flexible boards, etc. are the latest industry development directions.


Mr. Zhang's so-called "high-end and low-end" points can be reflected in the above classification and downstream applications. Shennan Circuit (002916.SZ), Hudian (002463.SZ), Shengyi Technology (600183.SH) and other industry head companies are mainly targeted at relatively high-end downstream customers such as communications, automobiles, and consumer electronics.


The profit margin of high-end PCB board is much higher than that of low-end products. According to the data in the 2019 annual report, the gross profit margin of the PCB business of Shennan Circuit was 27.98%, the gross profit margin of Shanghai Electric Power Co., Ltd. was 30.42%, and the gross profit margin of the PCB business of Shengyi Technology also reached 28.92%.


Under the epidemic, "a few happy and a few sad" can be described as a true portrayal of the PCB industry: small and medium-sized manufacturers are struggling, but the head company's performance in the first quarter is very dazzling. In the first quarter, Shennan Circuit's net profit increased by 48.19%, the profit of Shanghai Electric Power Co., Ltd. increased by 31.68% year-on-year, and the first quarter net profit of Shengyi Technology also increased significantly by 36.09%.


"Most of the board factories in Zhongshan and Foshan are supplied to downstream electrical appliance and lighting companies. The customers have low credibility and often default on payment. If the production is stopped for a long time and there is no capital inflow, there will certainly be no money to pay the supplier." According to Mr. Zhang, the high product premium, strong market position, and relatively high-quality customers are the core elements for PCB head companies to achieve stable performance under the impact of the epidemic. It is precisely these factors that will further increase the distance between the head company and the small and medium-sized manufacturers, which will accelerate the industry reshuffle and differentiation.


An unnamed person from the Guangdong Provincial Circuit Board Industry Association said that such "closures" and "management difficulties" will occur every year, but the epidemic has aggravated the adverse effects and the market is more concerned.


Shengang Securities Research pointed out that from the perspective of industry concentration, the spread of the epidemic has led to the reduction of overseas customer orders. Domestic small and medium-sized manufacturers may encounter another round of supply-side reforms. The industry concentration may be further improved. Head manufacturers may have the opportunity to obtain Orders and technical resources.


The person in charge of a PCB industry chain listed company in Dongguan said that the strong is always strong, and the industry's accelerated differentiation is inevitable.


RECENT POSTS