The PCB Supply Chain Squeeze - A C-Level Special with Confidee's Raymond Goh and TLT's Vytautas Ilgunas

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Hello, I'm Philip Stoughton.
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Welcome to PCB at Sea Level.
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I am joined today by Vitaltas from TLT Printed Circuit Board and Raymond from Confidi.
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I want to talk about the supply chain around printed circuit boards.
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We're seeing a real squeeze at the moment.
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It's not the only thing in the supply chain that's challenged, but it is a really significant thing that we haven't seen for some considerable time.
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Before we do that, can you just give me a one-minute introduction to each of you and your company?
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Vitausis, I think a lot of people know about TLT.
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You're one of the biggest and newest PCB manufacturers in Europe.
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Give me a quick introduction to you and the company.
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Yeah, of course.
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So hi, I'm Vito Tesilgonas from TLT PCB, Chief Commercial Officer.
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So we have just built one of the biggest PCB factories in Europe.
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And our main purpose is to bring manufacturing back in Europe.
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Okay, excellent.
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And Raymond, just give us a quick introduction to you and what Confidi does.
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Right.
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My name is Raymond.
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I'm from Singapore and uh Confidi.
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We call ourselves a Rectech uh company, but we are procuring and as well as supplying PCBs.
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Okay.
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And one of the fundamental parts to what you do is that whole traceability and compliance side of things.
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That's a really important element.
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Yes, that's correct.
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Compliance is actually the keywords.
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Yeah, absolutely.
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Okay, so what I want to start with is European printed circuit boards do seem to be having a bit of a moment.
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European EMS is actually having a pretty good time too.
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And some of that is due to the defense market, some of it's due to the uh AI market.
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I think automotive, we're still seeing um challenges there.
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Butabsis, do you think that has caught the printed circuit board industry by surprise or the EMS industry by surprise?
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And everything we've been saying about the supply chain being lacking for the last five years in Europe is kind of coming home to roost.
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Yeah, so I think we should start with a bigger picture.
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Uh because 20 years ago, Europe had more than 600 PCB factories and around 20 laminate manufacturers.
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Today we have fewer than 150 PCB manufacturers, and just around 30 factories generate more than 70% of the European PCB market.
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And when we talk about laminates, actually, the situation is even more critical.
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Today Europe has only one laminate manufacturer left.
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And this is where today, yeah, and this is where today's shortage began.
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Because we didn't lose demand, we lost manufacturing capacity.
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Yeah.
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Yeah, and there's some correction in that with what you've been doing, with also some of the investments we've seen by some of those other very large companies.
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Raymond, from your point of view, what are you seeing in Europe and what are you seeing globally?
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Because my sense is that this problem's being felt, maybe not to the same degree, but also in the in the US as well, where they have less capacity.
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And again, they've lost that that connection to the laminate part of the supply chain.
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Right.
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Uh I'll just like to add on on uh what Fantatis has been saying.
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I think the shortages come from first the uh the glass fabric.
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And then because of the AI uh high demand from the AI drive, it has uh taken a lot of capacity.
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And uh, like what you're saying, it's sucking away the oxygen in the room.
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But then today we are seeing that the uh because of the high demand, especially in the advanced uh material, right, it has now uh been cascaded down to even the standard FR4.
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Right.
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Let's take, for example, in uh in Asia, right?
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FR4, we can uh factories in China, for example, they can easily get FR4 within three days.
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Right in the good old days.
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Today we're looking at a lead time of up to three months.
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That's inside.
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And uh yeah, and then when we're talking about the more advanced material, um the Panasonic, the M6, M7, Micron 6, Micron 7, um, we are looking at what six months, nine months lead time.
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Yeah.
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I just had a communication with uh somebody from TUC, and um we're hearing that uh they're offering like uh more than six months lead time.
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Yeah.
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So that's what's happening now.
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Yeah, and is that reliable lead time?
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I mean, my sense is that a lot of people are providing, you know, um, I guess projections of lead time, but not guarantees.
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Um, is it purely that those laminate facilities are making much more money per square meter by making stuff for the AI market, which is hyperscaling and quite happy to spend?
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I believe uh part of it is true because uh they're selling in terms of the uh the advanced material are selling at much higher price.
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Right.
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And uh what we have to know is that in order to produce uh one square meter of an advanced uh CCL, right, it would take the capacity of probably five square meters of a standard FR4.
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Right.
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So that's that's where you see the capacity is going away.
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And at the same time, uh price continue to go up because the demand is going up.
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Yeah, yeah.
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Absolutely.
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So Tatus, when you look at your own supply chain, are you buying lamin, you're buying laminate from that one place maybe that's left in Europe.
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But what about what about the uh remainder of your laminate?
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And is it something that suddenly you think, hey, when we built this factory, we should have put a laminate facility on the side of it?
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Uh yeah, so you know, speaking about laminates, I think uh everything starts with uh forecasting.
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And today availability is more important than price.
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And uh I really agree with Collector because at the moment, you know, everyone speaking about AI and AI servers uh and so on and so forth.
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But actually, in Europe, almost no one can produce PCB for AI at scale, maybe just for prototype.
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So, like example, we are working with customers in defense and critical infrastructure sectors, and they understand that you cannot wait until demand appears.
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Materials need to be planned and capacity need to be reserved.
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And that's why close cooperation between customer and PCB manufacturer is becoming more important than ever.
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And that custom that communication goes all the way along the supply chain, much as you communicate with your customers to let them know when that laminate is available and you can deliver.
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You need a very honest and clear communication with your laminate supplier, and clearly those laminate suppliers are being disrupted in a good way from their point of view by the massive additional demand they're seeing.
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How have they responded?
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Are they up in capacity?
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For example, Vitas, as you talked about the one laminate supplier left in Europe, are they looking at building additional capacity and how long a lead time is it to is it for them to actually increase their capacity?
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So, in this case, you know, we are working not just with this European laminate uh manufactured.
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So it really depends on uh product.
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If we are speaking about the standard FL4, it could be really different, could be from uh one month, could be till uh five months.
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So you need to secure everything in advance, yeah.
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Raymond, you mentioned that you thought it was partly due to the glass element that's in there.
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When you look at all the elements that go into um PCB lamina, do you see a fast route to increasing the volume?
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Or is this something that the industry is going to suffer from as long as this um hyperscaler boom for um for data uh data warehouses continues?
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Okay.
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I think first off, uh based on the information that we have here so far, uh, we believe that this situation will continue until next year.
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So we won't see any good solution or uh a quick uh capacity availability this year.
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Um a few reasons for this.
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I think one is the uh the demand for AI continue to increase, right?
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And uh at the same time, uh besides the shortage of uh glass cloth, um, we have run into shortage of uh raisin, right?
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With the recent uh conflicts in uh the Middle East, one of the uh uh petrochemical complexes in Saudi Arabia has been affected.
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And so far, as far as I know, they have not recovered from that.
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Right.
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And this complex alone is supplying to uh like close to 70% of the worldwide raisin for uh laminates, right?
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So that is causing a serious uh shortages of raw material in order to build the copper clad laminates, right?
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So and we don't see uh a quick recovery.
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We have seen some uh new expansion.
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Uh personally, we have also uh visited one in China earlier this year.
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Uh they have a huge plot of land.
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Uh new uh CCL factories is gonna be built, but it's not gonna happen overnight.
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It's gonna be like we'll be ready probably end of next year.
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So yeah, I don't see a quick uh recovery.
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You feel you feel that the scaling of the supply chain is gonna happen faster in China uh than perhaps it can in Europe or the Americas, because it always does, and there seems to be that ability to build scale faster.
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But Altus, what do you see of outside of China in terms of companies that make copper clad laminate wanting to grow and wanting to expand?
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And do you see a a timeline that is any better than Raymond is seeing, or is it is it pretty much, you know, we're gonna it's it's gonna get quite a lot worse before it gets better?
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Uh so actually I really agree with Raymond because you cannot build the laminate or the same PCB, manufacture them in six months, even in one year or in two years, it takes a year.
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Yeah.
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So situation is pretty the same.
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Yeah, and it's a it's it's not just it's not just time, it's a big investment, isn't it?
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And what you need to make those big investments, particularly if you want to build laminate in Europe, is clear visibility, there's going to be long-term demand.
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And it sounds from what you guys are saying is that it's demand in 2028 that you need to be looking at and beyond um to ensure that investment now is is worthwhile.
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Um yeah.
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Yeah.
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And then you have to look no good.
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Because I just would like to add, yeah, because advanced manufacturing decision must be made years before the market realized it needs them.
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Because if we if we wait, if we wait a shortage, it's already too late.
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Yeah, yeah.
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Yeah, but absolutely it feels like you got that right with um with your PCB manufacturing facility.
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It's the it's the rest of the supply chain that weren't as um forward-thinking as you were.
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I think what's also interesting in Europe, and we discussed this in Brussels last week, is we're seeing CHIPS Act II, we're seeing the Industrial Acceleration Act, we're seeing different programs in Europe that require larger made in Europe elements.
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And as the EMS people look at their bill of materials and they know a certain percentage has got to be made in Europe, they look at the PCB as an opportunity to buy something from Europe because many of the semiconductors uh cannot be.
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The time scale for the industry to respond to that, even if it's not laminar, if it's printing circuit boards, is is quite considerable, isn't it?
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There's definitely a lag between um supply and demand.
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Yeah, because you know Europe is investing billions into AI, defense, and data center.
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But there is you know, one simple question: who will build the hardware and where?
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Because AI needs hardware, and hardware needs advanced PCB.
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And advanced PCB needs laminate.
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Yeah.
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Yeah, yeah, it's that whole process.
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I think what you were saying, Raymond, is really interesting thinking about the resins, for example.
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I didn't realize that we had 70% dependence on Saudi Arabia uh for resins for PCBs.
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One of the jobs that you have to do that I think is really important in this supply chain um planning is look down the many, many tiers of the supply chain almost back to almost back to sand, um, you know, and figure out what the what the exposures are.
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I remember the first time I visited a Nanya PCB plant, they had a presentation in reception, and I think it was the the God made copper and um sand, and Nanya did the rest.
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Uh, I thought that was a really nice supply chain concept, but we're not in that situation anymore.
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There's a lot of in in interdependence, and there's a lot of geopolitical disruption plus market disruption that exposes that.
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When you think about the printed circuit board industry, apart from the ones we've mentioned in um uh Saudi Arabia, where where else do you see those weak points, those exposures?
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Uh in terms of uh the overall supplies, I think today the glass uh fibers uh still majority coming out from China and Japan and Taiwan.
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You see, the way when I start mentioning all these countries, we are looking at Asia.
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So it goes back to the question in uh how well is Europe and even US right trying to bring back, I mean, you're trying to bring back uh manufacturing, PCBs, yes, we have TLT, which is very good.
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But then the next question is where do you get the laminates?
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Yeah.
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I mean, we we have to go one level down and look at where do we get the supply of the laminates?
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Still, uh majority of this still comes from Asia.
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That's where I think uh, in terms of the uh uh, at least from what I feel, is that from the point where the government is not pushing or has not enough policies to bring this back into Europe.
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Yeah.
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And it's ecosystemic policies, isn't it?
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It's not just thinking about chips.
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You have to think about those chips going on sprinted circuit boards, you have to think of the other requirements that the EMS companies that assemble them have, but you have to think of all the requirements that companies like TLT PCB um have um within their supply chain.
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And it sounds like there is no quick fix to that, but it also feels like the medium-term policies perhaps don't go as far down the supply chain.
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Is that accurate?
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Do you think that's we've done a lot as an industry and through the Global Electronics Association to communicate the ecosystemic requirements to the commission, but do you think there's still a lack of understanding there?
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Patos, what do you think?
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Uh so today Europe talks a lot about semiconductors, and that's it's important.
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But semiconductors are just the only part of the value chain.
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And you are really right, Philip.
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Uh, because for Europe also need laminates, need advanced PCB manufacturing, and Europe needs assembly as well.
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And we need to complete electronic manufacturing ecosystem because if one part disappears, Europe lose control.
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Yeah, yeah, absolutely.
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It's it's it is bringing everything together and and trying to bring it all along at the at the same pace.
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I like the ideas, particularly around the Industrial Acceleration Act, where it is pretty straightforward to be defined as made in Europe, you have to have a percentage.
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They're looking specifically at a policy for automotive and EVs, where you know 70, 70% excluding batteries, uh manufactured in Europe.
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I think for electronics, it's then 50%.
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Um, and I know that when the EMS companies look at their bill of materials, they have to work hard to find 50% that they can purchase in Europe.
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I know a lot of big EMS companies are now working with the groups of PCB suppliers, including their European suppliers, to have a strategy to um, you know, help them do that and help them dual source.
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Raymond, when you zoom out globally and you see these challenges globally, you mentioned that you don't think the US is much better off.
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Do you see any other regions?
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Um, and I'm thinking, for example, of places like India, where they are scaling their manufacturing ecosystem.
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Do you see them as another alternative solution where trading relationships, for example, between Europe and India are nice and strong?
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Um India is starting.
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I think uh just just some days ago, I've read about uh the ecosystems in in India that they are also looking at going backwards in into the whole supply chain.
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So they wanted to have PCBs, they wanted to have the laminates uh built in India.
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Right.
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But they're starting now to look into this.
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Yeah, so this is it was not there.
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It was not there previously, but now they're at least starting to look into this.
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Yeah.
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I wouldn't say in the short term, I don't see that as uh as a replacement or a very quick solution, but in the long term, maybe.
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Yeah, it's interesting though, isn't it?
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When you look at the if you think that AI, and I don't think it's just AI, I think defense plays a role in this as well.
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But I think AI plays a very big part in it because you know, within a dental data center, there's a lot of laminar.
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Let's let's let's face that, and we're building more data centers than have ever been built before, and that's continuing to scale.
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One wonders if there's a somewhere in the next two, three, two to five years, perhaps a saturation in having enough data centers.
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I don't know if that ever happens because they seem to um have a voracious appetite for them.
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Um, but one wonders if we're we're in a situation where by the time the supply chain catches up, the demand will start to um peter off again.
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Do you think that's a risk, Vitalus, that we've got this real mismatch in timing between supply and demand?
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And um and it's really hard to pull the two together?
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Of course, of course, Phil, because uh, you know, like like it's all at the moment, you know, in Europe everyone is talking about chips, but chips is don't float and they need advanced PCB.
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Well, let's take one example.
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For one AI data center with around 100,000 GPUs that translates into around 12,000 servers, and that's about 200,000 advanced PCB.
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And these are not standard PCB, we are talking about from 20 to 40 layer high density, high reliability.
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So who are producing incredible amount of lamina, isn't it?
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Yeah, who are producing at the moment in Europe?
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Almost not nobody, yeah, yeah, nobody.
00:21:10.960 --> 00:21:17.759
So when we look, we've covered the long term, and the long term or the medium term isn't great.
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When you look at dealing with the short term, how do you both as companies try to help mitigate the risk for your customers?
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Is it just a question of making sure that communication channel is strong and you can give them visibility?
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Or are there other things that that you can do to help?
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Because risk in the risk in the supply chain is you know top of agenda for many of many of both of your customers.
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Raymond, how do you how do you see that?
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I think for for us, we have been warning or have been trying to uh inform the customer upfront.
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I think since last year we have been trying to tell at but at a more subtle.
00:21:59.759 --> 00:22:06.960
Way to inform customers to prepare and to place their orders much way in advance.
00:22:06.960 --> 00:22:17.359
But now we are actually going more active into this because of the uh the shortage has been filled now much more closely.
00:22:17.359 --> 00:22:24.799
Uh what we have also been trying to do with the customers is to um get customers to approve multiple laminates.
00:22:24.799 --> 00:22:26.559
Right.
00:22:26.559 --> 00:22:30.880
So that the the projects, the project is not locked into one sole material.
00:22:30.880 --> 00:22:31.599
Yeah.
00:22:31.599 --> 00:22:32.319
Right.
00:22:32.319 --> 00:22:41.200
So it gives the manufacturer uh a wider opportunities or flexibilities to choose different materials depending on what is available.
00:22:41.200 --> 00:22:45.039
I think one thing is very true, what uh Vitatis has been mentioned.
00:22:45.039 --> 00:22:48.160
It's it's no longer price, it's it's availability.
00:22:48.160 --> 00:22:49.279
Availability, yeah.
00:22:49.279 --> 00:22:52.319
So we have to work with what is available.
00:22:52.319 --> 00:22:59.119
So in order to work with what is available, we need to have more alternative solutions, alternative uh options.
00:22:59.759 --> 00:23:00.079
Yeah.
00:23:00.319 --> 00:23:01.359
And are they responding?
00:23:02.319 --> 00:23:05.039
Are your customers responding by giving you more visibility?
00:23:05.039 --> 00:23:07.599
Are you seeing longer order schedules?
00:23:09.119 --> 00:23:10.240
Uh yes and no.
00:23:10.240 --> 00:23:11.920
Some of them are still stubborn.
00:23:11.920 --> 00:23:12.880
Yeah.
00:23:12.880 --> 00:23:36.640
But uh but yes, uh, most of them are actually uh giving more uh visibility in uh up to a year, and uh also willing to work on uh ECNs to change different materials to to have additional materials being approved for a single project, which is which I think they start to see the benefits of doing so.
00:23:36.960 --> 00:23:37.200
Yeah.
00:23:37.200 --> 00:23:39.119
But Tatas, are you doing that as well?
00:23:39.119 --> 00:23:45.680
Are you um asking them to specify multiple laminate suppliers and give you more visibility?
00:23:46.559 --> 00:23:53.440
So, you know, always we are trying to find uh the best solution for each Gerber file, I could say.
00:23:53.440 --> 00:24:03.039
And you know, is the main thing that the companies that plan to gather are the companies that keep producing when the market changes?
00:24:03.039 --> 00:24:09.519
And just start with laminate manufacturers, PCB manufacturers, EMS or OMS.
00:24:10.480 --> 00:24:10.799
Okay.
00:24:10.799 --> 00:24:16.240
And um, are you finding that you now have a much longer order book than you had six months ago?
00:24:16.240 --> 00:24:20.880
And I I know you guys have been on a ramp anyway since you opened the facility.
00:24:20.880 --> 00:24:27.119
Um, but are you finding that you're you're seeing orders that stretch into 2027?
00:24:27.839 --> 00:24:28.720
Yeah, yeah.
00:24:28.720 --> 00:24:33.759
And uh sometimes not just orders, but sometimes some capacity reservation.
00:24:33.759 --> 00:24:34.640
So yeah.
00:24:35.119 --> 00:24:35.440
Okay.
00:24:35.440 --> 00:24:37.119
And what does that mean for your plans?
00:24:37.119 --> 00:24:40.799
Does it mean you're you're already thinking of the next extension?
00:24:40.799 --> 00:24:48.559
Or how does how does that fit with your vision of um TLT when you when you first first built it?
00:24:48.559 --> 00:24:51.599
Um, I guess a little over a year ago you opened?
00:24:52.160 --> 00:24:58.319
Yeah, so you know, overall we are speaking about uh vertical integration solution for our customer.
00:24:58.319 --> 00:25:08.720
Uh because now we have PCB, we have EMS, we have plastic molding, and we should start uh semiconductor and power model factories.
00:25:08.720 --> 00:25:13.680
So our target is to have everything in one place.
00:25:14.720 --> 00:25:16.559
Yeah, yeah, it makes sense, doesn't it?
00:25:16.559 --> 00:25:18.799
And I I think that visibility.
00:25:18.799 --> 00:25:23.680
Um, so last word um from both of you, Raymond.
00:25:23.680 --> 00:25:35.839
In terms of the short and medium term, what are you hoping will happen from a customer point of view and the supply chain point of view to make your life a little bit a little bit easier?
00:25:38.000 --> 00:25:50.640
Personally, I would really uh like to see customers more willing to accept changes, more willing to approve new materials, and uh, of course, the visibility uh as far as that they can stretch.
00:25:50.640 --> 00:26:08.400
And uh one thing for another thing is it's more of uh for the the whole industry because because of the current situation, there are customers or manufacturers who are placing orders that is not in demand.
00:26:08.400 --> 00:26:11.680
By doing so, you're just making it worse.
00:26:11.680 --> 00:26:12.559
Yeah.
00:26:12.559 --> 00:26:13.920
Yeah, yeah, there's more dependent.
00:26:13.920 --> 00:26:15.680
You're buying something that you do not need.
00:26:15.680 --> 00:26:20.079
So you are you're just making it worse for the rest of the people to try.
00:26:20.559 --> 00:26:24.640
Yeah, it's the uh it's the toilet paper shortage during COVID all over again, isn't it?
00:26:24.640 --> 00:26:28.000
It's panic, panic buying doesn't do any any good.
00:26:28.000 --> 00:26:38.240
I uh I really think it's the um specifying other laminates is a really important message, and I think that should be uh a relative easy lift for many um many customers.
00:26:38.240 --> 00:26:42.400
The last word from you, Vitalksis, what do you what do you hope from your customers?
00:26:42.400 --> 00:26:45.839
What do you what do you hope from your suppliers in the coming months?
00:26:46.480 --> 00:26:54.000
You know, I could say maybe not just about customers or uh suppliers, but overall about European ecosystem.
00:26:54.000 --> 00:27:04.079
We need to support whole ecosystem: BCB manufacturers, materials, assembly, and semiconductors.
00:27:04.079 --> 00:27:07.680
Only then we can really change something.
00:27:08.319 --> 00:27:08.640
Yeah.
00:27:08.640 --> 00:27:10.799
I think it's a really good point, Vitadison.
00:27:10.799 --> 00:27:17.839
I think when you look at certain parts of that ecosystem and supply chain, some parts are undervalued.
00:27:17.839 --> 00:27:33.519
Um, and I think if you're not thoughtful of the impact that has on the on the overall process, then those undervalued parts of the supply chain can um can can wither, and that's when you when you have problems like these.
00:27:33.519 --> 00:27:36.559
And I don't think this is the last problem we'll see.
00:27:36.559 --> 00:27:42.079
I think disruptions in the supply chain are part of life nowadays, and we have to we have to be ready for them.
00:27:42.079 --> 00:27:45.599
Gentlemen, thanks so much for taking the time to talk to me today.
00:27:45.599 --> 00:27:47.440
It's been a real pleasure.
00:27:47.440 --> 00:27:55.039
Um, I hope we can talk again soon, and I guess we'll see you both at least at Electronica if we don't see you um before later this year.
00:27:55.039 --> 00:27:56.319
Thanks so much.
00:27:56.319 --> 00:27:57.759
Thank you.