Monday, June 18, 2018
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Domestic Versus Offshore PCB Manufacturing
Is your printed circuit board in one of those containers? Is it error-free, or will it require costly repairs?

As electronic products move through their life cycles, it has long been accepted that manufacturing those products eventually migrates offshore to reduce costs. Even leading-edge products eventually are produced overseas with the help of new technologies and the aid of a global economy. But with changes constantly occurring to offshore manufacturing, the costs of producing electronic components offshore are increasing, along with the risks with producing those components, specifically threats to domestic intellectual property (IP) related to those components. For these reasons, there is a growing trend of printed-circuit-board (PCB) manufacturing returning to domestic manufacturing locations. For example, in 2012, Sony UK Technologies enabled process automation by adding just two holes to one of their PCB designs. They then resumed manufacturing the PCB domestically, after many years of producing it in China.

By considering a number of factors related to manufacturing PCBs domestically or overseas, an intelligent decision can be made on where to produce PCBs. Some of these factors are less favorable for overseas PCB manufacturing, including rising wages overseas, persistently high costs of transporting goods overseas, and the limited improvement in the time to market by producing PCBs overseas. For example, the average manufacturing wage overseas is increasing by 18 to 20 percent per year; in contrast, the productivity of domestic manufacturing workers continues to improve, adding to the appeal of domestic PCB manufacturing. Shipping overseas remains expensive, while reductions in the costs of domestic energy are making the costs of producing PCBs in the United States less over time. Time to market is always costly, so any additional time required by an overseas manufacturer to produce and deliver PCBs is critical. As these cost differences narrow, the trend increases towards producing PCBs domestically rather than in overseas facilities.

Quality assurance (QA) issues are contributing to the trend of PCB production moving from overseas facilities to domestic production. Because collaboration with offshore electronic manufacturers is inherently limited, domestic product managers most hope that their PCBs are properly manufactured to meet required specifications. But QC problems from offshore manufacturers producing PCBs that are close but don't quite meet the design requirements are expected to fuel the return of at least $2.5 billion in electronics manufacturing to the US over the next three years. PCBs represent a significant portion of that amount that will be moving back to domestic manufacturing facilities with these increases in offshore QC problems.

In cases where offshore QC may not be a concern, protecting IP may be an issue, as even large companies (with considerable legal clout) have learned. In 2012, General Electric (, for example, shifted manufacturing of its Geospring water heater back to the US, even though production had already started overseas. The move was motivated by the need to protect the IP for the product line. And if protecting IP is a legitimate concern for such a large company, smaller companies must also stay alert to the risk when manufacturing PCBs and other electronic components overseas.

Asking the right questions can help lead to optimum outcomes when considering offshore versus domestic PCB manufacturing. For firms dealing with lower-volume PCB manufacturing, there will be greater risk to the company's bottom line when using offshore manufacturing facilities, so domestic manufacturing can appear far more appealing for lower-volume products. But even for companies faced with higher-volume PCB manufacturing, domestic product may also be the preferable, although perhaps not obvious, choice. For any firm, deciding between domestic and overseas PCB manufacturing should carefully consider the less-apparent problems associated with using overseas manufacturing facilities and should include questions aimed at using both manufacturing options.

Costs associated with overseas PCB manufacturing can usually be identified, such as rising wages and transportation costs, but offshore PCB manufacturing can also impact a company's domestic operations by means of real, indirect costs. For example, a company that carries more inventory to optimize their transportation costs may find that that are offsetting any savings in shipping by the costs to store, handle, and insure excess inventory. An overseas supplier that cannot meet just-in-time (JIT) inventory requirements means unfulfilled orders and lost business for a company. When manufactured PCBs fail to meet design specifications, they must be retooled or adapted at additional cost.

Mitigating Risk
Producing PCBs in an overseas manufacturing facility can save a great deal of money for a company that is the right fit for overseas manufacturing and with the right product and application. Manufacturing PCBs overseas also incurs risk, however, and mitigating that risk places burdens on a company's domestic manufacturing personnel, resulting in hidden costs for overseas manufacturing. Depending upon time differences with overseas manufacturing facilities, domestic personnel must be available for ensuring proper coordination of a manufacturing project. In addition, cultural differences can lead to miscommunications, misunderstandings, and costly mistakes. Some attention from a domestic team, which has costs associated with it, must be paid to any overseas PCB manufacturing effort, which will add to the total cost.

In considering factors in favor of using overseas PCB manufacturers, PCB designs with high-volume production runs and long lead times usually point to the use of an overseas PCB manufacturer. The large potential aggregate savings for large-volume PCB production runs can better insulate a company's bottom line against any less-apparent costs that may occur from an overseas manufacturer. But a return on investment in overseas manufacturers for lower-volume or prototype production PCB jobs quickly diminishes, since such overseas manufacturing facilities are optimized for large production runs and will not deviate in their manufacturing practices for smaller-volume runs. And any overseas manufacturing efforts that require any form of supervision, in the form of a visit from domestic personnel, can wipe out any financial advantages because of the costs of that one visit. Any issues with a domestic PCB manufacturer can be quickly resolved, to ensure good PCB quality and minimize manufacturing risk.

The size of a PCB order can impact scheduling, since many overseas manufacturers will give precedence to larger production runs. Such delays can ripple through a company's supply chain, delaying production of the finished product. Domestic PCB manufacturers tend to be structured for greater flexibility and better support of product schedules, even for lower-volume production. As noted for JIT production, domestic PCB manufacturers tend to provide less of a scheduling risk.

Yields Are Worth Watching
Yield is an important, although often overlooked, factor in choosing a PCB manufacturer. A multiple-dimension analysis of PCB quality can provide great detail on the quality of a manufacturer's work, as can consideration of a PCB's yields over time along with the circuit board's functional reliability in the end-product.

Long-term reliability is a key measure of manufactured PCB quality. Counterfeit components routinely find their way into PCBs manufactured offshore. Some substandard parts are easy to spot, others not as much. Counterfeit components may pass initial testing as part of an overseas manufactured PCB, but fail later when the circuit board has been installed in the final product. Counterfeit components impact product performance, end-customer satisfaction, and eventually a firm's reputation in the marketplace. This can be a high price to pay, but a difficult cost to measure.

Are Savings Worth The Risk To IP?
Threats to IP can increase once production moves offshore. These threats are quite complex, and can vary from country to country, requiring considerable financial commitments as part of the defense to protect IP. Domestic patent, trade secret, and mask work laws are antiquated and provide minimal protection. Little or no motivation exists in places like China to protect US corporate intellectual property. Laws in such overseas manufacturing locations tend to provide little protection for foreign IP with limited enforcement effort behind them. As noted earlier with General Electric, the company chose to move its manufacturing location rather than invest resources in trying to defend its IP in a manufacturing facility based in mainland China. Smaller companies realistically have few options for securing their IP. Thoroughly vetting partners to determine reliability can help, but most companies are forced to make a leap of faith when they send their IP offshore.

Depending upon the needs, it can make more sense for a company to turn to domestic sources for PCB manufacturing. Problems with overseas PCB manufacturers concerning timing, IP protection, and even hidden costs, can make overseas PCB manufacturers less attractive. Especially for projects that may involve lower volumes and greater attention to QC details, domestic PCB manufacturers may offer more realistic, cost-effective solutions for producing PCBs than traditional overseas suppliers.

Contact: Sunstone Circuits, 13626 S. Freeman Road, Mulino, OR 97042 503-829-9108 E-mail: Web:

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