Issue link: https://iconnect007.uberflip.com/i/1531014
24 SMT007 MAGAZINE I JANUARY 2025 sifying beyond China. It wasn't just about the trade war but a mix of other concerns as well. Now, U.S. and European customers have shied parts of their supply chain to Southeast Asia. As a result, China is facing an oversupply problem with fewer customers. e market's taking a tough turn—suddenly, it's all about price, with everyone competing to undercut each other. It's honestly a bit chaotic, some- thing we've never seen before, and it's a real challenge for Chinese suppliers. With these changes, does there seem to be a push for Chinese suppliers to concentrate on the Chinese domestic market over an interna- tional market? e trade war and China Plus One might seem like push factors that Chinese board shops want to focus more on the domestic market, but that's not exactly the case. Chinese sup- pliers are still keen to maintain relationships with current U.S. and European customers and even explore new ones. I noticed a trend: Most of the top 50 PCB manufacturers have announced plans to set up new factories in Southeast Asia, like Vietnam or ailand. is will lead to another highly competitive market in the region. However, Southeast Asia comes with its own challenges. ere's a labor shortage, so wages will remain high for at least a year or two. On top of that, there's also a supply chain gap, where supply costs will stay elevated. We're looking at 15–20% higher production costs in Southeast Asia compared to China. This makes it interesting for buyers and OEMs because working with a China-plus- one strategy means managing the cost increase for the plus-one portion. Does this mean a price increase, or do they absorb it in their margins? Customers are well aware of the situation. In the first three years, they're likely to accept the price increase. But aer that, they will want costs to come down to match China's pricing. While cost might eventually decrease, it will be a tough ride in the short term. Do you see the supply chain situation improving in Southeast Asia in the next couple of years? Take us, for example. We are a Chinese fab- ricator that has already purchased land in ailand with plans to build a factory there. e challenge is that most materials still need to be imported from China. is comes with its own set of issues: longer lead times, and extra import or transportation taxes. is could definitely drive costs higher. It's very clear that much of the build-out for Thailand's PCB industry is coming from Chi- nese companies building internationally. We bought the land at the end of 2022. Back then, there wasn't much PCB fab activity in ailand. But since we made our announce- ment, we've seen about 20 factories come to ailand. Everyone is under the same pres- sure from customers who now require it. For those factories looking to break into new European or North American customers, set- ting up in ailand or nearby countries isn't just optional—it's a must. Tom Yang