Fight for material. What problems are PCB manufacturers solving in the summer of 2021?

They say the world is a global village in which everything is related to everything. I’ll give you a common example. It is not customary for the main news channels to address the area of chip or PCB production. But there's no other way: each of us who has been used to ordering anything online in recent years and receiving everything on time suddenly has to deal with delays. Sometimes it is a few days, sometimes - months. As befits the global village, there are many reasons for it. We also talked about it with Radim Vítek and Ondřej Horký from Gatema PCB. One of the few manufacturers of printed circuit boards, which, thanks to its focus, has not yet had to fundamentally change delivery dates.

But let's follow the footsteps of a story that began to be written at the turn of 2019 and 2020 in Wuhan, China. That is, at the site where the coronavirus pandemic first appeared. It first eliminated local factories for a few weeks and caused an initial slippage of orders. Above all, however, the virus began to spread throughout the world from the focus of infection. You know how we reacted. Lockdown, quarantine, strict hygiene measures. And above all, the great uncertainty that has flooded a number of industries.

Exactly at that moment, orders that would normally belong to Asian manufacturers, returned to Europe. It was safer for many businesses not to rely on remote logistics. “Last year we produced a lot at first, because a number of European companies came to us due to the failure of China. We received orders from companies that had not purchased from us before. But in the summer, the caution of the whole market began to show. The number of standard orders decreased, the development ones were more addressed. It was felt that automotive branch in particular sits out”, says Ondřej Horký, Gatema PCB store manager.

It's not just electronics manufacturers who are fighting for copper

And it was the moment that Europe sowed the seeds of the current problem, which caught up with it fully with the start of this year. For years, everything ran in standard mode. Chinese companies produced basic raw materials such as copper or plastic. And they then supplied them to customers all over the world. Everything was contracted in advance and there was no need to look for any complexities. “By making many European companies insecure, they stopped stockpiling raw materials and preferred to wait. Paradoxically, they caused a crisis. Because there was suddenly a lot of copper, which, for example, would eventually end up in European automakers, and local producers weren't messing around. They found new customers, for example, from the field of wind power plants. It has ceased to be the case that electronics manufacturers compete with each other, but new players from completely different fields have appeared”, points out Ondřej Horký.

At the same time, while approximately three kilograms of copper are needed for one car, one wind farm needs three tons only for the base – plus cabling and wires. Moreover, such copper does not have to be so high-grade, and is therefore more attractive in terms of price. By the time European automotive and other industries caught their breath, Chinese producers already had other partners contracted. And that started the second round of panic.

Hunt for material

“Suddenly, we all found out that there is and will be a shortage of copper or plastics. That's why we reacted as usual. The hunt for material began. They all started ordering much larger batches than they normally needed to have enough stock. However, this made the whole situation even more complicated. We started to fight among ourselves, and thus we enabled producers to increase prices several times and try to profit, and new dealers appeared on the market”, adds Radim Vítek from the department of technical preparation of production.

To make matters worse, hand in hand with the lack of raw materials, other circumstances came, which were reflected in the nervous atmosphere. “At the beginning of the year, two huge productions in China, capable of producing an incredible amount of materials, burned down. Suddenly they do not exist, and logically it is not possible to replace the replacement from day to day”, says Ondřej Horký. Problems also affected logistics. Air transport is still recovering from the coronavirus crisis, maritime transport is congested. Many of us have experienced a crisis in the Suez Canal, caused by one stranded ship. But problems also affect other ports.

“In America, it is common for ships to anchor or circle around the harbour for a fortnight before they are unloaded. But we also know similar examples from Europe. As a result, the price of the container triples as standard, but it is often ten times the original price of transport. These are things you have to take into account”, adds Radim Vítek.

Nevertheless, Gatema PCB manages the vast majority of its orders on time. “The key point at the first stage was that we have a very strong economic background. Thanks to that, we were able to stock the material more than three months in advance – and we got it for us. Many of our competitors could not afford it and only produce what they have in stock. They often have delays for several weeks or months. In contrast, we still hold the standard between five and ten days. And also, it was important not to go crazy. At one point, several companies approached us with the idea that they would need us to produce large amounts. Of course, this would be tempting for us, because we would be able to cover production for several months in advance. But at the same time, it would jeopardize our traditional partners. Therefore, we decline with thanks and decided to bet on the faithful and loyal clients. I'm not saying that we don't accept new orders, but we don't want to start high risk ventures”, says Ondřej Horký.

With the proviso that if nothing extraordinary happens, Gatema is ready to handle everything at least by the end of the year. “Until then, the situation on the raw materials market could calm down a bit”, concludes Ondřej Horký.

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Ondřej Horký
Sales Manager