Circuit Board Manufacturing: USA vs. Asia
Isaac Maw posted on August 15, 2018 |

According to Research and Markets, the worldwide OEM electronics assembly market is worth $1.4 trillion USD, and is expanding rapidly. Automotive, consumer electronics, computers and aerospace are all major segments. Much of this market is currently controlled by Chinese companies in places like in the city of Shenzhen, located in Southeastern China.

However, there is also a contingent of electronics manufacturing services (EMS) providers in the USA. Competition with Asia is steep, but some American contractors have found the niche, the contracts and the suppliers to make EMS a viable business.

For North American entrepreneurs with a PCB diagram in hand, is local or overseas the better option? And for North American contract manufacturers, is there money to be made in electronics assembly?

To get started, I spoke with Phil Baker, a noted product designer and author of the book “From Concept to Consumer: How to Turn Ideas into Money.” If you’re an entrepreneur looking for advice on manufacturing, you should probably stop reading my article and order that book, instead.

Otherwise, keep reading!

The Asian Advantage in Electronics Manufacturing

Image courtesy of Foxconn
Image courtesy of Foxconn

I spoke to Anson Bao, Manager of PCBway, a Shenzhen-based PCB manufacturer about the advantages of using PCBWay. He listed the following items:

  • Communicating and negotiating with factories, and providing 24-hour service to each customer. Sometimes PCBWay can manufacture according to a customized design.
  • Quick delivery time. Expedited orders can be completed within 24 hours, and general orders can usually be completed in 2-3 days.
  •  Higher production capability. PCBWay can manufacture 1-14 layers of PCB and will finish it within the specified production time.
  • Lower manufacturing costs, with PCB prototype prices as low as $5 for 10 pieces.

Communicating with Your Manufacturer

Bao’s enthusiasm for fast response time is reflected in Baker’s experience with manufacturers in China. According to Baker, faster, more responsive service and communication is a definite advantage to working with Asian companies, compared to those in the United States.

“In the US, it’s between a week to two weeks to get a response,” said Baker. “And that’s a big indictment against US companies, but I have to say that one of the advantages with Asia is speed of response. When I started out it was fax and telex, now it’s email and messaging. That’s been my experience, anyway, and I’ve never seen anything that counters it. Anyone can test it; just go on a website like China Sources or Alibaba and make an inquiry about a product on a listing, and you’ll get a response within 24 hours,” said Baker.

Of course, this is a generalization, and you may well have experience with a North American company with excellent, fast service.

Lower Manufacturing Costs


While factors like lower cost of labor and lighter regulations do factor into the reduced cost of manufacturing in Asia, the biggest factor is the supply chain.

Efficient manufacturing is all about supply chain, and electronics are no different. With very few exceptions, the components in our devices are made in China, Korea and other Asian countries. Before even getting into things like labor cost, level of automation, service, or quality, the fact is that a company in a city like Shenzhen is dealing with a components supplier across the street, while a company in Ohio is dealing with a supplier across the globe.

There’s no way around it—this adds cost to the process. If the China-based manufacturer receives a bad shipment of LED displays, they can be back up and running in a matter of hours—not days or weeks.

However, this advantage is something of a double-edged sword. Just as components and materials need to be shipped around the globe, so too do the plans, personnel and finished products. At low production levels, these costs can be significant.

Because of this balance of efficiencies and costs, Asian manufacturing is well-suited to a specific range of electronics manufacturing projects, while others are best done Stateside.

Will a Chinese Manufacturer Steal My Idea?

The elephant in the room of this topic is the commonly-held belief that a Chinese manufacturer is going to rip off your design and sell it, cutting you off at the knees. To a Reddit post asking for advice on hiring a PCB manufacturer in the USA vs. China, one user replied, “If you want your design stolen and built to a lower spec, then go China.” Is this a serious concern?

“I’ve worked in Asia for 35-40 years, and I’ve always heard the issue of ‘your idea is being stolen,’ and I’ve tended to minimize that,” said Baker.

According to Baker, this attitude is not a realistic way of looking at your options. He cited two good reasons why. “You’re dealing with companies focused on OEM Manufacturing. They’re focused on building relationships with companies that are bringing them products. Most of these companies don’t have the ability to knock off a product. They can knock it off, rather, but they don’t have the resources to distribute it,” he said.

Furthermore, there are companies all around the world that would be willing to rip off your design to manufacture a knockoff or sell the design. However, these companies are focused on retail and distribution channels, not manufacturing. If the company you’re considering working with does not have these resources, it’s most likely not worth their while to bother stealing your idea, and you’re in the clear.

However, Baker had an even better reason not to give credence to this fear.

“Secondly, as soon as your product is released, there’s always the ability to reverse engineer it. It’s not a big risk to take it to a company and have them manufacture it 6 months earlier. Once it’s out in the market, it’s not protected from being knocked off. Anyway, many products today have software, or a unique service element, that can’t be knocked off,” Baker said.

He brought up a key idea: If your circuit board or your physical product was knocked off, would that sink your entire product offering? If so, you may have bigger things to worry about than your manufacturer knocking off your design.

He continued, “I have many people come to me and say, ‘I don’t want to go to China. They’ll steal my idea, I want to build it in the US.’ It’s really not a very realistic attitude. Too many entrepreneurs value their idea so much that they’re afraid that it’ll be stolen, and they’re afraid to do things. It very rarely happens.”

In many cases, it’s better to have your product in production and extra cash in your pocket than to spend too much time and money worrying about protecting your product, slowing production and adding cost in the process.

What do American Firms do best in EMS?


So, if Asia is the reigning champion of consumer electronics manufacturing, what are companies like Kimball Electronics doing assembling circuit boards in the USA?

Protoyping and Limited Runs

“If the product has several thousand or more per month of quantity, then there are often some advantages going to Asia,” said Baker. “But, it’s slower, and much more difficult to manage compared to doing something in the US. If the design is going through a lot of changes, you probably want to do it close to home.”

That’s where USA-based EMS shines: in the early stages, when kinks are being worked out, changes and improvements are being made, and frankly, when you’re still operating on the R&D budget.

If you’re working on the very first prototype of your product, consider building it yourself with your own equipment or in a makerspace. There’s no substitute for getting your hands on the design and learning about the potential issues or areas of improvement than doing it yourself.

Certain Low-Volume Industries

I asked Phil Baker when it makes sense to hire a USA-based firm.

“If you have a product that doesn’t have a really high competitive pressure to keep cost down,” He said. “In a particular field with a lot of competition, you really want to have the lowest manufacturing cost, so you have resources left to market the product. It’s much harder to compete with another product if your manufacturing cost is 50% higher.”

There are some industries where that isn’t the case. Medical devices, aerospace OEM, and custom projects are often unique and expensive, allowing them to absorb the higher costs. They also may need to deal with specific requirements or certifications, which can be difficult to oversee or attain in Asia.

Of course, the ultimate in USA EMS is the defense contract. “In the US, we never developed the infrastructure for mass production,” said Baker. “We never developed all the component manufacturing, and the fast response for product manufacturing. Our government has put a lot of focus into defense contracts, at the expense of the consumer industries.”

OEM contracts for companies like Lockheed Martin, Raytheon and Boeing are difficult to land, but could spell big money for American electronics contract manufacturers. Because of the sensitive nature of the contract, much of the work can’t be exported, no matter the cost.

Can Industry 4.0 Level the Playing Field?


Shipping, inventory, labor cost, production speed and quality—these are the factors contributing to China’s dominance in the electronics manufacturing market. These factors are all addressed by Industry 4.0 technology and advanced manufacturing concepts like Lean, Just-in-Time, the internet of things, and automation. So, will an advanced American manufacturing industry gain ground on Asia?

It’s possible. Already, highly precise assembly and pick-and-place robots are closing the gap on labor cost. While no amount of software can make your Asian components supplier closer to America, better supply chain management can eliminate costly downtime caused by late deliveries, as well as the costs of tying up dollars in inventory on the shelf.

Next Steps for Getting Your Design Manufactured

So, if you’re interested in seeking out a manufacturer in Asia, it still may not be clear how exactly you should go about it. While many reputable manufacturers have responsive support staff available online, it’s not always clear whether you have selected the best company for your job. I asked Phil Baker for his advice:

“Unless you knew a manufacturer, unless someone referred you to a manufacturer and you know they have the capabilities you’re looking for, I would not recommend trying to go to an Asian manufacturer on your own,” Baker said. “I would suggest going to a US company, and a lot of US companies have relationships in Asia, and they will work with a partner to do your board, or have it done somewhere else, or do a hybrid where the board is printed somewhere else and assembled locally… There are agents who can go and help you find a manufacturer, or there are people over there who can help you.”

 

While Asia seems to hold all the cards in consumer electronics manufacturing, the increasing application of advanced manufacturing technology, the need for quick-turn prototypes and limited-run projects, as well as the medical, aerospace, and other expensive, low-volume industries is keeping a niche market in North America for electronics manufacturing services.


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