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Flexible Circuits Market: Surging Ahead
December 31, 1969 |Estimated reading time: 5 minutes
By Ashwin T. Ananthakrishnan, Frost & Sullivan
In Summary
The market for flexible circuits is experiencing huge demand. Growth in consumer electronics devices such as cell phones, PDAs, and flat panel displays (FPDs), as well as end-user applications in aerospace and defense, medical, computing, and automotive are contributing factors for the positive trend in this market.
The flex circuit market, which was worth $5.7 billion in 2005, is projected to increase to $11.4 billion in 2010, growing at a 13.6% compound annual growth rate (CAGR). Demand for consumer electronics devices such as cell phones, PDAs, and flat panel displays (FPDs), as well as end-user applications in aerospace and defense, medical, computing, and automotive, have been contributing factors for the growth of this market. Customers seek compact and miniaturized devices coupled with increased functionality, which has led to the growth of flex markets.
A recent trend in the PCB industry is increased use of liquid crystalline polymer (LCP). LCP circuits are made of polymer laminates. They have not found a wide range of applications in electronic assemblies because of the lack of extensive circuit design and features. Low moisture at a higher frequency helps prevent any moisture-related problems that a manufacturer might come across using polyamide substrates. Moreover, when the moisture level changes, LCPs are stable and stay flatter than polyamide substrates.The requirement for lower assembly costs and better reliability has resulted in the use of LCPs, since they offer lower moisture content at a higher frequency, suiting many end-user applications in defense, avionics and homeland security, communication, medical, and automotive. On the other hand, polyamide films boast advantages like thermal stability and mechanical resistance. However, polyamides are disadvantaged in moisture retention and dimensional stability, making LCP a suitable alternative. LCP substrates face the challenge of good metal adhesiveness. Although adhesiveness can be improved by roughening the surface before lamination, reliability issues may occur in the end product.
With technology advancing at a rapid pace and new product innovations occuring frequently, the market for flex circuits is growing exponentially. However, this market has challenges alongside accelerators for growth. Competition from Asia’s low-cost regions is one hindrance to North American and European flex circuit manufacturers. On a global perspective, consolidation of companies acts as a threat to manufacturers, since that will have an adverse impact on some companies’ market share.
The booming Asian market for electronics manufacturing is driving the flex circuits segment with increased shipments and productivity. Moreover, the long-term reliability and product life span required for equipment used in aerospace and defense, as well as medical industries, drive flex circuits’ growth globally. The Asian market, which is the hub of manufacturing, might see new players enter, resulting in expanding market size and revenues. To top it all, demand for high-density and smaller-sized components primarily from the digital electronics segment is expected to grow briskly in coming years; this is predicted to be a revenue generator for the flex circuits market.
Regional Analysis
The market witnessed a high rate of penetration from companies, primarily in Asia, soon after the 2000 economic downturn and over time, capitalizing on the cost-saving factors of Asian regions. This made Asia the largest manufacturing destination in the world. Until recently, most global flex circuits production was concentrated in Japan. Various factors in the low-cost Asian regions (excluding Japan) like China, Taiwan, and nearby countries now have made Asia the world’s largest manufacturing area for flex circuits (Figure 1). However, Japan is still the highest flex producer in Asia, with around 24.2% share in global production in 2007. It is projected that Asia (excluding Japan) could manufacture nearly $5 billion worth of flex circuits by the end of 2008, followed in share by North America and Europe. China and Japan likely will lead manufacturing in the near future.
Figure 1. Revenues in flex circuits reside mainly in the Asia-Pacific.Figure 2. Flex circuits appear in diverse end products, from consumer to medical assemblies.
Different factors affect production across global regions. For example, the consumer electronics sector has experienced strong demand in the Asian market and this has driven the growth of flex circuits in Asia. Asia (excluding Japan) currently holds nearly 55% of global flex circuit production. As low-cost destinations, countries in Asia use cost savings as revenue generators, not only in the flex circuits market, but also for the overall electronics market. At the same time in North America, where flex circuits are used extensively, demand for aerospace and defense, computing, and telecom remains a growth factor. North America contributes 13% of global flex circuits production, whereas Europe takes around 10% of global share. In Europe, the demand from automotive electronics a booming sector drives growth. In terms of manufacturing, both North America and Europe will enjoy a steady rate of growth in the future, though not a high one. Manufacturing in Asia will enjoy tremendous growth in the years to come, as the market seems to have extreme potential in growth opportunities that are still untapped. The trend of outsourcing and starting manufacturing bases in the Asian region will continue.
End-user Analysis
The percentage split of revenues across all verticals has come down compared to what the market showed a few years ago. This is due primarily to the fact that flex has penetrated other products and end-user applications, because of the boom in the technology and product advancements across all regions. Moreover, this growth across verticals is largely dependant on the trends in regional markets. Figure 2 represents the percentage split of the flex circuit’s revenues across different verticals.
Figure 2. Flex circuits appear in diverse end products, from consumer to medical assemblies.
The computing and communications segment, of which approximately 65% is North America and Europe combined and the rest is Asia, contributed 44% of flex revenues in 2007 nearly half. Consumer segments contributed 17% and automotive segments accounted for 12% of global flex revenues. A major portion of this revenue comes from Europe, followed by North America and Asia. The aerospace and defense segment gained 13% of global revenues during 2007. The medical/industrial segment contributed 9% and packaging accounted for 5%.
The application of flex circuits in packaging is a segment to watch in the coming years, as it gives feasible and practical solutions for the challenges that the manufacturers face with respect to packaging electronics.
Conclusion
The multi-billion-dollar PCB industry is expected to experience a gradual growth in the near future. The market currently is declining, especially in North America. However, with EMS companies scaling back to support new product development, flex circuit manufacturers do have an area in which to concentrate and propel market growth. Manufacturing in low-cost destinations also is increasing shipments of these products. With innovations taking place frequently, manufacturers in the flex circuit market are trying out different techniques to reduce the cost of manufacturing and overcome present challenges in the process, striving for higher efficiency.
Ashwin T. Ananthakrishnan, research analyst, Electronics & SMT Group, Frost & Sullivan, may be contacted at 7550 IH West, Suite 400, San Antonio, Texas 78229.