An Integrated PCB Producer’s Approach to the Market
NCAB Group is one of the biggest PCB suppliers in the world. Barry Matties and Stephen Las Marias recently met with Andy Liu of NCAB to discuss an integrated producer's approach to the market, new design tools, the current state of the Chinese market, and the future of 3D printed electronics.
Barry Matties: Andy, start by telling me a little about NCAB and what you do.
Andy Liu: NCAB Group is a leading player in PCB production, with 13 sales companies around the world. Our ongoing goal is to provide high quality products to our customers. We have our own staff, our own standards, and we also provide local and global support to our customers. It is a global society.
Matties: And you are introducing some new design tools? What made you to want to produce design tools?
Liu: Earlier, there was not a particular demand for this, but now the technology is increasing and we've got more and more FPGAs using finer pitches. This creates a lot of challenges for PCB layouts itself. In the meanwhile, we want to design something that we can have the manufacturer build at the lowest total cost. Our design team consists of ten people, and above that, we have about 283 people that manage our daily business from quotation to delivery.
Matties: Of the 283 people, what do they do?
Liu: We have two parts: the local offices which handle each local market, and then we have the factory management. They are centralized in Shenzhen and Europe, and they control the quality, implement our standards, monitor the deliveries, and sustain the factory. Our factory management team in China consists of around 60 persons.
Matties: If someone needs a circuit board, they come to you with a design and then you put it with your best supplier partner, and that could be in China, Europe, and the United States or anywhere they need it, basically?
Matties: The advantage of them coming to you is that you manage the relationship with the factories. They don't have to worry about that, and you set a quality standard that you make sure your suppliers adhere to in order to make sure that your customers get the best product. Now, with the customers, do you do all the billing? Do they pay you directly for the circuit boards?
Liu: Yes. We take the full responsibility.
Matties: And you guys have been doing this for how many years?
Liu: Over 20 years.
Matties: So you've seen a lot change in 20 years. How long have you been with the company?
Liu: Ten years.
Matties: Boy, you've seen a lot of change in 10 years in China, for sure. What's the greatest challenge in that model for you?
Liu: I think it's about communication. Sometimes customers don't know what they want. They think, "I just need a reasonable product. I don't need this hole plating at 25 micro inches. Why do I need that? That’s an added cost for me." The challenge is for a customer to understand how important it is to have those requirements in place. It's not cost adding, but it's cost-savings in the long term. Plus, PCBs can be a surprise product. Different factories use different materials, have different internal standards, and you can get shocked.
NCAB is a company that can meet their customers’ expectations. In a way, we are selling sleep. If you buy the PCB from us, you can sleep. We don't want there to be any shock in the future.
Matties: So you guarantee quality and they don't have to worry about it. On-time delivery?
Liu: Yes, that’s very important.
Matties: What sort of revenue do you do?
Liu: Last year, we were doing about €138 million. This year, we're targeting about €158 million. Within three years, our target is €200 million.
Matties: That's a big number.
Liu: In PCBs, yes. Our vision is to be number one wherever we are and bring the benefits for our customers.
Matties: You certainly have competitors. There are a lot of brokers, if you will, that compete against you. How do you stand up to a competitor? I know that some of them have design tools, and they say a lot of the same things that you might say: "We provide quality, we give you the best price, and we let you make sure that you can sleep at night." They all say the same thing, right?
Liu: Of course. It probably sounds the same in one or another sales pitch. If you look at NCAB, we have been successfully partnering over 30 out of the top 50 EMS companies in the world. Actually, in the USA, we also received the highest award from the Parker Group, a famous American company. We are awarded their Gold Link Parker prize.
To have a good quality performance and on time delivery becomes basic, so, what we do is single out what the customer really wants based on customer value-added savings. For the last three years, we have saved about over $1 million for our customers with our ideas and innovations. This is what NCAB, as an integrated PCB producer, can offer. Normally, the business model for a manufacturer is that they’ll just manufacture what you give them.
Matties: There's a portion that do that, but that's the old thinking. I would argue that some of these fabricators don't do that. They come in, they run their design tools, and they provide a lot of what you're suggesting. The new thinking is more in line with providing the service, providing the tools, doing the DFM checks and helping them. A lot of fabricators are providing design services, design applications and engineering or consulting services. I think maybe the landscape has changed a bit to where more fabricators are offering what you're offering.
I think the advantage you have, though, is you can place the work with the right fabricator, where a fabricator is a fabricator.
Liu: You need size to do this, and what we have is buying power. If you only buy $1 million in total, but you have certain standards and want to implement this into everything you buy, sometimes that can be a challenge.
Matties: So the volume that you do allows you to give better competitive pricing?
Liu: Yes, and also to keep up the quality standards.
Matties: Well, quality is subjective, because they could produce higher quality, too, regardless of price. Quality is separate from price.
Liu: It's not only about machinery. It's also about the people. In the factories we use, we have approved some of the employees to be qualified to handle our products and who understands our qualification standards. If you look at the production line, you will also see some machines with the NCAB logo on.
Matties: So you own equipment used in the factories. That's unique, isn't it? Are other brokers doing that as well? Do you consider yourself a broker?
Liu: We call it integrated PCB production.
Matties: But you’re still a broker. Do other brokers have equipment in factories like this?
Liu: I'd say it's difficult, so probably not. You have to have the size to do it. Our strategy is very simple. We want to work with the factories as partners. We have been together with many of our major factories for more than 10 years. In order to have these partnerships, we have a goal to achieve 20% to 30% of their revenue, and thus we reserve the capacity. If it’s 20%, it will be worth for our factories to follow NCAB way.
Matties: Why don't more board shops go to this model where they work with you? Do board shops come to you and say, "We want you to represent our facility," or do you go to board shops and say, "We need to place orders"?
Liu: As answer to your first question: It's too difficult! NCAB is a quite well known PCB company, and this factor together with our size makes us interesting for the factories. We also are one of the first PCB companies in the world to meet the ISO 26000 standard for the social responsibility certification. This is an important factor for us and when we consider factories to work with, we don’t only look at the factory’s ability of producing high quality PCBs, the ability of doing it in a sustainable way is equally important.
Matties: When a customer does have a quality problem, it might be cosmetic or something along those lines, how do you guys take care of that?
Liu: This is very important. Unfortunately, quality problems do occur. And in these cases, we always start with taking care of and solving the problem. For example, if you are my customer and you have problems with 20 pieces, NCAB will first check our stock and send the pieces to you so you can continue your assembly. Secondly, we’ll dig into what the problem is and find out why the problem has occurred.
Matties: Well, it sounds like a good model that’s been successful. What do you think of the market conditions? How's the market right now?
Liu: The market is very dynamic. Many industrial trends are going towards low volume and high reliability. The cost of failure is much higher than before, and it's much quicker. The speed of the time to market becomes very, very crucial. In order to do that under the shorter lead times, you have to do it right at the first time. Therefore, we are providing a lot of service to our customers like DFM and material selection, stack up selection and so on.
Matties: What about the China market? There's been talk that it's starting to improve.
Liu: The China market, I think, is very good for us right now. I think I've been asked this question three times today already.
Matties: I have no doubt; a lot of people are very interested.
Liu: I think the market is more about integration at the moment.
Matties: So you think there's a transition going on?
Liu: There is a transition. Of course, the market as you can see is a little bit down, and a lot of things, like the currency, have an effect on that. We actually did some research in March, about what is really happening in China and how the stock market, the currency, and the housing prices in China are influenced and what is related to the PCB business. We think the companies who really put a lot of focus on this integration or innovation will see huge increases, and the ones that stay at the same level will slowly vanish.
Just remember, I think during the last year, there were over 100 PCB factories that went bankrupt in China.
Matties: Well, that's not surprising. You have how many factories in China?
Liu: Roughly about 1,800. This is going to be quicker and quicker.
Matties: But in the last year, the market declined, and the weak have to go away. There's the natural order of things, right?
Matties: We're seeing a lot more automation in China, as well.
Liu: For example, earlier during the material cutting process, a big facility needed over 10 to 20 people for this job. Now we may only see two people. There is a lot of automation during the FQC process. It's amazing how quickly this has happened. That was only two years ago, and now it's full of robots.
Matties: Do you do flex boards, as well?
Matties: Now that's a fast-growing area, isn't it? Is that one of the faster areas for you guys? Where's your primary growth coming from?
Liu: I think rigid-flex could be. Since products are getting smaller, you have no space for connectors, and you want to assemble easier. Rigid flex is a fast-growing market for us.
Matties: What about the tolerances on boards? We see tolerances getting tighter and tighter. What do you think about tolerances and where they're at and where they're headed?
Liu: In a lot of small products, the PCB is like a mechanical part and the tolerance is very important. For example, the high-end display boards.
Matties: What are your thoughts on 3D printed electronics and printed circuit boards, in particular?
Liu: This is also an interest research area for us. Our Chief Operations Officer, Chris Nuttall, just held a presentation about this subject. This technology could be especially useful for prototyping, because the advantage is that you could easily put an embedded capacitor in. This has never been possible for the normal way of doing PCBs. Also, we see flex PCBs being made in different shapes, where you cannot manufacture it in the normal way. Some people are also talking about injection conductive ink, and also special material for embedded capacitors as well as embedded IC.
Matties: I think printed electronics will change the way that people purchase and acquire circuit boards.
Liu: Yes, I saw a movie that print PCB and the mechanical enclosure together with different shapes.
Matties: Yes, they print it right on the part, like antennas for phones and such. There’s a lot of application opportunity with this.
Liu: We have actually seen that some of our factories start to build a 3D lab.
Matties: Here in China?
Matties: How many customers do you guys manage on a monthly basis, or an annual basis?
Liu: We have over about 2,000 active customers. We are producing 26,000 new part numbers a year.
Matties: Wow, 26,000 new part numbers a year?
Liu: It's massive; therefore, we need a systematic way of working and cannot be just like fire fighters.
Matties: What market segment do you primarily focus on?
Liu: Industrial, medical, aerospace, automotive and so on.
Matties: So you're across the board, basically. Automotive?
Liu: Yes, automotive is fast-growing for us.
Matties: It sounds like you guys are doing a lot of great things.
Liu: Thanks for saying that. NCAB is also a really “glocal” company which become even more attractive for global electronics companies that need global support. There's no player like NCAB right now, and we also want to take advantage of this opportunity.
Matties: And you have a global footprint already in place, so you're in a good position to service that changing dynamic.
Stephen Las Marias: You were mentioning earlier about the higher tolerances. One of the issues that was reflected in our survey is that plating and etching is one of the big problems that companies face when it comes to this particular miniaturization trend. What can you say about that? Are you seeing that as well?
Liu: Yes, people talk about and 2.5 mil, 3 mil, and even smaller. Plus, the size of the board itself becomes smaller which give limited space for PCB layout. Therefore, just like IC substrate, embedded capacitors become more popular.
Las Marias: Having said that, if a customer is approaching you for that particular challenge, what can you suggest they do?
Liu: This is all related. There are so many parameters in design, and they're not isolated. You talk about minimizing the hole, but this is of course related to the thickness of the board. If it is thicker, then the hole cannot be that small. All these factors are connected. That is why we're providing the DFM report to our customers. We need to understand all the connections and the constraints between each factor and look at different angles of where the constraint comes from. It's not isolated.
Las Marias: Can you help your customers with that?
Liu: Yes, one of our strengths is seamless production, which support the customer from design to manufacturing. The earlier we get involved with the customer, the better result it will be.
Matties: All right, well thank you so much.
Liu: Thank you.