About | RSS | Advertise | News Search

Chinese
Home Finance News Events EMSNowTV
Industry Directory Careers White Papers Webinars Newsletter Signup
Front Page | News Analysis | Columns | Lead Free | EMS People | Breaking News | Outsourcing Insights
News Analysis (Chinese) | Columns (Chinese) Lead Free (Chinese) | EMS People (Chinese)
Breaking News (Chinese) Outsourcing Insights (Chinese)  | News Search | RSS Feeds

RSS


Moore’s law and the impact on the raw material supply chain


Dec 22, 2016

According to the encyclopaedia, Moore’s law is the observation that the number of transistors in a dense integrated circuit doubles approximately every two years.

As the cost of computer power to the consumer falls, the cost for producers to fulfil Moore's law follows an opposite trend: R&D, manufacturing, and test costs have increased steadily with each new generation of chips. Rising manufacturing costs are an important consideration for the sustaining of Moore's law.

It would seem, from recent trends, that Moore’s law is entirely sustainable. Manufacturing costs are just about to rise significantly. For ‘the man on the Clapham omnibus’, electronics will no longer be seen as ‘smaller, faster, cheaper’, as the    electronics industry may now have to take a long and hard look at the last word in this trilogy.

It has long been a view that one of the factors in sales success is availability, and when essential raw materials are of critical importance, but become scarce, and then there is only one result.  Within the industry which provides the basic building block of electronics circuitry, a level of incredulity is rising to the surface rather like froth of a good pint of beer. But the taste is far less pleasant.  The ingredients of the brew that is unpalatable consist of copper foil, aluminium, glass fabric, resin and solvent.

A look at the causes is both interesting and probably unsurprising.  Copper has risen from $2.100/lb to $2.600/lb in the last six months and from $2.200/lb to $2.600/lb in the last month alone.  Aluminium has been unstable for the last month, fluctuating between a low of $1710/tonne to $1780/tonne.  But this time last year it was down at $1450/tonne. The trend for epoxy resin price is upwards, 10% in the last two months, and glass fabric the same mount in the same period.  
   
And the causes of all of this?  They are both political, and economical. In the USA the pronouncements from the President-elect on massive investment in infrastructure has fuelled speculation on demand for copper, which in turn has levered the price sharply upwards. Add to that the reduction in supply by 25% for reasons of maintenance, add to that the demands for copper foil from lithium-ion battery manufacturers, and you begin to see that the supply situation is serous now, and could become even more serious during 2017, with little signs of easing before the end of next year. 
   
Moore’s Law again – smaller, faster, cheaper, to which you can add lighter. Lithium batteries are an $11bn market, and they meet the latter demand, being compact and small. But they use copper foil, and with the present supply situation, producers are restricting supply by weight.   For a company producing copper-clad laminate this is a serious matter, as the need for heavy copper reduces the allocation by weight alone. The battery manufacturers have no such restriction, and their demands increase annually.  Thus it is that it would not be irresponsible to say that price increases of at least 30% for copper-clad laminate are imminent, if not already in place.

It is entirely relevant to quote from that acclaimed industry analyst BPA Consulting whose Global PCB & Laminate Industries Outlook 2017 says:-

“Several copper suppliers have decided to switch part or their entire capacity to the production of Battery Foils for Electrical Cars. (There is a particularly strong demand in China). As a result, there is a shortage of standard foils for the electronics market. This situation is unlikely to change over the next 6 months.

In addition, during the third quarter, a number of companies have been trying to raise their prices as many report unsustainable margins for 2016. With the advent of small feature sizes and quality requirements in many of the end markets going forward, PCB companies are going to have to invest even more in up to date equipment and will need a sufficient margin to re-invest.

This may well be beyond some manufacturers in 2017. Therefore much of the increased demand value in 2017 is likely to come mainly from this potential price increase, rather than any uptick in underlying demand”

One recalls the days in the 1970’s when monetary devaluation was necessitating the implementation of price rises, at the rate of 10%, and on more than one occasion.

Needless to say, buyers were searching around for the best deals to obviate this increase to their manufacturing costs, but to no avail. The effect was national, the end result the same – price increases. What changed then was that manufacturing in a country so affected became less competitive, and thus manufacture, over a period of time, moved to countries where costs were significantly lower. What is interesting about the present situation is that it is not just national, it is international, and there are ‘no best deals’  A global market has a global supply side nowadays, and the impact will be felt right down the supply chain to the consumer, regardless of location.

With new copper capacity coming along at the end of 2017 there is some hope, but for the next 12 months the need to close ranks with suppliers of copper laminate and copper foils will be essential, as under such conditions an end-user could find themselves “at the back of the queue”.  OEMs will do well to consider that the ‘downward spiral’ they energetically pursue is about to change direction rather dramatically. 

Matthew Whyte
December 2016






Send This Story To Someone
Your Email:
Their Email:
  Comments:
Type the text in the image above:

Front Page | News Analysis | Columns | Lead Free | EMS People | Breaking News | Outsourcing Insights
News Analysis (Chinese) | Columns (Chinese) Lead Free (Chinese) | EMS People (Chinese)
Breaking News (Chinese) Outsourcing Insights (Chinese)  | News Search | RSS Feeds

Assembleon, Asymtek, Mydata, Siemens, Transition Automation






RSS 

Add EMSNow news to your site


 About EMSNow
 
 Advertise
 
 Career Center
 
 Chinese Version
 EMSNowTV
 
 Events
 
 Finance
 
 Industry Directory
 News Publishing
 
 Newsletters
 
 Polls
 
 RSS Feeds
 Webinars
 
Home  |   Site Index  |   Privacy Policy  |   Terms of Use  |   Feedback  |   Advertising
11/02 11/02 1/03 3/03 4/03 5/03 7/03 8/03 10/03 11/03 12/03 2/04 3/04 4/04 5/04 6/04 7/04 8/04 9/04 10/04 11/04 12/04 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05 10/05 11/05 12/05 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 10/06 11/06 12/06 1/07 2/07 3/07 4/07 5/07 6/07 7/07 8/07 9/07 10/07 11/07 12/07 01/08 02/08
© 2002-2007 EMSNow Media, LLC. All Rights Reserved.
Email EMSNow