Merger-mania rocks PCB industry

Citation

Galbraith, T. (1999), "Merger-mania rocks PCB industry", Circuit World, Vol. 25 No. 3. https://doi.org/10.1108/cw.1999.21725cab.010

Merger-mania rocks PCB industry

Europe

Merger-mania rocks PCB industry

Keywords Business, Electronics industry, Printed circuit boards

The PCB industry in both Europe and USA has witnessed a large number of acquisitions and consolidation in recent months affecting chemical suppliers and bare board test companies throughout the industry.

Many feel the consolidation is a direct response to the rise of massive PCB manufacturing companies like Viasystems, who have acquired a substantial number of the principal board shops in Europe, USA and are now venturing into China and south-east Asia. These companies can supply from whichever region in the world is operating most efficiently and which governments are offering the biggest carrots.

This latter point is an unfortunate by-product of corporate globalisation that has been exploited in the UK by the ransom demands made to the UK government by the Japanese component manufacturers and, more recently, by BMW who are demanding £200 million to guarantee the continued employment of 14,000 workers at their Longbridge plant, otherwise the work will be transferred to Bulgaria.

It appears that the aim of these monolithic organisations is to capture large market segments of industry by offering the very latest manufacturing techniques, extremely competitive prices and short delivery schedules. To achieve this and to maximise efficiency, they appear to want to homogenise the supplier base down to as small and as manageable a number as possible. Using their considerable muscle, they can drive down their purchasing prices and demand the very highest levels of service and attention to their manufacturing sites.

Smaller competitors are faced with a stark choice of either merging with these organisations or refocusing their product base to supply marginal products like prototypes, microwave boards etc. The end result is that there are now less than 150 PCB manufacturing companies in the UK, where there was just under 500 in 1989.

Similarly, the supply industry has responded to these tactics by consolidating to offer the same "economies of scale". By the time this journal goes to press, we anticipate that where there were formally seven major chemical suppliers, there are now three. A pattern that has been repeated around the world. These companies, in turn, form their own kind of mini cartel to protects prices from being driven through the floor ­ a form of industry self-regulation.

The winners in this game of brinkmanship are the consumers, who end up with cheaper computers, cars, telephones etc. Also, the shareholders who continually demand unrealistic returns in often mature industries. The losers are the employees who formed the heart of these many small companies that once made up the PCB industry. Sad ­ it may be, but to paraphrase the immortal words of Margaret Thatcher, "You can't buck the market".

Trevor Galbraith