In his most recent monthly column my friend Gene Weiner pointed out the irony of calling a printed circuit board a commodity. “When did printed circuits become mass-produced unspecialized products?” he asks.
As I told Gene, it’s true PCBs are custom, but in some (many?) instances they are highly mass-produced. Think residential LED lighting, or game consoles or the most popular phones, etc. My sense is that calling them “commodity” or “custom” is a bit of a red herring. Large OEMs call PCBs commodities even though they know each is specific to a particular program. I think to most its a catchall word for “volume procurement.”
There is real tension on costs between customers and suppliers, and without artificial price bottoms I can see no reason that won’t continue. I think it’s highly unlikely sellers will be able to change the pricing model as long as the process technology remains essentially the same. It’s too entrenched, and often the buyers (which more and more often are EMS companies) have lower margins than the fabricators, so there’s no incentive for them to switch to a pricing model that will cost them more. A move to a different process technology (3-D/additive manufacturing) might well change the pricing curve.
It’s not that simple, of course. As double-Ph.D. and former CTO of Multek Craig Davidson once said, “Never underestimate the tenacity of incumbent technology.” It’s perhaps the best quote on technology adoption I’ve ever heard.
I used to think that with the many brilliant minds in our industry, we would successfully disrupt ourselves — in other words, the ideas that obsolete our current ways of doing things would be conceived and implemented by one of our own — maybe some genius in the basement of Apple or Intel or IBM. I’m less confident of that now.
I now lean toward the notion that the true disruptive change will come from someone outside our industry who has knowledge of both hardware and software and who uses a truly novel process to develop a widget that the public embraces. The mass appeal of the product (not the process, to which the general public is ambivalent) will be the proof of concept. And the investment money will follow.