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reassessing risk of offshore pcb manufacturing

Offshore board production has long been considered an effective way to reduce cost of producing electronic devices here at home, but those savings often demand a higher tolerance for delivery issues and come with lowered expectations for quality. Risk associated with global supply chain logistics has increased in the wake of coronavirus and the component costs of offshoring were already increasing due to rising wages abroad, persistent high overseas transportation cost, and uncertainty surrounding global trade policies.

These macro-factors are not unique to our industry. Their impacts can vary as market conditions evolve. Problems with Quality Assurance (QA) are a more persistent issue when it comes to PCBs, accelerating the reshoring trend. When quality issues occur, they are usually accompanied by an absence of transparency. Collaboration with offshore manufacturers is inherently limited by time zones, distance, and sometimes language. These impersonal relationships foster a “take what you get” transactional paradigm that device manufacturers should not and cannot tolerate.

Offshoring Production Can Onboard Problems

Along with the highly visible risks, there are some less apparent complications that will tangle up a manufacturer. If you plan to offshore PCB manufacturing, carefully examine the impact to your domestic operations in several key areas.

Offshore manufacturing does not automatically equal savings and it can disrupt cash flow.

If you need the boards fast, expedited shipping can offset a lot of your potential cost savings. And most Chinese manufacturers require full payment for prototypes or small volume orders before they begin production. When offshore PCBs fail to meet design specifications, you’ve already paid for them and have limited leverage with the supplier — meaning the resources required to re-tool the boards yourself or adapt the product to accommodate them further mask the real cost of low yield.

Increased risk can unleash additional costs.

Risk mitigation isn’t free, and the resource burden required to manage it falls on your domestic production team. This creates additional hidden costs that can quickly add up to offshore manufacture actually being more expensive than domestic.

An overseas manufacturer in a time zone 10 to 14 hours different from yours literally builds your board while you sleep. Unfortunately, if you need to speak directly with someone on the offshore team, one of you will be getting up in the middle of the night to do so. Disruptions to routine like this can lead to miscommunications, misunderstandings, and expensive mistakes.

Your intellectual property (IP) won’t protect itself while it’s away.

The threats to your IP are complex, vary from country to country, and require substantial financial commitment to combat. Domestic patent, trade secret, and mask work laws are antiquated and provide minimal protection. Little or no motivation exists in places like China to protect US corporate intellectual property. Their laws aimed at protecting foreign IP are mostly toothless and carry limited enforcement effort with them.

Your production volume may not justify the journey.

Volume is one critical factor in determining whether to use a domestic or offshore manufacturer. Offshoring favors simple or established PCB designs requiring high-volume runs with long lead times. The larger potential aggregate savings better insulates your bottom line against less apparent offshore manufacturing costs.

The return on offshore manufacturing investment diminishes quickly when dealing with lower volume or prototyping production. This QA risk alone should give lower volume producers pause. A domestic resource offers more transparency to the manufacturing process, and collaboration happens faster and with less effort. Issues resolve quickly, which minimizes risk to yield and PCB quality.

Excellence is not relative.

During the transition from design to manufacture, you need effective communication and coordinated effort to succeed. Transition plans, phase-ins, phase-outs, and revision control demand immediate attention that is sometimes unavailable because of time zone differences. Respected PCB fabricators in the US build their businesses by excelling in these areas, while offshore vendors simply aren’t structured to provide the responsive support often required in such situations.

For an overseas provider, it is hard for your small run project to be a priority. Even if you have an established PCB design to manufacture, larger production runs will take precedent over smaller ones. Unless you are prepared to overstock to accommodate your offshore vendor, this widely accepted practice impacts scheduling and can ripple through your supply chain, adding up to significant delays in getting the finished product out the door.

Domestic manufacturers are structured for better flexibility, able to provide real-time support, and more likely to better meet the needs of low-volume production. They are also more likely to adopt green manufacturing practices and provide a safe working environment for their employees — qualities increasingly important to members our industry. And if you operate on a JIT basis, fabricators located in your hemisphere also pose less of a scheduling risk.

Did you get what you paid for?

Once your boards arrive from the offshore fabricator, yields become your next concern. We again encourage multi-dimensional analysis of the production. Instead of targeting a percentage yield and checking a box, also consider consistency of yields over time along with the boards’ functional reliability in the end product.

Long-term reliability is a key measure. Counterfeit components routinely find their way into PCBs manufactured offshore. Some substandard parts are easy to spot, others not so much. Counterfeit components in your offshore PCB may stand up to initial testing, then fail after your product is in use. This can impact product performance, reduce customer satisfaction, and, eventually, tarnish your reputation in the marketplace.

Making the right decision about domestic versus offshore PCB manufacturing depends on a thorough cost-benefit analysis.

Your results will vary depending on volume and design requirements. We encourage our customers to look for hidden costs of offshoring and seriously consider its less quantifiable pain points.

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