Rising labor costs in China as well as currency appreciation hurt the nation’s domestic flexible printed circuit board industry last year, according to the "Global and China FPCB (Flexible Printed Circuit Board) Industry Report." The overall market will continue to grow: the global flexible printed circuit board (FPCB) market is valued at $1.321 billion with a year-over-year growth rate of 9.4 percent in 2013, and will be worth $12.008 billion in 2014 and $12.686 billion in 2015.
FPCB is mainly used in displays; LCD panels and touch screens; computing, HDD and ODD; and communications, in mobile phones. In 2013, FPCBs used in computers accounted for 25 percent of the market, of which 80 percent was dominated by Japanese companies; however, this market is gradually shrinking.
In the field of mobile phones and tablet PCs, only vendors such as Samsung, Apple, LG, Sony, HTC and Nokia -- who have high quality requirements -- use FPCB, while other vendors may replace FPCB with FFC or common connectors. The FPCB purchases of Samsung and Apple are equivalent to more than 50 percent of the global FPCB market.
In 2013, the most significant change of the FPCB industry lay in the slumping profit margins of veterans and the soaring profit margins of new entrants. Veterans lagged behind new entrants in equipment and technical R&D strength. After a high starting point and early difficulties, new entrants witnessed a significant increase in profit margin. In addition, the production bases of the veterans were mostly located in Mainland China, where RMB appreciation and rising labor costs led to the substantial fall of profits.
The world's largest FPCB company, Mektron, suffered its first loss since its establishment, because of three main reasons: First, HDD and ODD markets contracted; second, Mektron began to intervene in the price war; third, Mektron's 45 percent output came from China where RMB appreciation and rising labor costs eroded profits. Mektron has increased the capacity in Taiwan, and Panasonic has also invested $100 million in building a new FPCB base in Taiwan.
The gross margin of South Korea's largest FPCB company Interflex fell by nearly 50 percent in 2013, and its operating margin plummeted from 6.2 percent to 1.2 percent. The only FPCB company in the United States ------ MFLEX, with manufacturing bases in Mainland China also faced its first loss. Fast-growing companies such as Flexcom and BHflex transferred their main production bases to Vietnam.
Hon Hai Group's ZDT obtained more orders from Apple with the advantages of the parent company, so that its profit margin went up substantially. ZDT's main base is located in Shenzhen, but it has also transferred part of its bases to low-cost regions: its second base is in Qinhuangdao, and the third base is in Huai'an.