Skip to main content

Should You Friendshore PCB Production?

Published Date
Author Cadence PCB Solutions

PCB production friendshoring

The past several decades saw a grand movement of manufacturing capacity away from the United States and Europe into Asia, most notably into Taiwan and China. Now that trend is starting to reverse, and many companies have accepted the benefits of nearshoring or friendshoring their production capacity back to Western nations, elsewhere in Southeast Asia, or to newer markets like Africa. The question then arises: as an OEM or engineering firm, should you follow suit and focus on nearshored/friendshored production?

The answer depends on several factors, ranging from average order sizes to the location of your customer base. While no one is expecting a mass migration of electronics manufacturing capacity out of mainland China and Taiwan, many companies are seeing the benefits of geographically diversifying their manufacturing base. Here are some of the factors to consider when planning for production, specifically related to production location.

Real Momentum for Friendshoring

Professionals in the supply chain world have been recently debating the appropriate form of geographic diversification: friendshoring or nearshoring. The difference between these is relatively simple:

  • In nearshoring, priority is given to production location, regardless of national relations
  • In friendshoring, priority is given to production in friendly nations, regardless of location

According to a recent survey from Deloitte, 62% of surveyed United States and European manufacturers with annual revenues of more than $500 million have started or plan to start reshoring or nearshoring their production capacities. While not exclusive to the electronics industry, the data spans across manufacturing and distribution companies, and it indicates a broad acceptance of nearshoring as the path forward for multinational companies.

Given a new set of geopolitical factors arising since early 2022, friendshoring and nearshoring are realistic candidates for electronics production. This is in addition to fully onshoring portions of the supply chain for the most critical systems for OEMs. This was essentially the approach in the US CHIPS Act, and the related European version of the CHIPS Act.

Why Friendshoring Matters for PCB Production

There are many reasons to friendshore that directly address some of the criticisms of long-term manufacturing in China and Taiwan. These include:

  • IP protection - Friendly nations are more likely to enforce IP protection and patent protection laws, which helps companies producing sensitive technology offshore remain competitive.
  • Greater access to raw materials - One factor in friendshoring is that it could put production closer to critical raw materials, which may reduce production costs.
  • Favorable trade environment - Things like tariffs and import taxes could be lower in a friendshored environment, and export/import restrictions could be reduced.
  • Less stringent regulations - Environmental and labor regulations could translate into an advantage for OEMs expanding their production capacity into friendly markets. This could also help EMS companies in these locations be more competitive on price.

For companies in North America and Europe, the expansion of electronics manufacturing capacity away from Asia may not be a binary decision. Many friend-shored locations available for production might also be considered near-shored. You can get the benefits of friendshoring while also producing closer to your customer base, which may reduce logistics costs  and time-to-market.

Challenges in Friendshoring

There are several major challenges involved in friendshoring, with some of these overlapping with onshoring and nearshoring. Among the proponents of friendshoring, you’ll likely hear three commonly-cited challenges to address:

  • Political stability - Electronics production must align with foreign national interests such that political issues do not interfere with a company’s ability to produce or invest in new manufacturing capacity.
  • Workforce development - The available workforce needs to be trained up to the minimum required skill level, and the existing education system should enable this level of workforce development.
  • Quality control - This is as much of a company culture issue as it is a practical matter of developing a QC process. Friendshored OEM capacity and foreign EMS companies need to develop a culture of production quality.

Friendshoring Options for OEMs and CMs

OEMs and CMs do not always have captive production operations; they generally work with external EMS providers to get boards fabricated and assembled. Other services provided by these companies include functional testing, product assembly, cable and wire harness manufacturing, and inventory management.

Companies that want to friendshore their production operations should start by evaluating capabilities of the EMS companies in the target region. The capabilities of these companies can vary, and advancement of these capabilities is slowly increasing as the friendshoring movement continues to progress. Although the most advanced PCB and substrate fabrication capabilities still reside in Asia, it’s possible that this will shift to North America, Europe, and Latin America, making friendshoring much more feasible for progressively more advanced products.

No matter where you plan to place your board into production, use the complete set of CAD tools in OrCAD from Cadence to create your electronic products. Only Cadence offers a comprehensive set of circuit, IC, and PCB design tools for any application and any level of complexity.

Subscribe to our newsletter for the latest updates. If you’re looking to learn more about how Cadence has the solution for you, talk to our team of experts.