The European Electronics Industry is addicted to Chinese supplies and that is a threat.

Over the last 30 years, the European electronics industry has made itself highly dependent on the Chinese supply chain.

This effect started as early as the 1980s when larger European electronics groups settled in China to take advantage of the cheap labor and production resources. All started joint ventures with Chinese shareholders that set up factories to produce European-developed intellectual property (IP).

Less than a decade after these adventures began, Chinese companies marketing similar products at a lower price sprang up like mushrooms, quickly capturing dominant market shares and eclipsing their former European partners. We all know the big names from the 80s and 90s who suffered the consequences of this rather naive approach to the Chinese manufacturing miracle.

The Chinese themselves played it very cleverly and became the world market leader for electronics production. They conquered the market from the bottom up, starting with the markets for important basic components such as printed circuit boards. The price level at which these markets were conquered suggests that some form of government support was involved. For printed circuit boards (PCBs), the Chinese sales prices of the end product are far below the material prices with which European manufacturers have to start producing.

This strategy decimated the European PCB market which once represented more than 40% of the global market, today less than 3% and China now represents more than 50% of global PCB production. A similar situation is developing in the components market.

It should come as no surprise that when China's manufacturing engine sputters, as we have seen lately with the Coronavirus situation, the effect on the European electronics market is enormous. It should also not be surprising that in such situations the remaining European PCB manufacturers, who represent 3% of the world's volume, can only compensate for a small fraction of the shortcomings of the 50% giant.

The European PCB industry, with less than 3% of the world's volume, is also at risk of becoming too insignificant to maintain supplier interest. For example, actively keeping sales and service organizations open in the EU is becoming increasingly difficult for them. Suppliers of basic materials are also reducing their presence in Europe or are simply no longer there. Much of what we need in the PCB industry comes from China, even if we use a European base material manufacturer, the copper foil still comes from China.

The European electronics industry's addiction to the Chinese supply chain, without real local backup, poses a real economic threat.

The way our companies operate within the EU and the taxes they contribute ensure many things that affect our daily lives, such as: social care, healthcare, good infrastructure, care for the environment, care for the climate, sustainability, accountability, not using child or forced labor, not using modern slavery and much more. (See our Business Etiquette page.)

In the EU we are also concerned with the privacy of our citizens. Our companies must deal with the strict rules of the General Data Protection Regulation (GDPR), making it rightly impossible to bombard people with emails without asking first.

These rights/privileges that we in the EU highly value and are happy to support are destroying all our chances of meeting Chinese competition on a level playing field.

Seeking a unique advantage over non-EU suppliers, the remaining European PCB industry has focused on prototypes and small series with short delivery times as offerings for the electronics design market.

Over the past 5 years we have seen an increasing interest from Chinese suppliers in this market segment. The reason is clear, because development lies at the beginning of the value chain. Now that the volumes are already under roof in China, prototypes and small series will follow.

With ridiculous prices they buy themselves a place in the electronics design market (Eurocircuits' response to some Extreme Chinese prices for prototype PCBs). The Chinese use our customs rules, which do not require VAT for import values under €22 (in Belgium) and no customs clearance costs for values under €150. Since the prices of Chinese prototypes are usually even below the VAT threshold, they are very attractive for students and schools. The latter form our engineers of tomorrow and are sponsored today with the taxes we all pay. It's very cynical to think that what we as an industry pay for today will wipe us out tomorrow.

Today, electronics are becoming an increasingly important part of our daily lives. We find electronics in almost everything we do. For Europe, electronics design has always been a core strategic task. It is the basis for shaping our society and our way of life. But as we all know, there can be no hardware development without production nearby, because the knowledge and experience of one influences the other.

Hence the reason for the Chinese to suffocate the European prototype and small series PCB industry and the assembly industry. Once these are gone, the design will also shift to China, putting the Chinese in full control of our electronics needs.

Once the Chinese dominate all electronics in the world, from creating designs to delivering the final products, they will be able to dominate the world without having to make an aggressive act.

Where the major countries of the world have their button to cause nuclear war, the Chinese who dominate the electronics industry will have a whole panel of buttons to cause all kinds of disaster around the world.

Some examples to consider are:

• Money transactions no longer work
• Disruption of the functioning of the police, fire brigade, army, hospitals, etc. due to communication disorders
• All wireless communications will fail
• … ..

Our beloved Internet of Things (IoT) is our weak spot, through which possible less good intentions can be carried out.

It may all sound like a metaphor, science fiction or rather far-fetched, but if you think about it carefully, is it?

And even if China only has our happiness in mind, the effects of the latest Coronavirus crisis make it clear that we are addicted to and completely dependent on the Chinese supply chain for our European electronics industry, without any backup.

We have to ask ourselves if this is what we want for our future and the future of our children.

Dirk Stans – Managing Partner Eurocircuits

This text is a translation of my original that I wrote in English and what one can be found here.