One big supply chain security issue starting to get more attention

The Chips Act shoveled billions of taxpayer dollars to the microelectronics industry. One reason for making more circuits domestically is greater cybersecurity and supply assurance. Now a sort of overlooked piece of the electronics supply chain is gaining attention in Congress: The boards the chips are mounted on. For more, Federal Drive with Tom Temin spoke with the Executive Director of the Printed Circuit Board Association of America, David Schild.

Interview Transcript:

Tom Temin And I guess we spoke quite a number of months ago about the need for the supply chain and cyber assurance of the substrate that is the backbone of all electronics. What is the new development in what’s going on on Capitol Hill?

David Schild A lot of great progress since the last time we spoke in March. President designated printed circuit boards and integrated circuit substrates as a critical federal technology under the Defense Production Act. As you probably know, we’ve been hearing a lot about that act in recent years. We used it during COVID to make ventilators a lot faster. That designation is very important because it drops a lot of red tape and frees up the government to move much more quickly to acquire American made printed circuit boards and integrated circuit substrates. So that’s tremendous progress. Also, a lot going on on Capitol Hill. The National Defense Authorization Act once again pushing the Pentagon to secure its microelectronics supply chains, especially in the commercial off the shelf space, which is very important. And then we’ve got standalone legislation, a sort of our version of the CHIPS Act, which is moving forward to hopefully shore up this critical industry. And as we say, chips don’t float all these wonderful semiconductors that we’re going to manufacture in the United States need integrated circuits, substrates and boards to do their jobs. We think that we should make the entire technology stack right here in America.

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Tom Temin And there is a cybersecurity issue factor to this. Is that fair to say? Because something could be embedded in a circuit board. These are not simple structures and they’re multilayer, and there’s interconnection among the layers. Someone could slip a tiny chip into a circuit board, even. I imagine.

David Schild It’s a point of great concern for officials throughout the national security establishment that we have a trusted microelectronics supply chain. And of course, as we have pushed more and more production and research and development and innovation overseas, I think it’s introduced some risk that we otherwise would not tolerate in our supply chains. And so, yeah, being able to say that we know where these things are manufactured, we know who’s doing the manufacturing, it’s certainly important for anybody who’s in federal acquisition.

Tom Temin I would think, you know, just from a physical standpoint, someone could add a trace that wasn’t in the original design, that could create a backdoor to monitor. There’s all kinds of ways of getting into what’s going on in a circuit other than just hacking it from the signal that’s output. And so if you could adjust that output signal without the knowledge of the person that built the board, built the circuit in these embedded systems, then you could do a lot of damage on the cyber front.

David Schild Boards are highly engineered pieces of technology, far from being simple green plastic racks. You’re talking about a complex laminate of woven glass, precious metals like gold, copper, certainly any number of specialty chemical formulations. And there’s a lot of engineering at a very small nanometer level even that goes into production. So you’re absolutely right. It would be difficult to look at a board and say with any degree of surety, we know that this is something that’s safe for the end user, which is again, why we want to bring back production. We’ve fallen off a cliff in terms of where we used to be. At one time, 30% of printed circuit boards were made in the United States. That was 2200 companies. Today it’s less than 150 companies, and with that constitutes only 4% of global market share. So the U.S. that invented this technology no longer owns production of it or even controls a sizable percentage of the portfolio.

Tom Temin And there are circuit boards in their circuit boards. I mean, the main card in a high end, say router, you know, is an extremely complicated piece. But then there’s also circuit boards that go into maybe a hearing aid, a little tiny thing with only a couple of layers and, you know, one chip on it, that type of thing. So the question is what is the distribution by technology of origin of manufacture?

David Schild So that’s a great point. Everything from F-150s to F-35s is going to have a printed circuit board. Absolutely. If electricity is running through it today and, you know, your listeners can look around their home or office and printed circuit boards are everywhere. They’re a ubiquitous piece of technology. But certainly we are not pushing for the federal government to bring back the boards that you would find inside dishwashers and garage door openers and thermostats at a very large scale in the commercial marketplace. What are simpler technologies are going to stay in overseas production. Market forces have have seen to that. But we think in high tech spaces like banking, critical infrastructure, certainly the energy grid, medical devices, certainly those are places I think, where we need to have more production in the United States. And you think about everything outside of traditional defense applications that depends on trusted microelectronics, right? The ability for us to do our banking, the ability for the lights to stay on. Certainly everything that’s happening in decarbonization, EV chargers, electric vehicles, all of these things are dependent on PCBs and substrates. I think it makes sense to know that we control a sizable portion of that supply chain.

Tom Temin And by the way, garage doors, they’re on the Internet now, too, these days. We’re speaking with David Schild. He’s executive director of the printed Circuit Board Association of America and for the military or any one that or contractors, you know, that have critical circuitry, there’s another cyber danger. And that is if the board is not only made but stuffed overseas in the final production assembly situation, the wave soldering gear, that means that the critical circuits themselves have to be shipped to where the boards are assembled and come back, which is another vulnerability.

David Schild Yes, supply chain resiliency has been getting so much attention lately, right along with this idea of de-risking and decoupling from foreign sourcing. And you saw throughout the National Defense Authorization Act a lot of language talking about prevention of foreign ownership and control and influence over our critical supply chains. If you say we’re going to make new semiconductors in places like Ohio and Arizona, I don’t think that the vision is that those products will then have to get shipped across an ocean for the next part of the ecosystem, the next part of the stack, to then come back to United States, perhaps for final assembly and onto store shelves or end users. I think that’s not the vision that the administration and Congress are seeking. Manufacturing nodes, regional hubs. That’s what you hear Secretary Raimondo talking about. I think those are really the future.

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Tom Temin All right. And then there’s legislation which has been in the House a couple of times now. Your bill is back in. It’s called H.R. 3249, Protecting circuit Boards and Substrates. What’s the backing of it and what’s the real chances of anything happening this session? Because, you know, they’ve got a few other things ahead of that.

David Schild It’s a challenging time for anyone who’s trying to move policy forward in Washington. But I will say that I think the wind is at our back in terms of congressional focus on the need to make more things here in America and certainly confront the pacing threat that’s out there from a national security perspective. The PCBs Act is very much focused on two things a direct amount of support for our industry. In the same way that the CHIPS Act supported the semiconductor industry so that we can hire new workers, so that we can break ground on new facilities by the critical tooling that’s necessary to produce PCBs. I think, more importantly, a tax credit for people buying printed circuit boards accomplishes what so many VP’s of ops or heads of supply chain want to do right now. They want to diversify their supply chains. They want to de-risk. They want to perhaps de-emphasize their dependence on Asia. But how do they do that when the bottom line doesn’t support those moves? A tax credit to say when you buy American, we’re going to bring these costs into a competitive position. We think that builds the demand signal that’s necessary to truly spur a manufacturing surge.

Tom Temin And how labor intensive our high end board making. I mean, a lot of this is automated, which means the more things are automated, the less they need to be in China or Southeast Asia.

David Schild Automation is increasingly a part of our business. But I will tell you, if you walk through a PCB facility, it’s a very fascinating mix of old school and new school manufacturing. You see a lot of chemical processes to do the etching work to layer and plate the copper that we need, of course, to build PCBs. And at the same time, you have clean rooms and folks and, you know, the bunny suits doing, you know, very small and very precise work to lay down critical pathways and actually make the boards work. And I’m so glad you talk about this, because I was in a facility recently and we have train technicians doing visual inspections of these boards because we can’t yet teach a computer or a camera to make sure that those connections are reliable in the same way that a highly trained technician in the human eye can do that work. So there’s still very high touch and highly educated, skilled labor involved in this process. And so we think from a jobs perspective, of course, you know, in the same way semiconductor factories are going to lead to a lot of economic development. We’re ready to put thousands of people to work building PCBs.

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