January 4, 2005    Volume 13, No. 1

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National Academies of Sciences Panel Tells DOD It Is Vulnerable To Loss Of Circuit Board Industry; Half The PCB Industry Workforce Has Vanished

BY RICHARD McCORMACK richard@manufacturingnews.com

The rapid decline of the U.S. printed circuit board industry should be raising red flags and a plan of action at the Pentagon, according to a new report from the National Research Council. With U.S. production projected to fall below 10 percent of world output (down from 42 percent in the mid 1980s), the military could soon be facing a crisis in finding U.S. companies capable of producing highly sophisticated circuit boards and assemblies for weapons systems needed to field a "netcentric" military force, says the report entitled "Manufacturing Trends in Electronics Interconnect Technology."

The diminution of the printed circuit board (PCB) industry raises fundamental questions as to how the Defense Department is going to handle technology development and assurance of supply in a global economy. "The dynamics are huge," says one member of the NRC committee investigating the industry. "DOD is caught looking at problems that are bigger than defense."

Among the larger questions raised by the decline of the PCB industry: Can there be innovation in the defense electronics sector without a robust manufacturing base, as electrical engineers and designers move offshore? Should the Defense Department fund R&D if there is no U.S. production base for the application of the resulting innovation?

Says David Berteau, chair of the NRC Committee that produced the report: "The message is that you need to wrestle with the big picture, but we should not wait until we have all the answers before we begin addressing the most critical industries."

The NRC committee spent a year assessing the state of the printed circuit board industry and its impact on DOD. It recommends that DOD affirm its "critical" dependence on the industry; that it start an assessment of its economic health by collecting data; and that it increase support for the few national PCB research facilities that do exist. "The threat potential posed to overall defense capabilities by lack of access to high-quality trusted PCB component technology will require a more specialized assessment for understanding how best to use DOD resources to maintain and enhance the nation's security," says the report.

The growing divergence between commercial and military applications for interconnects has presented a complex challenge for DOD, "but it's not an impossible task to deal with this," says committee chairman Berteau. The Pentagon needs to know whether it is vulnerable to shortages and to such things as "Trojan horses" inserted into electronic circuit boards. "You have to answer those questions and you can't do it with piecemeal studies," Berteau says. "You can't do it with outside groups. DOD has to have the analytical capability and the in-house expertise to be able to answer those questions and to make judgments on its [technological and industrial] priorities so that the allocation of the next marginal dollar goes to the highest and best use."

DOD cannot wait until it knows all the answers to the questions about whether it can operate without a domestic industry. It needs to determine which electronics industries it needs to sustain and then put in place policies to assure there is an industrial base there to supply it. "My view is that it's a lot easier to steer a moving car, so get in it, start driving and make adjustments as you go," Berteau told Manufacturing & Technology News. "You need to have the big picture in mind and wrestle with it, but to test [policy avenues] with critical, vulnerable and threatened areas that have a fairly discreet universe like printed circuit boards."

The Department of Defense "has no chance in fighting the economic dynamics" that are pushing the industry to China, says one member of the NRC committee. But the Pentagon has not invested in the sub-tiers of the electronics industry for 10 years, and now must pony up. "If you want a specialty industry, you have to subsidize and support it and accept that fact, and focus on the problems caused" by relying on commercial off-the-shelf components that are neither made in America nor have any applications in military equipment.

Berteau says DOD can't expect much innovation from the small board processors remaining in the United States -- companies that generate between $10 and $20 million a year in revenue. "You may occasionally get a brainstorm because there are a lot of smart people who spend their recreational hours trying to think about new ideas," he says. "But that's not a system; that's serendipity. If you're going to have a system that's based upon small shops that meet only DOD or a few other industry's needs such as medical equipment and industrial machinery, then where is that innovation going to come from?" In many cases, these industries only require 150 boards, many orders of magnitude less than the tens of thousands and millions of commoditized boards used in the consumer electronics and telecommunications industries.

The printed circuit board industry trade association is pleased with the NRC report, having been in the forefront of raising concerns about military vulnerability. "The recommendations go to what we've been arguing: that there is a problem out there and we need to start investing in technology and training to sustain it in the future particularly in defense needs," says John Kania, director of government relations at IPC, the Association Connecting Electronics Industries. "I'm not surprised by the recommendation that DOD take a closer look because there is not a lot of data going down into the third and fourth tier suppliers. We need to make that investment because it's all just disappearing."

IPC believes DOD needs to follow up on the National Research Council recommendation for investment in interconnect R&D efforts at the Crane Division of the Naval Surface Warfare Center in Indiana and at the Warner Robins Air Logistics Center in Georgia. The PCB research facility at Crane this year (2006) received $2.1 million. IPC lobbied for $5 million. Without an adequate investment in technology "how does DOD intend to get is printed circuit boards and electronic assemblies?" Kania asks. "Where are they going to come from? How high-tech will they be and will they be reliable and secure? Based on the [NRC] report, we're going to get industry involved for the DOD '07 budget cycle."

For now, it is unclear as to whether many people in Congress, the Pentagon or the Bush administration really care or believe there is a problem worthy of attention, say observers.

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