Chinese PCB services don't make dollars, but do make sense

[Joebeazelman]

Back in the 90s to early 2000s, I was happy to find any PCB manufacturing service willing to manufacture a single, 4-layer PCB for $100 here in the US. The price easily quadrupled if I wanted it in a few days instead of weeks.

Fast forward to today, Chinese PCB services companies can manufacture the same board for just a few dollars for a batch of 10 and about $20 or more to ship it in a few days. It costs more to ship a FEDEX envelope to your next door neighbor. Economics cannot explain how they can support such absurdly low prices, especially given their insanely aggressive marketing targeting both hobbyists and professionals alike. For instance, they'll readily sponsor any YouTuber who remotely covers electronics topics, and their ads are so ubiquitous, even laypeople have heard their names floating around.

I'd wager they are heavily subsidized by the Chinese government. The electronics hobbyist market, especially at the advanced level of custom PCB design, is just too small to support the volume needed to justify such low prices. They're low enough to make PCB-based prototyping often more cost effective and timelier than traditional methods, such as wire-wrap, breadboards and perfboards.

It leaves an open question, why would the Chinese government subsidize something as obscure and arcane as PCBs when there are a lot more lucrative businesses worthy of subsidies. I suspect it offers some China some strategic advantages.

First, their low prices obliterates domestic competitors, establishing themselves as monopolies. Overtime, nearly every PCB designed on earth will be manufactured in China for nearly every imaginable device. Second, the PCB service manufacturers are likely retain a copy of every PCB manufactured, giving them intimate and unfettered access to intellectual property.

Is this a plausible explanation? 

[ataradov]

Why would they need to be subsidized? The prices are really cheap only for 2 layer boards. As soon as you go to 4 layers or deviate from the most common configuration, the price goes up.

They are benefiting from the overall government economic policies, but I doubt they get specific subsidies. They run mostly automated business. And for the manual part, cheaper labor costs help.

US companies just don't want to structure their systems to deal with low volume orders. They are sitting on much more lucrative military and aerospace stuff, which can't be outsourced and they can pretty much charge whatever they want. The high retail price you see from them is not because it costs that much, it is because they don't want to deal with your order, so they set the price accordingly.

And of course, their main expectation is that once you've done prototypes, you will order the real quantity, which is charged at the real rate.

[Kim Christensen]

Perhaps some of these small PCB orders simply use areas between larger PCBs that would otherwise be scrap material?
I couldn't take the empty JLCPCB box and ship it to my neighbor for less than it cost me to order. I think that has something to do with international postal treaties, so in a way that's a subsidy.

On another note, MicroChip's free samples didn't make sense back in the day, but this service was available for a very long time before the resellers ruined it for everyone. But it did boost the popularity of the PIC line of chips so when the students/hobbyist got real jobs they'd want to use PICs. I think in the end, the cheap PCB fab is a similar tactic. It's a loss leader that they hope will turn into larger orders in the future. Long term strategy vs short term losses.

[ataradov]

None of those services offer particularly cheap shipping. Their rates seem to be normal for high volume shippers. You can't ship a single box for that price, but if you are shipping 1000s, you can absolutely negotiate similar price with UPS and DHL.

Shipping cost is one of the reasons I started using OSH Park again for small boards. With the free shipping they offer, it ends up being a better deal in many cases. Unfortunately they don't offer 4 layer boards in a non-purple color. And I'm not ordering purple PCBs.

[Kim Christensen]

None of those services offer particularly cheap shipping.

It's pretty good if you can wait 10-14 days. My last order:

2024-06-03 21:57:31 Order submitted
2024-06-05 19:14:52 Awaiting carrier pickup
2024/06/15 02:29:19 Delivered

Previous order:
2024-01-21 21:28:10 Order submitted
2024-01-23 00:36:18 Awaiting carrier pickup
2024/02/05 04:02:21 Delivered

This was using their "Global Standard Direct Line"... Total cost of PCBs + shipping was less than $5 Canadian for each order. Maybe I'm just lucky living on the west coast of North America.

[ataradov]

I just checked, and JLC is indeed cheap. I just compared the same design and JLC was $1.5 while PcbWay was $7 for the same global standard shipping.

So, for JLC specifically, I would say they are probably not even breaking even on that. I guess it is just a difference of where the marketing money goes - PcbWay advertises heavily, while I have not seen a lot of JLC ads.

[Someone]

I just checked, and JLC is indeed cheap. I just compared the same design and JLC was $1.5 while PcbWay was $7 for the same global standard shipping.

So, for JLC specifically, I would say they are probably not even breaking even on that. I guess it is just a difference of where the marketing money goes - PcbWay advertises heavily, while I have not seen a lot of JLC ads.

There are often hidden promotions/discounts on shipping for certain orders, absolutely marketing at work.

As soon as you step outside the specials it adds up. Example:
5 designs of tiny boards that would fit comfortably inside the 100x100mm special most places offer, all wanted to charge a multiple design fee higher than the cost of ordering the 5 designs as completely separate orders. Shipping was also higher than the advertised "normal" price for the single panel design because the multiple designs triggered it into a different pricing structure entirely.

[T3sl4co1l]

Part of it is, shipping is subsidized, or, was some years ago anyway?  Not sure exactly what the economics are today.

With the recent tariffs, shipping whole assemblies (cost above tariff threshold) is no longer economical, or, is overall competitive with domestic sources; PCBs are still cheap (usually below threshold even for custom proto runs).

Tim

[ataradov]

All Chinese vendors changed up shipping a lot recently.  USPS and likes were making a lot of noise that they are overwhelmed and are not getting paid enough to deliver the packages. So, now most vendors on Aliexpress have switched to some (new?) last mile delivery, where packages are delivered by random people in cars. I'm guessing there is some Uber/Lyft like system where people can sign up.

I looks like PCB vendors still use USPS as a last mile, but it may not last when that other service gets fully ironed out.

[fourfathom]

A few datapoints:  JLCPCB 4-layer isn't much more expensive than their 2-layer boards.  The difference is pretty trivial.
As for delivery, I've been paying for "DHL Worldwide Express" (not the cheapest, but the cheapest of the "fast" methods).  This often arrives in my mailbox, so US Postal Service is involved.  But sometimes a DHL-affiliated van does the delivery to my doorstep.

I don't know if or which subsidies are at play, but it does look like JLCPCB has truly optimized their process for high volumes of small to medium orders.  I would like to use local (USA) fab and assy houses, but from time to time I check the price and delivery options and the USA cost is typically 20x the JLCPCB price, and the delivery is worse.  OSH Park is usually better than that, but still not competitive.  And using JLCPCB assembly, even though most of my components aren't JLC standard stock, is still a big bargain compared to USA assy (or me doing it myself).

[Smokey]

JLCPCB recently made me five 4-layer 1oz copper boards with white silkscreen for $118.

... did I mention these boards are 575.3 mm x 116.8 mm (22.6in x 4.6in)!
Right off the bat, that's only $23.56 per board.  But even crazier, it's 104in^2, so $0.22/sqin!

If I hadn't needed 1oz copper or white silk it would have been even cheaper. 

I don't care how they do it

[daisizhou]

In China, 2-layer PCB within 10cmX10cm is free, and the shipping fee is not required.(Sometimes there are free tickets on the 4th or 6th floor)https://www.jlc.com/portal/t7i37578.html
PCB manufacturers are private enterprises, and the government does not participate in the formulation of sales strategies.

I think this is the result of large-scale industrial production.There are many videos on the Internet, JLCPCB is all automated production.

These are very common in China

[SiliconWizard]

I assume that the free PCBs are a marketing investment. Many companies invest *a lot* of money in marketing/sales, and given the production lines JLCPCB have, I bet this is a relatively small investment overall, even though it looks like "getting stuff for free", so this makes sense.

[soldar]

Is this a plausible explanation?

No. It makes no sense whatsoever.

[daisizhou]

I assume that the free PCBs are a marketing investment. Many companies invest *a lot* of money in marketing/sales, and given the production lines JLCPCB have, I bet this is a relatively small investment overall, even though it looks like "getting stuff for free", so this makes sense.

Yes.This seems to be more cost-effective than the cost of advertising.

A benefit for amateur electronics enthusiasts

[retiredfeline]

JLCPCB offers a "Global Standard Shipping" where I can get 5 boards shipped for $1.50, so the total for me is $3.50 for 5 boards delivered. They seem to be delivered by contractors in their own cars, so nothing to do with the postal service. Probably the rise in cheap tat sold by the likes of Temu and Shein has created cheap shipping channels too.

[stretchyman]

Yeh who cares!

The Chinese Govmint can copy my PCBs if they want!

JLC have utterly transformed PCB manufacturing and Yes I used to use OSHPark, however they're way more expensive.

I use FedEx for shipment (to UK) and get them in less than 2 weeks, 10 days on average.

I know some PCB manufacturers use JLC and sell on as their own, naughty.

Kinda makes you wonder why folk use anything other than a PCB now? I guess they haven't discovered JLC?

J.

[tszaboo]

A 20 feet container costs around 4000 EUR to ship, my numbers might be a bit outdated. This is port to port.
It can be loaded up with ~ 20 Tons. 
5 x 100x100 PCB with packaging weights less than 0.5kg. So the container might be loaded up with 40.000 PCB packages, and the cost of shipping it is  ballpark 0.1 EUR. The rest is paid for handling.
They probably use rail to send it, because its 12-18 days not ~30-40. But ballpark the price will be the same, even if its 2x it's still only 20 cents per order.

[soldar]

People who do not know and understand how things work will very often imagine and believe complicated conspiracy theories rather than say to themselves they just do not understand it. 

Most people tend to consider the cost of producing something must determine the final sales price but this is not how companies work. Companies try to make as much profit as a whole unit and often that means making more money in one product or sales line and less money in another line or even "losing" money.

Airlines often are selling seats at a loss. A seat sold at low price brings in more dollars than a seat which goes empty.

Many companies will sell at a higher price in one market and at a lower price in another market because they figure that is what brings the highest yield.

Suppose a container is shipping tomorrow and it has some free space left over. That space can be offered at a very low price rather than just let it go empty. There are many consolidators in China who do just this. If you have a big load which is time sensitive and not so much price sensitive then you pay higher rates than if you have a load which is less time sensitive and can be fitted into space which would otherwise go empty.

The entire load of a container may not be paying all the same rates. And the shipper - consolidator only cares that the entire shipment makes him money.

Same thing with a factory where they would lose more money by having unproductive capacity than by selling at a low price. The individual price is almost meaningless. What counts is the entire profit and loss account at the end of the year. Most people just have no idea about all this.

Many companies lose money when they introduce new products or activities.

But it is easier to find a simple conspiracy explanation than to educate oneself. Conspiracy explanations are generally the consequence of ignorance.

[mikeselectricstuff]

People who do not know and understand how things work will very often imagine and believe complicated conspiracy theories rather than say to themselves they just do not understand it. 

Most people tend to consider the cost of producing something must determine the final sales price but this is not how companies work. Companies try to make as much profit as a whole unit and often that means making more money in one product or sales line and less money in another line or even "losing" money.

Airlines often are selling seats at a loss. A seat sold at low price brings in more dollars than a seat which goes empty.

Similarly, it costs a sufficiently automated PCB company very little to fill unused space on a standard-sized panel with multiple additional designs.
All that matters is that the total income for some number of panels exceeds the cost - being able to sell otherwise-unused capacity for peanuts is a good marketing tool to attract customers for production orders
This only works once you have sufficiently high order volume, so attracting more customers is a very important part of the overall business model.

[daisizhou]

People who do not know and understand how things work will very often imagine and believe complicated conspiracy theories rather than say to themselves they just do not understand it. 

Most people tend to consider the cost of producing something must determine the final sales price but this is not how companies work. Companies try to make as much profit as a whole unit and often that means making more money in one product or sales line and less money in another line or even "losing" money.

Airlines often are selling seats at a loss. A seat sold at low price brings in more dollars than a seat which goes empty.

Similarly, it costs a sufficiently automated PCB company very little to fill unused space on a standard-sized panel with multiple additional designs.
All that matters is that the total income for some number of panels exceeds the cost - being able to sell otherwise-unused capacity for peanuts is a good marketing tool to attract customers for production orders
This only works once you have sufficiently high order volume, so attracting more customers is a very important part of the overall business model.

There are many such PCB manufacturing factories in China.JLCPCB just developed overseas business

[Bud]

If this was that simple then why the West is not doing it.

[Nominal Animal]

If this was that simple then why the West is not doing it.

At the point where you can pony up the capital needed to setup such a factory here, you can get more profit by focusing on large businesses and military manufacturing, just like the existing PCB factories do.

Would you voluntarily choose a business niche with smaller profit projections for the same investment?

Unless you are a billionaire who decides they'd like to see PCB prototyping locally, you'll be hard pressed to get the investment.  Plus, for the same reason, it'll be very hard to find executives who agree with that plan, instead of diverting to the more common approach with bigger profit opportunities.

[soldar]

If this was that simple then why the West is not doing it.

As I have already said, western companies are doing it all the time, every day, and twice on Sundays.

Almost 40 years ago I was purchasing for a company and we were looking for a corrugated cardboard box, a rather small box. In my conversations with one supplier who had given me an estimate which was kind of high he mentioned that if we made some changes in the geometry of the box then he could do it for like 1/10th because they could fit it in the scrap part of some other order so basically it would be done using material which would go to srap.

They start with huge sheets of corrugated cardboard and they try to fit several orders in a way that minimizes waste but there is always waste and if you can fit a new order in that waste area then you got something for free and any return you get is free money.

This was at a time when computers were not as ubiquitous  as they are today but they had a computer program just testing millions of combinations so they could minimize waste.

[Kim Christensen]

They start with huge sheets of corrugated cardboard and they try to fit several orders in a way that minimizes waste but there is always waste and if you can fit a new order in that waste area then you got something for free and any return you get is free money.

Not only that, it saves you from having to dispose of the scrap material. Some can be sold, but other scrap materials will cost the company money to get rid of.