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How PCB Factories could save costs and improve competitiveness?

Written by Ming Siu, CEO and Chairman of EPC International Limited

At this moment, the printed circuit board industry is in a downturn, and everyone is thinking about how to win orders and reduce the costs of buying laminates. Actually, PCB factories can increase profits through increase their selling price. However, such increase in unit price is not obtained through bargaining with customers. It is through more in-depth and careful internal adjustment when PCB factories can improve the actual unit price per square meter, save costs and improve competitiveness. By going through the analysis below, we hope to share another perspective with PCB factories of what can be done to improve their operation.

Key words:PCB industry, Operation and Management, Homogenization competition

1. The cost of a PCB factory

The cost of a PCB factory basically includes the following four aspects:
  • Laminates: 40% - 70%
  • Labour costs: 8% - 15%
  • Water and electricity cost: 4% - 6%
  • Consumables: 7% - 10%
If you want to increase the gross profit margin by 1.6%:
  • You need to save about 4% of laminates assuming the laminate costs accounting for 40% of the selling price. If the laminate accounts for 50%, you only need to save 3.2% of the laminates;
  • In terms of the labour costs, you need to cut the labour costs by 20% in order to increase the gross margin by 1.6% assuming the labour costs account for 8% of the selling price. If the labour cost accounts for 15% of the selling price, you will need to reduce the labour cost by 10% which is very challenging.;
  • In terms of the water and electricity costs, you will need to reduce 40% such costs in order to achieve a gross margin improvement of 1.6% assuming the water and electricity costs accounting for 4% of the selling price.
Therefore, saving laminate costs is a more realistic way to increase profits. Improving the utilization rate becomes the most effective way to enhance the competitiveness of PCB companies.

2. How to calculate utilization?

Firstly, we need to figure out how to calculate utilization.

There are different understandings about laminate utilization in the industry. Increasing the utilization rate refers to increase the utilization rate of net saleable area. It is because the net saleable area is the only area customers will pay for.

The size of this PCB is 280mmX180mm. Engineers calculate the dimension of the working panel by adding the process edge (or working space) required for routing and for surface finish. The working panel's size is 560mm * 538mm. In this case, the utilization rate of the working panel is 93.2% (260X180X6)/(560X538)=93.2%.

When the working panel is calculated on the laminate sheet with a dimension of 1,092mm X1,245mm the utilization rate drops to 82.62% which is calculated as (260X180X6X4)/(1092X1245)=82.62%.

Therefore, to increase the unit price and reduce the laminate cost, we should start from the utilization rate of the net saleable area. It is vital to understand how the net saleable area utilization is calculated and the distinction with the utilization rate in production working panel. High utilization rate in the production does not help your income at all.

3. Net saleable area utilization

Net saleable area utilization could directly affect pricing of PCBs. There are two ways to calculate PCB pricing in the market:

1. It is directly calculated by the number of sets that can be produced in a laminate sheet. Generally speaking, this approach to calculate pricing is mainly used in the single sided PCB sector. The advantage is that no matter whether the utilization is good or not. The PCB revenue is guaranteed, because customers bear all the risks of high or low utilization.

2. Another method is to calculate the unit price according to the actual dimension of the PCBs. Most of the time, the buyer sets a per square meter price with the PCB companies. The unit prices of each PCB is calculated based on the PCB dimension and the agreed upon per meter price.

For example:
There are two part numbers A and B: A size is 280X210mm, B size is 177X170mm.

The selling price is $154 per sq meter, and the laminate costs is $105 per square meter. The processing income is $ 49. The price of the part number A is $10.27 and that of the part number B is $6.16.

From the perspective of the PCB factory, the customer is paying for the entire sheet of laminate. The utilization rate does not affect the PCB factory as it is still receiving $49 processing come per meter regardless of the utilization rate.

However, most buyers calculate prices on the basis of the net saleable area.

When calculating prices on the basis of the net saleable area, the price of the part number A becomes only $9.06 which is calculated as (280X210) X $154=$9.06. Each meter of laminate can produce 15 sets of the part number. The selling price of one sq. meter is calculated at $135.83 ($9.06X 15=$135.83). The processing income is $30.83 not $49. It is because the utilization rate is only 83.54%.

The utilization rate of the part number B at 71.25%. The price is only $4.63 yuan (177X170X$154=$4.63). delivering a processing income of $10.85. With $10.85 per sq meter, the PCB factory clearly loses money on this part number B.

This example shows even when the PCB factory receives a new order, it should not be too happy too soon. It should firstly understand the net saleable utilization rate in order to gauge whether the order could be profitable or not. With more low utilization part number orders, even high production efficiency of PCB production may not compensate for the low utilization and low unit price.

4.Standard sized working panels versus production working panels optimized on a laminate sheet

For a long time, many PCB factories maintain that cutting a laminate sheets into 4 or 6 same sized working panels is one of the best way to improve production efficiency. These same sized working panels are also called "standard working panels ".

For examples, there are four sizes of laminate sheets below: 940X1245mm, 1041X1245mm, 1092X1245mm and 2082X1245mm.

Standard sized panels of 621X468mm, 621X519mm, 621X544mm and 621X692mm are cut from the above 4 sizes of laminate sheets.

The prevailing view is that using large standard sized working panels to produce more net saleable PCBs is the most efficient way to produce PCBs. But in fact, the utilization rate of the standard sized working panels board should be reviewed carefully as it would impact the returns from even efficient production.

The following worksheet illustrates how standard sized working panels are used to produce orders for seven part numbers, namely A, B, C, D, E, F, G. Part number A, B, C, D, E, F and G will be allocated into different standard sized working panels.

When putting the seven part numbers into the different sized standard working panels, we can see the different utilization for each part number as follows:

Part number A’s utilization is 89.36%.
Part number B’s utilization is 85.24%.
Part number C’s utilization is 93.2%.
Part number D’s utilization is 78.19%.
Part number E’s utilization is 64.23%.
Part number F’s utilization is 83.12%.
Part number G’s utilization is 80.42%.

As it can be seen above , except the part number A and C, the net saleable utilization rate of B, D, E, F, G is not high.

While fulfilling the orders , it is calculated that the net saleable area for 7 part number approximates 2,639.26 square meters. Using the standard sized working panels requires 3,206.07 square meters of laminates for the orders. The average utilization rate for 7 part numbers is 82.32% which happens to be the average utilization rate for many PCB factories.

However, further analysis shows that if the orders for the part number A and C are removed from the utilization calculation, the net saleable utilization for the remaining 5 part numbers is 79.21%. Many PCB factories have made a mistakes of looking at the overall average utilization when the contribution of the high utilization part number is diluted unnecessarily.

We recommend PCB factories can make internal process adjustments by only continuing part numbers with higher than 89% utilization with the standard sized working panel production . For part numbers with lower than 89% utilization, PCB factories can combine those using the same types of laminates to optimize on the laminate sheet in order to raise the net saleable utilization rate. This would require the use of software tool to perform such complex mathematical calculation.

The following table shows the results of using optimization software to calculate how the five part numbers with lower than 89% utilization to be allocated in the laminate sheet with different dimensions. The result is a very satisfactory 87.02% utilization.

The laminate sheet with dimension of 1,245X2,082mm and 1,092X1,245mm are selected and the quantities are allocated as above. The allocation is done on the basis of respective part number working panel sizes determined by the engineering department on the basis of the process edge (or working space) required.

The result is for the part number B, D, E, F, and G , it only needs to issue 2,211.81 square meters laminates to produce orders for the 5 part numbers saving a total of 215.27 meters or 8.87% compared with the standard sized working panels. The savings actually extend to more than laminate. PCB factory saves the costs of dry film, solder mask, etching and other related environment recycled costs.

Because the software uses up the entire laminate sheet in its algorithms , it would show it is producing few more sets of part number B and D than the standard size working panels. But the PCB factory can definitely issue less working panels into the production and the laminate saving will even be higher.

Another key figure to compare is the number of working panels that will undergo the production process. The standard sized working panel will process 5,862 working panels. In the optimization calculation by the software, the result is 5,868 working panels. However, if we remove the excess panels per the above paragraph explanation, the number of working panels is the same as the standard sized working panel production process.

The followings are the cutting map from the optimization software for the 5 part numbers.

After understanding how to improve the utilization rate on a laminate sheet with part numbers with lower than 89% utilization rate, we can examine the economies of such optimization results.

Assuming each sq. meter of PCB is sold for $400 per sq. meter and the cost of laminate is $150, the total income for the 7 part numbers is $1,055,576. The laminate costs of producing using standard sized working panels is $480,910.65 giving a processing income of $574,665.35. On the other hand, optimizing the allocation of the 5 part numbers with lower than 89% utilization rate on laminate sheet will reduce the laminate costs to $448,606.3, giving a processing income of 606,969.65.

It is an increase of income by $32,304.3.

If every PCB factory adopts the same standard sized working panels production approach with a capacity of 8,000 panels a day, how can it compete with another PCB factory which also uses standard sized working panel production approach with a capacity of 8,0000 panels a day? It has always been the practice of the PCB factory to increase production capacity in order to make more money.

However, if the PCB factory can make a deeper analysis and understand the net saleable utilization rate of its own customers' part numbers and learn to mix those part number orders with the utilization rate of less than 89%, it is very feasible the PCB factory will be able to enhance its competitiveness as it can now afford a lower price without compromising on the profitability.

5.Is it troublesome to optimize different part numbers on the same laminate sheet?

It has been widely adopted to have one part number cut on one laminate sheet, is it troublesome to have 3 to 4 part number on one laminate sheet?

The answer is only the cutting department has more work to do than before. It is because the cutting department will need to adjust the cutting blade dimension two to three more times than before and the cutting department will need to separate different working panels after cutting. Other than that the process after cutting remains unchanged.

Such optimization of different part number is a new process. But it is no different from the internal staff training and developing habits to operate a new automatic machine. When the factory adopts a new concept, there will be a transition period. However, the whole factory will fully adapt to these practices within three months.

6.What is cloud based optimization software?

With the advancement of technology, cloud storage has become a part of our life. We now download email, WeChat and music from the cloud to our mobile phones and computers.

Because of the popularity and wide availability of the cloud, there arrives a new cloud based optimization software. For a long time, PCB factories manually calculate how best to optimize the laminate usage when orders arrive. Because of the complexity of such calculation, it is not always feasible to achieve consistent ideal results. Because of the cloud, calculation can be performed on a parallelization basis on multiple cloud servers simultaneously. Calculation that historically needs one week to calculate can now be done in 10 minutes.

Such cloud based optimization software requires PCB factory to submit the following data online in order to calculate ideal utilization percentage and cutting map.

1) Part number (it can use ERP specifically generated IDs to ensure confidentiality)
2) Production quantity
3) Types of surface finish
4) Any grain requirements (because the grain requirements will affect how the software calculates the panel arrangement in the cutting map)
5) The length and width of the PCB SET and how many pieces in one SET
6) Length and width of the WORKING PANEL and how many SETS in a working panel
7) Type of laminate
8) Laminate sheet dimensions and on hand quantities
9) Size and quantity of restock laminates (if there are restock laminates in the PCB factory, they can also be used in the optimization calculation)

Within 2 to 15 minutes (depending on how many part numbers are calculated with the maximum number set at 20), the software will calculate an ideal optimization result with easy to use cutting map. We can see an example below:

In this example, There are 12 part numbers being run on the optimization software. The first line shows the result of these 12 part numbers with each laminate sheet only having one part number. The utilization rate is 85.83% which is respectable.

But with the optimization software, the 12 part numbers can achieve an utilization rate of 90.17%. Because of high utilization, the PCB factory can save 132.65 square meters in laminates.

The actual net saleable area utilization rate is a very important number for PCB factories. It impacts the actual selling price and the costs of the PCB factories. It also helps enhance the competitiveness of the factory when a PCB factory is more capable of adjusting prices to win orders because of its ability to continue to optimize utilization rate.

In order to implement the laminate optimization , PCB factories need to pay attention to the following points:

1) The engineering department shall be assigned the tasks to identify part numbers with a net saleable utilization percentage of less than 89% in order to increase the opportunities for optimizing the utilization rate of several part number orders;

2) The engineering department should only set adequate process edge (or working space) based on the production process and machine requirements. Because the engineers normally works on one part number at a time when calculating the working panel sizes, it is common for the engineering department to add bigger process edge than necessary in order to consume the entire laminate sheet.

It is advisable to limit the engineering department’s application of the process edge to what is required when designing a working panel. Do not increase the process edge because there is excess area left on the laminate sheet.

3) The PCB factory should train the cutting department on the process of separating panels after cutting and implement a reward plan for the cutting department for assuming a heavier work load from using laminate optimization software. This is to avoid resistance from the cutting department to learn a new tool that is so beneficial to the PCB factory.


The PCB industry is highly competitive and customers are always asking for lower prices. PCB factories have been using standard sized working panels and large working panels to increase production efficiency in order to compensate for price reduction. While doing so, PCB factories should always focus on maintaining a stable and high net saleable utilization rate. Taking part numbers with lower than 89% utilization together for optimization can help raise the effective unit price and reduce laminate consumption as well as all related costs. A PCB factory that does not optimize utilization is bound to lose its competitiveness overtime as it cannot match its competitors on pricing advantages.

Author's introduction:
Mr. Ming Siu is the creator of "Wise Cut " which is a cloud based laminate optimization software ( Mr Siu is a major shareholder of two single sided PCB manufacturers, EPC International (Dongguan) Limited and EPC Tai Hong International (Dongguan) Limited. Before entering the PCB industry in 2007, Mr. Siu was in the financial industry in Hong Kong and the United States for 25 years. In 2000, he founded the first generation of fintech company, SMEloan Hong Kong Limited in Hong Kong offering online loans to small and medium enterprises. Before founding the fintech company, he was the Managing Director of a Hong Kong multinational financial company.Contact email: