LED industry’s PCB makers demand a change in the custom duty structure
Quality is not a problem but quantity is the area in which the Indian PCB industry is lagging behind China. This is making LED players dependent on imported PCBs. To counter this situation, the local PCB industry is suggesting solutions and demanding some modifications in the current custom duty rates.
LEDs have revolutionised the lighting industry worldwide, and for good reason. One factor, though, that can severely damage the performance of these reliable sources of light is heat. Therefore, LED manufacturers use different approaches to thermal management, the most important being choosing the right printed circuit board or PCB.
In LED luminaires, LED chips are soldered on PCBs. The Indian LED industry has so far depended on the FR4 or CEM3 PCBs because of cost concerns. But the downside of using FR4 boards is that they are not capable of transferring heat on their own. Hence, LED manufacturers have moved to metal core PCBs, popularly known as MCPCBs. These PCBs can efficiently transfer excess heat away from the hot spots as they use aluminium, which is highly thermally conductive. This prevents damage to the board, as that could reduce the life cycle of the end product.
A recent ELCINA study points out that the domestic market for PCBs will register a growth of 20.56 per cent
over the period 2015-2020 and will reach US$ 6 billion by 2020 due to a massive spike in consumption of electronic components, including LEDs. Government programmes like ‘Make in India’ have significantly improved the PCB manufacturing scenario in India, though there are still some fundamental loopholes that need to be addressed quickly.
The concerns of PCB makers
While speaking to a few Indian PCB players, we found that locally manufactured PCBs can meet orders for small volumes but the capacity for bulk orders is yet to be built for making these boards. According to Vinit Lal, director, Vintek Circuits India Pvt Ltd, “Currently, China’s top three PCB manufacturers produce the equivalent of what India’s entire PCB industry manufactures.” He says this has been made possible because of the financial subsidies that Chinese PCB makers get from their government, which are absent in India. This lack of state support in India restricts new players from setting up plants here.
Daya Jain is the director of EPS PCB Technologies, a company that manufactures PCBs for LEDs. He has recently shut down his LED PCB line because the majority of his customers now source from China. Citing the reason behind taking this drastic step, he says, “It was becoming difficult for us to match the prices that China was offering. Customers were demanding PCBs at Chinese rates, but we cannot lower the product cost beyond a certain level, as we need to earn some profit as well.”
Lal, too, states that the price pressure from China is hampering the growth of the Indian PCB industry. Explaining why there is such a wide price gap between Indian PCBs and their Chinese equivalents, he says that imported PCBs are completely duty free in India. This is the reason that Chinese PCBs of various standards of quality are flooding the Indian market. “When you are importing from China, you have zero control over the quality of the product. The only thing you get is the price of your choice,” he adds.
Lal says that Chinese PCB manufacturers export PCBs to India to get a 12 per cent incentive from their government. “The Chinese manufacturer is getting a 12 per cent duty drawback plus there is no custom duty on the import of PCBs in India; so, naturally, this makes their PCBs much cheaper,” he adds.
Jain gives another crucial reason for why Indian PCB players cannot match the costs offered by China. “None of the raw materials used in the making of PCBs are locally sourced, which means Indian PCB manufacturers have to depend on China for the raw materials too,” he says. The basic raw material for making PCBs is the copper clad laminate. Earlier, there were a few factories that manufactured this in India but they had to shut down due to the lack of government support and infrastructure, Jain adds.
Government support: The need of the hour
Apart from the government setting up raw material inventories for PCB manufacture, the consensus among local players is that custom duty should be imposed on imported PCBs. The industry is certain that if the government takes these steps, it will bring about quick and remarkable changes in the Indian PCB industry. “The day import duties come into existence, I can confidently say that the Indian PCB industry will grow at ten times the pace at which it is currently growing,” Lal says.
Underlining why government involvement is crucial, a senior official from Genus Electrotech Ltd adds, “If we want our PCB industry to match the demand and standards of the LED lighting industry, then the government should impose import duties and offer a 10 per cent subsidy to PCB manufacturers (not traders).”
The three main reasons that are making Chinese PCBs cheaper are their humongous production volumes, the duty drawback they get when they export to India, and zero custom duty on PCBs entering India. Lal suggests that if the government takes care of even one of these issues and encourages state governments to come up with PCB clusters, the Indian PCB manufacturing scenario will improve considerably in quick time.