The U.S. Defense Department is requiring most of its printed circuit board purchases to come from domestic factories, as national security concerns grow over the dominance of Chinese manufacturers in producing PCBs that sit beneath AI chips. Nearly all AI circuit boards, including those for Nvidia and other major tech companies, are made in China, according to U.S. officials and industry representatives who spoke to CNBC. The dependency has prompted lawmakers in both chambers of Congress to introduce legislation in May offering financial incentives for domestic PCB manufacturing, coinciding with rising U.S.-China tensions over AI supremacy and the Trump administration's April accusations that Chinese entities are waging "industrial-scale campaigns" to steal U.S. AI systems.
U.S. PCB Market Share Declined from 30% to 4%
The U.S. share of global printed circuit board production has dropped from 30% to just 4%, according to the Printed Circuit Board Association of America (PCBAA). PCBAA executive director David Schild said six of 10 PCBs are now made in mainland China, which he described as a "risky dependency." Domestic capacity cannot keep up with state-sponsored manufacturers in China, where material and labor costs are also lower.
"Chips, substrates, PCBs represent multiple avenues of attack for a potential malicious actor," said Mike Cadenazzi, U.S. assistant secretary of war for industrial base policy, in an interview with CNBC. Worst case scenario, he said, a compromised PCB could mean a "missile malfunctions in flight." Former U.S. deputy under secretary of defense Al Shaffer, who helped make technology acquisition decisions in the Obama administration and in President Donald Trump's first term, said PCBs are the "easiest place to disrupt an electronics chain" because of the ability to hide things in substrates and layers.
PCB Prices Rose Up to 40% from March to April
PCB prices rose by up to 40% from March to April, according to a Goldman Sachs note cited by Reuters. TTM Technologies told CNBC in May that it is increasing prices by between 5% and 25%. The price increases stem from supply constraints driven by military demand amid ongoing wars in the Middle East and Ukraine. Nvidia supplier Victory Giant in China, one of the world's largest PCB makers, warned in April that the Middle East conflict could push up prices of key ingredients copper and resin.
"We are competing with the AI demand," TTM's Cathie Gridley, an executive vice president, told CNBC in an interview. "The commercial side is willing to pay a much higher price to get access to that capacity, and so what that does is that really drives prices up across the board."
TTM Technologies and Sanmina are the only two public companies that make PCBs in the U.S. TTM shares are up almost 500% in the past year, while Sanmina's stock has more than tripled. The global PCB industry is projected to grow 12.5% this year, reaching nearly $96 billion, and expanding to $123 billion by the end of the decade, according to electronics research firm Prismark Partners.
TTM Technologies Expands with New York and Wisconsin Factories
TTM Technologies is expanding its domestic footprint with a new factory in Syracuse, New York, where production will start soon, and a plant in Wisconsin also getting off the ground this year. When operational, TTM will have seven factories in Asia, with its biggest still in China, and a total of 18 in the U.S. Sanmina is expanding at its two manufacturing sites in California, as well as in China and Singapore.
TTM CEO Edwin Roks told CNBC the company is supplying "the big guys" in AI, though TTM does not disclose its customers. At TTM's California plant, 71% of production ends up in aerospace and defense products. Nearly three-quarters of PCBs made at TTM's biggest standalone China plant end up in data centers. The PCBAA says circuit board factories cost between $250 million to $400 million to build.
Defense Electronics Must Use U.S.-Made PCBs Starting Next Year
Defense electronics will be legally required to come from the U.S. under new legislation starting next year. The requirement addresses national security vulnerabilities that Circuit boards present, as they offer opportunities for adversaries to introduce malicious components. Cadenazzi gave examples of how certain mechanisms could be introduced to "siphon off data" back to China, decrease performance of the system, or interfere with weapons.
"A particular code is enabled and then all of a sudden, the PCB, in combination with the chip, make a decision to actually disrupt the guidance of the munition and it lands in the wrong location," he said. Nvidia and its assembly partners mitigate risk by physically inspecting all PCBs, using X-rays and AI-enabled image detection tools to look for anomalies.
Congress Introduces 25% Tax Credit and $3 Billion Grant Legislation
Senators from both parties introduced the Protecting Circuit Boards and Substrates Act in May, which offers a 25% tax credit to companies that choose American-made circuit boards. A companion bill in the House calls for $3 billion in grants for U.S. manufacturers. Both bills are currently under consideration, as part of an effort by the U.S. government to help level the playing field against Chinese companies that are heavily subsidized by Beijing.
"The best thing we can do is develop a robust domestic PCB industry that starts to be competitive against subsidized pricing from our competitors and provides options for these firms to buy domestically in a more resilient way from trusted partners," Cadenazzi said. The PCBAA's Schild said many executives "indicate that risk is a part of their cost analysis," and say they see the need to diversify, though "the numbers need to pencil out."
FAQ
What percentage of printed circuit boards are made in China?
Six of 10 printed circuit boards are now made in mainland China, according to the Printed Circuit Board Association of America executive director David Schild. The U.S. share of global PCB production has dropped from 30% to just 4%.
Why did PCB prices increase from March to April?
PCB prices rose by up to 40% from March to April due to supply constraints driven by military demand amid ongoing wars in the Middle East and Ukraine, according to a Goldman Sachs note cited by Reuters. The Middle East conflict also affected the supply of key raw materials like copper and resin.
What financial incentives is Congress offering for U.S. PCB manufacturing?
Senators introduced the Protecting Circuit Boards and Substrates Act in May, offering a 25% tax credit to companies that choose American-made circuit boards. A companion House bill calls for $3 billion in grants for U.S. manufacturers.
