India wants to restrict Chinese dumping of circuit boards. Automakers resist

PCBs form the base of the many integrated circuits that control electronic functions in modern automobiles. They are also widely used across sectors such as consumer durables (for TVs, refrigerators, etc.) and telecommunications (network equipment).

The anti-dumping duty will increase auto companies' cost of procurement by 30% and have a cascading effect on the cost of vehicles, industry body SIAM (Society of Indian Automobile Manufacturers) said in a letter to the ministry of commerce. Mint has seen a copy of the letter.

SIAM points out several challenges in the letter in sourcing PCBs domestically, including the lack of advanced technology for producing multi-layer boards, insufficient facilities to ensure contamination-free PCBs, and a shortage of high-quality, approved materials like Shengyi S1000H required for producing chips in India. 

They also mention that domestic manufacturers do not consistently produce the high-reliability PCBs needed for various “safety-critical applications". 

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While the government is heavily incentivizing local manufacturing of ‘intelligent’ electronic components like chips, it has imposed anti-dumping duty on PCBs imported from China and Hong Kong for five years, reasoning that the boards were being imported into India ‘below normal values’ and harming the domestic industry.

SIAM declined to comment on Mint's request for comment on the story.

A matter of safety

SIAM's letter further said, “PCBs are an integral functional part of Electronic Control Units (ECUs) which controls several safety and emission control systems in the vehicle. Any malfunction can disrupt the vehicle functioning, leading to accidents which can result in fatalities /injuries to drivers, passengers and other road users. 

Hence, PCBs must be of global quality and manufactured by following the aforesaid processes. Availability of domestic manufacturer meeting these manufacturing practices is a challenge presently." 

“Hence, the PCB manufacturers in India need to augment their capabilities and capacities to enable supply PCBs of required specification and consistent quality to the component suppliers of vehicle manufacturers," the letter said.

However, Indian PCB makers say the auto industry hasn't given them firm commitments of volume, thus preventing them from investing in building capacity. They say the anti-dumping duty is necessary to promote manufacturing of the boards in India, as China's large-scale manufacturing and dumping at cheap prices, subsided by the local government, have kept investments in ramping up manufacturing in India low.

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“The auto industry doesn't need to compromise on quality or safety; we have equally satisfactory technology, knowledge and skills in the country," M. Thiyagarajan, president of Indian Printed Circuit Association (IPCA), told Mint. 

"We understand the concern that the industry feels we may not be able to deliver the quality they need, but we make PCBs for satellites, ground and aircraft systems for defence, and we started PCB manufacturing much before the Chinese did. But the lack of raw material needed (such as copper-clad laminate) to make PCBs in India took away that advantage from us," he said.

“Other countries have taken advantage of that and are dumping at a lower cost. Our argument is that technology that is available in India should be encouraged and manufactured in the country," Thiyagarajan added. “Mainly we are buying from outside because it is cheaper."

Thiyagarajan said PCB makers are “absolutely willing" to invest in capacity, but for that OEMs need to start giving them firm demand signals.

“We do want Indian manufacturers to invest in quality and understand that due to insufficient capacity at present, an anti-dumping duty will hurt the consumer in terms of higher pricing," a top auto industry executive said on condition of anonymity as the discussions are currently ongoing. “This is a chicken-and-egg problem, which can be resolved with more pragmatism on both sides."

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The executive also said that some automakers have begun moving to give demand indications to local PCB manufacturers, and in ongoing dialogues with the industry, several more are expected to put forth their requirements and demands.

After consumer durables, automobiles comprise the largest market for PCB makers in India, who supply close to ₹500 crore worth of PCBs to the industry annually, catering to about 25-30% of demand, according to IPCA. Prominent PCB suppliers to auto companies in India are Genus Electrotech, Ascent Circuits, and CIPSA-TEC; several small and medium enterprises (SMEs) are also part of this manufacturing ecosystem.