AI drives high-end upgrades, domestic manufacturers seize development opportunities

1. Industry Overview: Strongly Optimistic about the PCB Entire Industry Chain, with AI as the Core Driving Force

We are long-term optimistic about the development of the PCB (Printed Circuit Board) entire industry chain, covering the PCB manufacturing process and upstream copper-clad laminates (the original text “interconnected board” was a typo, the same below), raw materials, etc. The core logic can be summarized in three points:

1. Strong Commercial Demand for AI Drives Rapid Growth in AIPCB Demand

Currently, the demand for AI commercial applications remains strong, and the high prosperity trend is expected to continue, directly driving the rapid growth of AIPCB (AI scenario-specific PCB) demand, becoming the core growth engine of the industry chain.

2. AIPCB Technical Specifications and Capacity Consumption are Both High, Optimizing Industry Structure

AIPCB has significantly higher technical specifications (such as layer count, transmission rate) and capacity consumption compared to traditional PCB products: on one hand, it directly enhances product value, and on the other hand, it optimizes the industry competition structure through capacity consumption, further highlighting the technological advantages of leading manufacturers.

3. AIPCB Supply Structure Shifts Towards Domestic, Domestic Manufacturers Seize Opportunities

Domestic PCB manufacturers, with years of continuous investment in equipment and talent, have successfully seized the AI wave: domestic manufacturers represented by Shengyi Technology (the original text “biotechnology” was a typo) have showcased China’s PCB manufacturing strength and service efficiency to the global market. In the future, domestic manufacturers will continue to leverage the complete advantages of the industry chain and engineer dividends, with market share and supply ratios expected to gradually increase.

2. Upstream Copper-Clad Laminates: Clear Trend Towards High-End, Domestic Substitution and Cyclical Resonance Drive Growth

Copper-clad laminates are the core upstream raw materials for PCB and account for a high proportion of PCB manufacturing costs, directly determining the overall performance of PCB. The industry’s development presents three core characteristics:

1. Technological Development: Upgrading to Halogen-Free, High-Frequency and High-Speed

•Upgrading Ordinary Copper-Clad Laminates: Traditional ordinary copper-clad laminate production is highly polluting. To meet environmental requirements and enhance performance, it is gradually transitioning to halogen-free copper-clad laminates;

•Increased Demand for High-End Copper-Clad Laminates: With the upgrade of chip performance and communication rates, coupled with the high prosperity of AI computing power, the penetration rate of high-frequency and high-speed copper-clad laminates is accelerating. Currently, the high-end high-speed copper-clad laminate market is showing signs of tight capacity.

2. Market Size: Continuous Growth, with AI and Emerging Fields as Major Drivers

According to data from the Business Research Company:

•In 2024, the global copper-clad laminate market size is approximately 13.56 billion USD;

•It is expected to grow by 8% year-on-year in 2025, reaching 14.66 billion USD;

•By 2029, it is expected to grow to 20.17 billion USD, with a compound annual growth rate (CAGR) of 8.3% from 2025 to 2029, driven mainly by demand from AI, 5G devices, and automotive electronics high-speed communication.

3. Competitive Landscape: Concentration Among Leading Manufacturers, Domestic Manufacturers’ Share Increases

•In 2023, in the global mainstream copper-clad laminate market, Kingboard ranked first with a market share of 10%-15%, followed by Shengyi Technology, Haiguang Electronics, and Nanya Plastics, with the four manufacturers’ total market share reaching 48%, indicating a high industry concentration;

•The traditional high-end copper-clad laminate market is dominated by manufacturers from Taiwan (such as Taiflex and Unimicron) and overseas manufacturers. In recent years, domestic manufacturers have gradually caught up with international first-class levels in mid-to-high-end product performance through technological research and development, and companies like Shengyi Technology have become core suppliers of AIPC, ushering in development opportunities for domestic high-end copper-clad laminates.

4. Core Catalysts

(1) Significant Trend Towards High-End, Substantial Increase in Value

AIPCB specification upgrades drive the high-end trend of copper-clad laminates: the grade of high-speed materials is iterating from “M6” to “M8”; the unit price of M8 grade copper-clad laminates is more than double that of M6; Goldman Sachs predicts that from 2024 to 2026, the high-end copper-clad laminate market size will have a CAGR of 26%, significantly higher than the overall growth rate of the copper-clad laminate industry.

(2) Cyclical Dimension: Rising Copper Prices Drive Copper-Clad Laminate Price Increases, Restoring Profit Margins

The price of copper-clad laminates is positively correlated with copper prices, and rising copper prices drive profit margins for copper-clad laminate manufacturers:

•In 2021, the average spot price of LM1 copper increased by 51% compared to 2020, during which time the gross profit margin of copper-clad laminate manufacturers significantly improved, with industry leader Kingboard’s gross profit margin for copper-clad laminates reaching 34%, up by 7 percentage points;

•In 2024, the average spot price of LM1 copper is expected to increase by 8% year-on-year, and from January to June 2025, it is expected to rise again by 4%; in February 2025, Kingboard plans to raise prices for its FR series products by 5 yuan per unit, and again by 10 yuan per unit in August (doubling the increase). As an industry leader, Kingboard’s price increases are expected to be transmitted to other manufacturers, coupled with stable downstream demand, profit margins for copper-clad laminate manufacturers are expected to continue to recover.

(3) Acceleration of Domestic Substitution, High-End Products Improve Profitability

Domestic manufacturers have made technological breakthroughs in high-end copper-clad laminates, and as they become suppliers of AIPC, the high profitability of high-end products will improve the overall profitability of domestic manufacturers, further driving the increase in domestic market share.

3. Midstream PCB Manufacturing: Upward Cycle, AI Drives High-End Product Volume

PCB manufacturing is in the midstream of the industry chain, benefiting from the high prosperity of innovative fields such as AI, automotive electronics, and the recovery of traditional downstream demand, the industry is entering an upward cycle:

1. Market Size: Continuous Expansion, with China as the Core Production Base

According to data from Prismark (the original text “Press mark” was a typo):

•In 2024, the global PCB output value will reach 73.57 billion USD;

•It is expected to grow to 94.66 billion USD by 2029, with a CAGR of 5.2% from 2024 to 2029;

•In terms of regional distribution, China is the core production area for global PCB , with an output value share of 56% in 2024, far exceeding other regions (except for China and Japan, other Asian regions account for 29%, and Japan accounts for 8%).

2. Competitive Landscape: Dominated by Leading Manufacturers, Mainland Manufacturers’ Advantages Highlighted

•In 2024, the global PCB manufacturers’ revenue ranking: Zhen Ding Technology (5.34 billion USD) ranks first, followed by Shengyi Electronics (3.594 billion USD), Dongshan Precision (3.412 billion USD);

•Among the top four global PCB manufacturers, three are from mainland China, and one is from Taiwan, indicating that mainland manufacturers’ status in the global market continues to rise.

3. Product Structure: Clear Trend Towards High-End, with Significant Growth in Multi-Layer Boards Above 18 Layers and HDI

Based on output value statistics (Prismark forecast):

•In 2025, 4-6 layer multi-layer boards will still be the largest PCB category globally, with an expected output value of 16.069 billion USD, year-on-year growth of 2%;

•AI computing power demand drives PCB specification upgrades, with rapid growth in multi-layer boards above 18 layers and HDI (High-Density Interconnect) output value, with year-on-year growth rates of 41.7% and 10.4% respectively in 2025;

•In the domestic market, benefiting from the technological advancements of packaging substrate manufacturers and domestic substitution demand, the domestic packaging substrate output value is expected to reach 3.331 billion USD in 2025, with a year-on-year growth of 7.5%, forming the main growth drivers along with multi-layer boards above 18 layers and HDI.

4. Core Catalysts

(1) AI Boosts High-End PCB Demand, Continuous Upgrades in Technical Specifications

AI chip platform iterations drive PCB technical specification improvements:

•Layer Count Upgrades: Traditional server PCBs are mainly below 20 layers, while AI servers (such as AI GPUs) have an average layer count exceeding 20 layers, with a trend towards further stacking;

•HDI Upgrades: The performance and power consumption improvements of AI chips, along with increased cabinet density, drive the growth of high-end HDI demand. NVIDIA’s Blackwell platform uses 5 stages of HDI, and the new generation platform expected to launch in 2026-2027 is likely to upgrade to 6-7 stages of HDI;

•Product Innovations: NVIDIA’s Rubin platform introduces new PCB products such as mid-boards and treatment backboards (the original expression may refer to “direct connection backboards”) and CoWoS (Chip-on-Wafer-on-Substrate) supporting technology, further opening up demand space for high-end PCBs.

(2) High-End Capacity is Tight, Driving Profit Improvement Across the Industry

PCB specification upgrades lead to increased consumption of high-end capacity, coupled with limitations on high-end PCB yield, high-end PCB capacity will remain tight from 2025 to 2026:

•In the short term, there is no significant downward pressure on high-end PCB prices, and the high profitability of AIPCB continues;

•In the long term, leading manufacturers’ high-end capacity is saturated, while second-tier manufacturers can improve profitability of traditional products through price negotiations and delivery cycle optimizations, driving overall industry profitability improvement.

(3) Processes Shift Towards Domestic, Domestic Manufacturers’ Share Expected to Increase

Domestic PCB manufacturers (such as Shengyi Electronics, Shennan Circuit, Dongshan Precision) have reached international top levels through technological accumulation and have capacity positioning advantages; in the future, in the AIPCB field, domestic manufacturers’ market share is expected to gradually increase, becoming core suppliers of high-end PCBs globally.

4. Investment Recommendations: Focus on High-End and Domestic Substitution Main Lines

In the context of rapid development of AI technology, the trend of the PCB industry chain towards high-end upgrades is clear, with significant increases in product value. Domestic manufacturers have become important global suppliers through long-term layouts. It is recommended to focus on the following targets:

1. Copper-Clad Laminate Segment

•Nanya New Materials: Leading in high-end copper-clad laminate technology, benefiting from the growth in high-speed material demand driven by AI;

•Shengyi Technology: Industry leader in copper-clad laminates, core manufacturer of domestic substitution, and an important member of the AIPC supply chain.

2. PCB Manufacturing Segment

•Pengding Technology: Global PCB leader with a well-established layout in high-end AI server PCBs;

•Shengyi Electronics: Outstanding PCB technology strength, deeply bound to AI chip manufacturers;

•Shennan Circuit: Representative enterprise of domestic high-end PCBs, with significant advantages in servers and communications;

•Dongshan Precision: Rapid growth in PCB business, driven by both automotive electronics and AI.

•Shenghong Technology, Huadian Co., Ltd.

5. Risk Warning

1.Risk of Downstream Demand Recovery Falling Short of Expectations: Currently, traditional PCB application fields such as e-commerce and consumer electronics are showing weak recovery trends. If demand recovery slows, it may affect the performance of industry chain enterprises;

2.Risk of New Technology Development Falling Short of Expectations: Technological advancement is the core competitiveness of PCB enterprises. If domestic manufacturers lag in high-end PCB and copper-clad laminate technology development, they may fail to meet global high-end demand;

3.Risk of Raw Material Price Fluctuations: Copper, glass cloth, and other core raw materials for PCB and copper-clad laminates. If raw material prices fluctuate significantly and companies cannot effectively hedge, it will affect profitability.