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Summary of Content
What is the overall report content today? What are the main driving forces behind the downstream value of PCBs?
Today’s report provides a detailed logical overview of the drilling segment, while also summarizing some aspects of PCB logic. Currently, the core trend in PCB materials is evolving from single-sided and double-sided boards to more complex types such as high-layer and HDI boards. The main driving force behind the downstream value of PCBs is centered around AI servers. Last year, the growth rate of AI servers exceeded 33%, accounting for more than 1/7 of the total downstream value of TCB, and this proportion continues to rise.
What special requirements do AI servers have for PCB materials?
AI servers impose higher requirements on PCBs, including demands for lower loss, higher transmission speeds, and continuous iteration of material types, such as evolving from traditional interconnect boards to higher-level M8M9 boards. This involves changes in hole distribution and diameter, leading to significant quantitative growth and value elasticity in the drilling process.
What are the development trends of multilayer and HDI boards, and how do they affect drilling requirements?
The demand for multilayer and HDI boards is growing rapidly, with HDI boards requiring more drilling due to their small hole diameters and complex structural designs, especially in terms of blind and buried holes, which have increased demand for laser drilling. The entire drilling process has become more complex as PCB structures evolve, and besides drilling, exposure and plating processes are also experiencing significant value growth.
What is the scale of the global PCB equipment market and the proportion of each segment?
The global PCB equipment market is approximately $7 billion, with drilling equipment accounting for the largest share, exceeding 20%, followed by exposure and inspection equipment. The investment in these devices is positively correlated with the increase in PCB output value, rather than a decrease in equipment investment due to increased single production.
What is the logic behind the growth in value around the drilling segment?
The growth in value in the drilling segment is driven by two main factors: first, the increase in the proportion of high-layer boards, especially those with more than 30 layers and HDI boards, driven by AI technology; second, the increase in unit loss leads to higher demand for drilling equipment and consumables, while the prices of high-end drilling equipment are also relatively higher. Overall, the increase in drilling related to AI could reach about 30% to 60%, with specific differences depending on the type of drilling demand.
What is the current supply-demand gap in the drilling segment?
From the supply perspective, the drilling segment still shows a significant supply-demand gap. Since the beginning of the year, leading manufacturers such as DingTai and ZhongOu have seen continuous growth in shipments, with global drilling sales expected to approach 31 million units last year. This year, the leading manufacturers’ shipment growth rate is over 30%, and the capacity utilization rate has increased by about 25% since the beginning of the year, expected to reach around 50% by the end of the year.
What is the expansion situation of other manufacturers?
Other manufacturers, such as Zhongye, have announced an expansion of 140 million units in annual capacity through technological upgrades, equivalent to a monthly capacity of about 12 million units, but this cannot be achieved in the short term. Taiwanese manufacturers are starting to expand production, with new capacity gradually being put into equipment from July, and it is expected that by January next year, monthly capacity will increase from the current 31 million units to 35 million units, but the overall expansion is limited, only slightly over 10%.
What investment opportunities exist regarding the capacity shortage in the drilling segment?
We maintain our previous view that the supply-demand gap will continue to exist in the short to medium term, and the drilling segment may be the most constrained in terms of equipment and consumables. There are three main investment opportunities: first, in a situation where rapid volume cannot be achieved in the short term, price elasticity may exceed expectations, especially for companies with a high proportion of AI-related products; second, companies that can expand production the fastest and most stably when others face difficulties; third, if subsequent demand continues to exceed expectations, the advantages of laser drilling will become apparent when mechanical drilling cannot meet demand, leading to an increase in its proportion.
Under specific conditions, will laser drilling become a better choice?
When mechanical drilling capacity is limited and prices rise to a certain extent, the cost disadvantage of laser drilling will relatively weaken, especially in the range of 100 to 120 microns, where laser drilling may become a better choice, and its proportion is expected to increase.
What is the current state of the global drilling equipment market and how is the hole diameter classified?
The global drilling equipment market was approximately $1.47 billion last year, primarily dominated by mechanical drilling due to its price advantage. In terms of hole diameter classification, the range of over 100 microns is a transitional area, where mechanical drilling can also produce holes around 100 microns under special circumstances. In conventional complex PCBs, the proportion of small blind holes (such as HDI blind holes) will increase, while consumer electronics and packaging substrates tend to prefer laser drilling. As the hole diameter decreases, the proportion of laser drilling will increase. Both types of drilling equipment are expected to see significant growth, and the order situation of leading companies has already reflected this trend.
How is the demand for mechanical drilling changing in PCB manufacturing?
Mechanical drilling remains the primary method for PCB drilling, with high demand. As server PCBs evolve towards multilayer boards, the variety of panel materials increases, developing from M6M7 to higher levels like M8M9, leading to an increase in the demand for mechanical drilling, as material changes result in decreased drilling efficiency, reducing the number of holes drilled per unit time, thus increasing demand.
Why are mechanical drilling prices rising?
This year, there has been a significant upward trend in mechanical drilling prices. The main reason is that AI-related mechanical drilling products are more complex and precise, making them more expensive compared to ordinary drills, with price increases varying by equipment type, potentially reaching double or even several times the difference.
What are the market trends for laser drilling? What investment suggestions exist for the entire drilling equipment market?
Laser drilling has different technical types, such as CO2 laser drilling, ultrafast laser drilling, and UV laser drilling, each with its advantages and applications in different types of PCB products. Currently, CO2 laser drilling is mainstream, but as PCB materials upgrade, structures become more complex, and precision requirements increase, the proportion of high-speed drilling will rise, especially the proportion of ultrafast laser drilling will further increase due to its clear advantages in drilling efficiency, precision, and quality, albeit at a higher cost. The main investment suggestions are threefold: first, focus on leading manufacturers of mechanical and laser drilling, as their performance expectations have not fully considered volume-price elasticity, and there is significant upward potential in capacity bottleneck segments during high prosperity; second, look for new targets in core segments that have not been fully interpreted by the market, such as companies like TIER focusing on ultrafast laser, as well as manufacturers of exposure equipment and laser drilling; finally, keep up with the urgent expansion direction of PCBs, as both advanced packaging of chips and electronic assembly processes may benefit from the sustained growth in PCB demand, with some manufacturers already seeing significant order responses.
What are the logical aspects of laser drilling?
The triple logic of laser drilling includes: first, the recovery of downstream demand and the trend of high-end PCB development leading to increased demand for AI server PCBs; second, the increase in the proportion of applications such as HDI boards and positive resin backplanes during the high-end process, which is expected to drive up the proportion of laser drilling; third, the increase in domestic production rates, with domestic CO2 laser drilling machines starting to be sold in batches and gradually replacing imported equipment from low-end to high-end markets, especially as the research and sales of domestic ultrafast laser drilling equipment increase, the overall trend of domestic laser drilling will become more apparent.