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Summary of Content
What is the main theme of today’s report? What are the core trends in the PCB industry?
Today’s report focuses on the drilling aspect, providing a detailed logical analysis and briefly reviewing the basic situation of the PCB industry, especially the development trends of multilayer boards and HDI boards. The current core trend in the PCB industry is the transition from single-sided and double-sided boards to more complex types such as high multilayer boards and HDI boards, with multilayer boards becoming the predominant type of PCB material.
What are the main driving forces behind the downstream value of PCBs? Which segments of the PCB industry benefit the most from AI servers?
The main driving force behind the downstream value of PCBs is the AI server sector, which has a growth rate exceeding 33% and accounts for about 1/7 of the overall PCB downstream value, expected to become the primary driving force in the future. Under the influence of AI servers, the drilling, exposure, and plating segments of the PCB industry benefit significantly, as these segments need to meet more diverse and precise processing requirements.
What special requirements do AI servers impose on PCB materials?
AI servers have more complex and diverse requirements for PCB materials, including lower loss, higher transmission speeds, and continuous updates to material specifications (such as hole distribution and diameter) to meet the demands of AI servers.
What is the demand logic for drilling under the influence of AI servers?
With the increase in demand for high multilayer boards and HDI boards driven by AI servers, the unit loss also increases, leading to a higher number of drilled holes. Additionally, the prices for specialized coated drilling have also risen, resulting in significant growth elasticity in both demand and price for drilling related to AI servers.
What is the scale of the global PCB dedicated equipment market and its main components?
The global PCB dedicated equipment market is approximately $7 billion, with drilling equipment accounting for the largest share, exceeding 20%, followed by exposure and testing equipment.
What is the relationship between PCB equipment investment and PCB output value?
PCB equipment investment is closely related to PCB output value. As the demand for multilayer boards increases and the recycling of processes occurs, the investment in equipment will increase proportionally, with overall equipment investment growing alongside PCB output value.
What is the value position of the drilling segment in PCB production?
The drilling segment holds the largest value share in PCB production, involving not only consumables (drill bits) but also investments in specialized drilling equipment.
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, especially among leading manufacturers such as DingTai and ZhongOu, whose shipment volumes and market shares indicate that global drilling sales were close to 3 billion units last year. This year, the strategic shipment growth rate of leading manufacturers exceeds 30%, with a significant increase in capacity utilization, expected to rise by about 50% by the end of the year. However, other manufacturers are expanding production at a relatively slow pace; for instance, one manufacturer claims to expand by 140 million units annually, but this cannot be achieved in the short term. Taiwanese manufacturers are also initiating expansion plans, expecting to increase monthly production capacity from 31 million units to 35 million units by January next year, but the increase is limited. Therefore, we maintain the view that the short to medium-term supply-demand gap will continue to exist, and we believe that the drilling segment may be the most constrained part of equipment consumables, presenting investment opportunities.
In the current situation where capacity cannot be rapidly increased, what factors might lead to unexpected price elasticity?
In the short term, with the inability to rapidly increase capacity, price elasticity may exceed expectations, especially among leading companies. Due to limited capacity, companies need to choose between regular orders and AI orders, and some manufacturers may prefer to take on AI projects, which will lead to greater elasticity in their average prices and profit margins. However, traditional manufacturers will also take on some non-AI projects, but the proportion is relatively small. We believe that companies with a lower proportion of AI projects will have greater price elasticity space in the future.
Which companies are likely to benefit the most in the face of expansion difficulties?
In a situation where everyone faces expansion difficulties, companies that can expand capacity the fastest and most stably will benefit the most. For example, DingTai can expand production relatively quickly through self-manufactured equipment, while ZhongOu can also expand capacity through technological upgrades. Considering both efficiency and stability, leading companies have a clear advantage in the speed of expansion and capacity stability, thus are expected to benefit the most in the current market environment.
If subsequent demand continues to exceed expectations and related segments cannot keep up with capacity, what will happen?
If demand continues to exceed expectations while capacity cannot keep up, prices will rise to a certain extent, revealing the advantages of alternative processes, such as the cost advantages of laser drilling within specific hole diameter ranges may become more apparent. When prices reach a certain height, in some boundary areas, the cost-effectiveness of laser drilling will be demonstrated, and its market share may increase.
What is the market share and hole diameter distribution of mechanical drilling versus laser drilling?
In the global drilling equipment market, mechanical drilling dominates. Although it has a price advantage over laser drilling, the overall value share is not significant. In terms of hole diameter distribution, there is a transitional area around 100 microns, where mechanical drilling can also create smaller holes under special circumstances. However, for conventional complex PCBs with small blind holes (such as HDI) and consumer and high-end packaging substrates requiring smaller diameters, laser drilling is more commonly used. As the capacity of mechanical drilling is limited and prices rise, the market share of laser drilling may increase.
What is the current situation of mechanical drilling in PCB production?
Mechanical drilling remains the mainstream method for PCB drilling, especially in the server PCB field. Although the types of panel materials are advancing from M6M7 to higher-end materials like M8M9, this has led to an increase in the demand for mechanical drilling, as material changes reduce drilling efficiency, thus increasing demand. Additionally, the complexity and precision of AI-related mechanical drilling products have increased, making them more expensive than ordinary models, leading to an overall increase in equipment average prices.
What are the development trends for laser drilling? What are the key points for logical analysis of laser drilling?
Laser drilling includes various types such as CO2 laser drilling, ultrafast laser drilling, and UV laser drilling, with CO2 laser drilling being the mainstream market. However, as PCB materials upgrade and structures become more complex, the share of high-speed drilling will increase, especially the proportion of ultrafast laser drilling will rise due to its efficiency, precision, and quality advantages, despite its higher price. The logic of laser drilling mainly has three aspects: first, the demand increase brought by the repair and high-end trend of downstream AI server PCBs; second, the increase in the proportion of high-value components such as HDI boards and positive glue backplanes driven by AI, which will enhance the proportion of laser drilling; third, the acceleration of domestic production, with domestic CO2 laser drilling machines starting to be sold in batches, expected to gradually replace imported equipment, while the localization of high-end ultrafast laser drilling equipment is also expected to improve, indicating a significant overall market space.
What is the layout of domestic manufacturers in the supply of laser drilling equipment?
Currently, some domestic manufacturers such as Dazhu and Tianzhun are selling CO2 laser drilling equipment; in the higher-end ultrafast laser equipment field, although the domestic rate is currently low, manufacturers including Dazhu have begun to layout, and other domestic manufacturers such as Xinqi Weizhuang, Tier, and TianDN are actively promoting the research and sales of ultrafast laser drilling equipment, indicating a clear logic of domestic substitution for laser drilling equipment, and the entire market has not yet fully interpreted this, presenting significant incremental space.