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(Source: Advanced Manufacturing New Perspective)

Investment Rating: Buy (Maintain)

1 Rising demand for computing power drives capital expenditure in the PCB industry

According to IDC data, global server sales are expected to reach $95.2 billion in Q1 2025, a year-on-year increase of 134.1%. The global server market is projected to reach $366 billion in 2025, a year-on-year increase of 44.6%. The demand for computing power is driving the growth of the PCB industry. According to Prismark data, the global PCB market size is expected to be 73.565 billion yuan in 2024, a year-on-year increase of 5.8%, and is projected to grow to 78.562 billion yuan in 2025, a year-on-year increase of 6.8%, with further acceleration in growth.Server demand is the main driver for the expansion of the PCB market. In 2024, the output value of servers/storage in the PCB downstream is expected to be 10.916 billion yuan, a year-on-year increase of 33%, accounting for about 15%. By type, the output value of multilayer boards with more than 18 layers is expected to increase by 40.2% year-on-year in 2024, and the output value of HDI boards is expected to grow by 18.8%, both significantly exceeding the overall growth rate of the PCB industry at 5.8%.

2 Drilling, exposure, and inspection are core processes in PCB production, with increasing difficulty in high-end board processing

PCB production involves several processes including material preparation, drilling, electroplating, exposure, developing, etching, inspection, and lamination, with drilling, exposure, and inspection being the most critical processes. In 2024, the value of drilling equipment is expected to account for about 20% of the entire industry chain, while exposure/inspection/electroplating equipment will account for 17%/15%/7%, respectively.Currently, the high growth in PCB demand is driven by computing server needs, leading to increased demand for multilayer boards, HDI, and high-frequency high-speed boards. For example, HDI boards have more layers, denser circuits, and smaller hole diameters, which impose new requirements on drilling, exposure, and electroplating processes.

Drilling process:The increase in layers drives the number of blind and buried holes, increasing the demand for drilling; additionally, smaller hole diameters increase the demand for high-precision mechanical drilling and laser drilling;Exposure process:HDI boards have higher circuit density, leading to the emergence of laser direct imaging as a replacement for traditional photolithography processes;Electroplating process:With the increase in the number of high aspect ratio through holes, blind holes, and buried holes, the requirements for electroplating processes are higher.Currently, the domestic production rate of mechanical drilling is relatively high, while there are opportunities for domestic substitution in laser drilling and laser imaging processes.

3 CoWoP technology emerges, further driving PCB development towards high density and high precision

CoWoP technology eliminates the need for a packaging substrate compared to CoWoS technology, allowing chips to be directly packaged onto the PCB through a silicon interposer, simplifying the process steps and is expected to become the next mainstream packaging technology. CoWoP technology requires PCBs to have high-density wiring capabilities and high precision similar to packaging substrates, with PCB line widths reduced from 20-30μm in CoWoS-P technology to 10μm in CoWoP technology, necessitating the use of MSAP technology for fine wiring. The development of PCBs towards high density and high precision imposes higher requirements on drilling, exposure, and electroplating processes, and the value of corresponding equipment is expected to increase.

Risk Warning.

Macroeconomic risks, PCB production process not meeting expectations, and computing server demand not meeting expectations.

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