In previous articles, we focused on PCBs and the upstream and midstream industries related to PCBs (such as copper-clad laminates, electronic resins, copper foil, electronic fiberglass, etc.), and we have also introduced key targets in this area. Recently, a friend asked me: with so many technology targets and industrial chains, which has a higher investment value, PCB or copper-clad laminate (CCL)?This is a very professional and core question. To determine whether PCB (Printed Circuit Board) or CCL (Copper Clad Laminate, the core substrate of PCB) has a higher investment value, we cannot generalize; we need to compare multiple dimensions such as industry chain position, business model, competitive landscape, technology-driven factors, and cyclicality.
Commercial Position and Industry Chain RelationshipCCL (Upstream Material Industry): Known as the “foundation” and “flour” of the electronics industry. It is the core substrate for manufacturing PCBs, and its performance directly determines the performance of PCBs. The CCL industry has typical characteristics of capital and technology intensity and occupies a key foundational position in the industry chain.
PCB (Midstream Processing and Manufacturing Industry): It is the “soil” and “bread” of the electronics industry. Almost all electronic components need to be mounted on PCBs to achieve electrical connections. The PCB industry is labor and technology intensive, focusing more on processing, manufacturing, process management, and customer service.
Analysis: CCL is positioned further upstream, and its demand fluctuations are highly synchronized with the overall prosperity of the electronics industry. However, due to its foundational position, its cyclicality is relatively weaker than that of PCBs. Overall, the CCL industry places more emphasis on technology and material research and development, while the PCB industry focuses more on customer management, as its customers are a series of top technology companies (such as Apple, NVIDIA, Huawei, etc.). It must constantly adjust products according to customer needs.
Market Competition LandscapeCCL Market:Highly concentrated, exhibiting an oligopoly structure. The global and Chinese CR3/CR5 are very high. Leading companies such as Kingboard Laminates and Shengyi Technology hold significant market shares. This structure gives leading manufacturers strong pricing coordination capabilities.
PCB Market: Extremely fragmented, with fierce competition. There are thousands of PCB companies globally, and the market concentration is very low. Even leading companies like Unimicron Technology and Flexium Interconnect have market shares far below that of leading CCL companies. Companies need to compete fiercely in different sub-product segments (such as multilayer boards, HDI, carrier boards, flexible boards).
Analysis: The competitive landscape of CCL is far superior to that of PCB. The oligopoly structure means that price competition is not as fierce, and leading companies can more easily form synergies to maintain industry profit levels.
Gross Margin and Profitability
CCL Gross Margin: Usually higher and more stable. Leading CCL companies generally have gross margins of 20%-30% or even higher. Its cost structure is mainly influenced by the prices of commodities (copper foil, resin, fiberglass). Leading companies can effectively pass on cost pressures through technological advantages and economies of scale.
PCB Gross Margin: Relatively lower and more volatile. The gross margin of ordinary PCB products typically ranges from 15%-25%, with many small and medium-sized manufacturers even below 10%. The costs of PCBs, in addition to raw materials like CCL, are also affected by labor, depreciation, and environmental protection costs, leading to weak bargaining power and delayed cost transmission.
Analysis: The gross margin ceiling and stability of CCL are generally higher than the industry average of PCB. This directly reflects its stronger industry position and bargaining power.
Bargaining Power
Bargaining Power of CCL over PCB: Strong. CCL manufacturers face a large number of highly fragmented PCB customers. When upstream raw material prices (such as copper) rise, leading CCL manufacturers can quickly raise prices for downstream PCB manufacturers, transferring cost pressures.
Bargaining Power of PCB over Downstream Customers: Weak. The downstream customers of PCB manufacturers are terminal giants like Apple, Huawei, Lenovo, and Tesla, who have extremely strong bargaining power. PCB manufacturers find it difficult to fully pass on the cost increases from upstream CCL, often needing to absorb part of the cost increases themselves. Only those PCB companies with irreplaceable technologies (such as high-end IC substrates) have stronger bargaining power.
Analysis: In the game of the industry chain, the bargaining power of CCL manufacturers is significantly stronger than that of most PCB manufacturers.
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Comprehensive Conclusion and Investment Perspective
1. The relationship between CCL and PCB is like the business of “gold miners” and “shovels”. Just like during a gold rush, those selling shovels and jeans often make more money with less risk. Leading CCL companies are the ones selling “shovels” to all PCB manufacturers; regardless of which PCB sub-sector rises, it cannot do without its materials.2. From an investment perspective, investing in CCL is essentially investing in the barriers and bargaining power of its leading companies. You are betting that companies like Shengyi Technology can maintain technological leadership and stabilize profits through their market position. Its profit volatility will theoretically be lower than that of PCB companies. Investing in PCB is about selecting “alpha” from the bottom up. You need to deeply study the company’s customer structure, technological reserves, and management capabilities to find the winners that can emerge in fierce competition. Once selected correctly, its performance elasticity (growth rate) may far exceed that of CCL companies.3. Suggestions and Thoughts: If you pursue stability, choosing to invest in leading CCL companies is actually a good choice, as CCL is used throughout the industry chain. It is essentially a top-down selection and investment opportunity. If you are a seasoned technology industry researcher or practitioner, you need to have the ability to judge which downstream tracks (such as automotive, AI servers) will continue to be prosperous and find PCB companies with strong technical capabilities and quality customers, meaning you need to lock in PCB companies based on customer demand. Moreover, technology updates and iterations are rapid, requiring you to have a keen sense and remain rooted in the industry to notice every change, which is quite challenging. However, once selected correctly, the performance returns can be very considerable. Of course, if anyone has needs in finding targets for CCL and PCB, you can refer to my previous articles, which have key elaborations, hoping to give you a direction. Personally, I lean towards the CCL industry. Finally, I wish everyone good luck in their investments!!!Follow me to focus on the development of the technology industry and delve into the technology industry in China!