1. Analysis of the Switching Factors Driving the PCB Industry Cycle2. Impact of Computing Power Servers on the Quantity and Price of PCB Drill Needles3. Analysis of the Competitive Moat in the PCB Drill Needle Industry4. Comparison of Operational Performance of Major Global Enterprises5. Marginal Changes of Major Enterprises and Stock Price OutlookFull Text1. Analysis of the Switching Factors Driving the PCB Industry Cycle· Previous Cycle Driving Characteristics: The last global PCB upcycle lasted from 2017 to 2023, driven by application layers, including the consumer electronics cycle and the industrial scenarios supporting in-vehicle electronics for new energy vehicles. The fluctuations in the industry cycle resonate with new energy and consumer electronics, with PCB output expansion centered around application ends.· Current Cycle Driving Switch: The current PCB output value and cycle leadership differ significantly from the previous cycle, with the drive transitioning from application layers to computing power infrastructure layers. In 2024, servers and data storage-related downstream will account for 14%, becoming the second-largest downstream market, weaker than mobile phones but surpassing tablet PCs. The automotive sector is the fourth-largest downstream, with an exposure of about 12%. In the next five years, the compound annual growth rate of computing power scenarios is expected to reach 10% or more.2. Impact of Computing Power Servers on the Quantity and Price of PCB Drill Needles· Static Market Size and Share: The PCB drill needle industry is relatively small. In 2024, the global PCB drill needle market size is approximately $940 million, while the global PCB output value is $73.6 billion, with drill needles accounting for about 1.3%, meaning that producing 10 billion PCBs only consumes 100 million drill needles.· Incremental Estimation of Computing Power Scenarios: Computing power scenarios have generated demand for thick plate processing in servers, bringing greater imagination space to the PCB drill needle market, but there are overly optimistic views on market size in institutional communications. Based on forecasts from Funo Shariwen, the incremental PCB related to computing power servers from 2024 to 2029 is estimated to be $4.6 billion. The estimation of thick plate processing on PCB drill needles has two key anchors: the consumption multiple of broken needles and the price increase brought by adding layers. Based on research from listed companies, a consumption multiple increase of about 3 times is appropriate, with a price increase of around 30% on a neutral basis. The proportion of drill needles in PCB output value will increase from 1.3% to 5%, corresponding to a new drill needle market of about $230 million, with market elasticity of about 24%.From a long-term perspective (over 5 years), the PE valuation of PCB drill needle companies is appropriate at around 25-30 times.3. Analysis of the Competitive Moat in the PCB Drill Needle Industry· Customer Resource Barriers: The global PCB industry shows a trend of increasing concentration among leading companies, with the top 40 PCB manufacturers contributing 77% of the industry’s revenue in 2024. Against the backdrop of recovering computing power demand, the processing thresholds related to computing power products are higher, further deepening the trend of concentration among downstream customers. The current competitive landscape of PCB drill needle companies is intricate, stemming from the competition for customer resources among local PCB manufacturers and Taiwanese, Korean, and Japanese companies. The revenue gap among global PCB drill needle manufacturers is not significant, essentially representing an oligopolistic competitive market as indicated by CR4, with a revenue difference of less than 200 million RMB. Since companies in the industry often connect with downstream customers through direct sales, negotiations are conducted on a case-by-case basis, leading to high price sensitivity.· Manufacturing Capability Barriers: Manufacturing capability is a crucial ability in PCB processing, and manufacturing costs are a significant component of the PCB drill needle industry’s costs. Taking Ding Tai High-Tech as an example, direct materials account for about 35% of the average cost of drill needles, while manufacturing costs account for about 33%. The production of PCB drill needles is a typical grinding processing industry, with processes including tungsten steel cutting, welding, subsequent processing, edge processing, slotting, sharpening (including rough grinding and fine grinding), surface coating, and inspection (using laser measurement or concentricity instruments to ensure size compliance). In terms of self-manufacturing capability of equipment, Japan’s Right Energy’s 2024 annual report and 2025 mid-year report both indicate that self-manufacturing of all core equipment is a core moat, with a self-manufacturing rate of 90%, having self-manufacturing capabilities in both processing and inspection stages. Domestic companies have insufficient self-manufacturing capability for micro-drilling equipment, with a defect rate of 1.2% for 0.1mm micro-drill products from Japan’s Right Energy, compared to 3% for domestic representative companies, with the gap reflected in five-axis grinding machines, electrical discharge machines, and other micro-drilling equipment. To compensate for the lack of micro-drilling categories and equipment capabilities, Ding Tai High-Tech has established a subsidiary in Germany and acquired related companies.4. Comparison of Operational Performance of Major Global Enterprises· Comparison of Ding Tai High-Tech and Japan’s Right Energy: In terms of industry competition, among the four companies, Taiwan’s Jianbing has shown relatively insufficient development momentum in recent years, while Jing Tai, Jingzhou, and Japan’s Ruiming have revenue levels that differ by less than 100 million RMB, in a competitive chase. The key comparison between Ding Tai High-Tech and Japan’s Right Energy shows differences in financial indicators: Japan’s Right Energy’s gross margin for PCB tools in 2024 is 43%; Ding Tai High-Tech’s gross margin for 2024 is 35%, with a difference of about 8 percentage points. In terms of AI business share, Japan’s Right Energy disclosed in its 2024 annual report that AI-related business accounts for 40%; according to the latest situation in Ding Tai High-Tech’s 2025 mid-year report, AI-related shipments account for 20%. In terms of technical capability positioning, Japan’s Right Energy is regarded as an industry benchmark in terms of technical capabilities for long hard pens and small-sized micro-drills, with high product recognition.5. Marginal Changes of Major Enterprises and Stock Price Outlook· Marginal Changes of Ding Tai High-Tech: Ding Tai High-Tech’s recent stock price performance has exceeded expectations, with its market value rising from 15-16 billion to 28 billion. In the first half of 2025, the company’s PCB drill needle sales reached 500 million, far exceeding the total of 810 million for 2024. In terms of price, the average price has dropped from 1.6 RMB per unit to the current 1.2 RMB per unit, not reaching the institutional expectation of an annualized growth of 10% or more, which is related to the company’s competitive strategy. The company is in an oligopolistic competitive landscape, leveraging strong production capacity reserves and comprehensive customer resources (covering AI, non-AI, and ordinary PCB customers), choosing to maintain customer relationships and moderately layout AI production capacity. There are two points of marginal change: first, the acquisition of the German micro-drilling company MPK in August, which focuses on micro-drilling production and has sales channels to foreign-funded PCB manufacturers that are difficult for Ding Tai to enter, with annual revenue of about 80 million to 100 million; second, a clear expansion plan, with a monthly production of 120 million units by the end of 2025 and 150 million units by 2026, with a more aggressive expansion compared to domestic competitors.· Analysis of Japan’s Right Energy’s Stagnation: Japan’s Right Energy has a market value of only 7.4 billion RMB, far lower than Ding Tai High-Tech’s 28 billion and Zhongjing’s 42.7 billion. In the first half of 2025, its revenue growth rate was 16%, continuing from a high base in 2024 (30% revenue growth). Technically, Japan’s Right Energy excels in FCPG packaging substrate processing, with a yield rate of over 98% for micro-drill products of 0.1mm and below.· Factors for Stock Price Increment in the Second Half of the Year: The stock price increment in the second half of the year depends on two aspects: first, verifying the effect of AI product structure on average price enhancement; as of the first half of 2025, the average price of 1.2 RMB per unit has not significantly changed due to AI product structure; second, monitoring the elasticity of gross margin, with AI product gross margins ranging from 40% to 75%, needing to observe whether factory renovations or expansions can promote a sequential increase in gross margin. Additionally, the development of other business lines of platform companies also needs attention. The current stock price is relatively hot, which may pose a risk of capital lock-in gains.