PCB will enter a new growth cycle

The upstream of the printed circuit board (PCB) manufacturing industry is mainly raw material manufacturers such as copper foil, wood pulp, fiberglass yarn, and resin; the midstream is mainly PCB manufacturers, of which copper-clad laminate is the core raw material for PCB manufacturing; the downstream is mainly communications, electronics , semiconductor, computer and other fields.

Upstream and midstream: PCB raw material costs have fallen, and CCL manufacturers are in the process of bottoming out

The main raw materials for PCB and CCL include copper foil, epoxy resin and fiberglass cloth. In addition to labor and manufacturing costs, PCB raw materials mainly include copper clad laminates, copper foil, phosphor copper balls, solder mask ink, etc. Copper clad laminate accounts for the highest proportion of PCB raw material costs, reaching 30%. The main raw material of copper foil is copper, and the LME copper spot price has fluctuated downwards since 2023.

The prosperity of PCB upstream and midstream A-share targets is low. Copper prices fluctuated downward, and the prices of epoxy resin and electronic-grade fiberglass cloth were at relatively historically low levels. Affected by the continued decline in prices, the recovery of revenue and net profit performance of the main targets of copper foil, fiberglass cloth and epoxy resin for the whole year of 2022 and the first quarter of 2023 was lower than expected. The overall copper-clad laminate market is still in a bottoming period, and the revenue and profits of major A-share listed companies continue to decline. The CCL sector needs to wait for downstream demand to pick up and new demand growth points to emerge to drive the sector to achieve an orderly recovery.

Downstream PCB manufacturers: tracking production, sales, inventory and production expansion

The production and sales of major domestic PCB manufacturers are relatively stable, and they are waiting for an inflection point in demand after inventory is cleared. In 2022, the production and sales of major domestic PCB manufacturers will be relatively consistent. In terms of sales, most major domestic manufacturers have maintained stable sales, with Xingsen Technology’s sales growth reaching 7.27% in 2022. In terms of output, Dongshan Precision has grown rapidly, with a growth rate of 4.99%. In terms of product area and product output value, Jingwang Electronics’ output reached 9.2697 million square meters, and Pengding Holdings’ output reached 27.1 billion yuan. Stimulated by the overall PCB industry prosperity and objective factors, manufacturers have previously been under pressure on inventory to prevent supply chain risks. We believe that the gradual digestion of inventory will be conducive to the recovery of the PCB industry.

When domestic PCB manufacturers are expanding their production, the expansion direction is toward high density and high performance of PCBs. Global PCB production capacity has been transferred to mainland China, and PCB manufacturers in the mainland have achieved rapid development and expanded production this year. The production expansion plans of major manufacturers are mainly for HDI boards, IC packaging substrates and high-multilayer boards, which are in line with the development trend of the PCB industry towards high density and high performance.

Downstream prosperity trend: multiple fields stimulate demand for PCB sub-sectors, pay attention to changes in market space and competitive landscape

The main downstream applications of PCB include communications, consumer electronics, automotive electronics, computers, industrial control medical and military aerospace. According to Prismark statistics, the largest downstream application in the global PCB industry in 2021 is computers, accounting for 34%; followed by the communications industry, accounting for 32%; and the consumer electronics industry ranks third, accounting for 15%.

Consumer Electronics: We are optimistic that global electronics will enter an innovation cycle and boost the demand for FPC soft boards. The recovery of the consumer electronics demand side and the innovation of various product segments will bring a broader market space for PCB. Consumer electronics includes mobile phones, computers, smart homes, wearable devices and other product segments. With the rapid development of the global consumer electronics industry, new consumer hot spots emerging from new series of products such as smartphones, tablets, wearable devices, AR, and VR will lead to a round of iterations of consumer electronics products, thereby driving demand for PCBs.

Automotive Electronics: New energy vehicles and automotive electronics increase PCB demand

The new development trend of electrification, intelligence, networking and sharing of smart cars will drive the growth of the entire industry chain. Currently, my country has a high penetration rate of new energy vehicles and a large automotive electronics market. The development of smart vehicle electrification will empower the development of the three core systems of new energy vehicles: batteries, motors, and electronic controls. Benefiting from the drive of the "four modernizations" of automobiles, the value of bicycle PCB has increased to about 1,200 yuan to 3,000 yuan. Taking the median price range of 2,100 yuan/car, we predict that China's new energy vehicle automotive PCB market space will increase from 1.196 billion yuan in 2019 to 13.494 billion yuan in 2025, with a CAGR of 49.76%.

Communication: AI server is increasing rapidly, pay attention to the progress of verification of card slots by domestic manufacturers

The increase in demand for AI servers has brought room for development to the PCB market, and high computing power demands will place higher quality requirements on PCBs. PCB is mainly used for motherboards, power backplanes, hard disk backplanes, network cards, riser cards, etc. inside servers. As the requirements for computing and transmission rates of servers continue to increase, PCBs will usher in new upgrades and innovations, and drive PCB Incremental market demand. According to Prismark's forecast, global PCB output value will reach US$101.6 billion in 2026, with a compound growth rate of approximately 4.8% from 2021 to 2026; Mainland China's PCB output value in 2026 is expected to continue to maintain its position as the region with the highest PCB output value in the world, reaching US$54.6 billion. The compound growth rate from 2021 to 2026 is approximately 4.6%.

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