Investment Rating - The industry investment rating is optimistic (first-time rating) [2] Core Insights - The rapid development of artificial intelligence (AI) technology is driving strong demand for AI servers, which is expected to reach 1.981 million units globally in 2024, accounting for 12.1% of the overall server market. This demand is projected to grow by 24.3% to 2.4611 million units in 2025 [2][14] - The demand for printed circuit boards (PCBs) is expected to increase significantly due to the rising AI server penetration, with global PCB output valued at $73.565 billion in 2024, representing a year-on-year growth of 5.8% [2][14] - The market for third-generation electronic fabrics (Q fabric) is anticipated to grow from $720 million in 2024 to $3.127 billion by 2031, with a compound annual growth rate (CAGR) of 23.3% from 2025 to 2031 [4][19] Summary by Sections 1. Electronic Fabric Product Upgrades - Electronic fabrics are critical materials in the electronic information industry, with continuous technological upgrades driven by the demand for high-frequency and high-speed signal transmission in advanced applications such as 5G and AI [7][9] - The evolution of electronic fabrics is categorized into three generations: first-generation (alkali-free glass fiber), second-generation (modified glass fiber), and third-generation (Q fabric/quartz fiber), each targeting different market needs [9][12] 2. Steady Progress in Domestic Substitution - The domestic substitution process is advancing steadily, with key companies like China Jushi, Zhongcai Technology, Honghe Technology, and International Composite Materials making significant strides in product development and capacity expansion [19][20] - China Jushi holds a 23% global market share in electronic fabrics, while Zhongcai Technology has established itself as a leader in low-DK fabric production, with plans to increase capacity significantly [19][20] - Honghe Technology and International Composite Materials are also expanding their production capabilities to meet the growing demand for high-performance electronic fabrics [20] 3. Market Dynamics and Future Outlook - The capital expenditure of major cloud service providers (CSPs) is on the rise, indicating a sustained demand for AI infrastructure, which is expected to further drive the need for high-end electronic fabrics [17][18] - The report highlights the importance of technological advancements in the electronic fabric sector, particularly in meeting the stringent requirements of high-frequency applications [4][19]