Investment Highlights - PCB technology is evolving in materials, processes, and architecture, driving continuous value growth. The demand from AI servers, high-speed communication, and automotive electronics is pushing PCB technology upgrades across these three dimensions [2][3][9] - The upstream high-end materials are in short supply, and cost increases are being passed down to downstream PCB manufacturers. The core materials for copper-clad laminates (CCL) include copper foil, resin, and fiberglass cloth, with cost shares of 39%, 26%, and 18% respectively [4][6][46] - The PCB market is on an upward cycle, driven by AI, with both volume and price increasing across various sectors. The global PCB market is expected to reach $94.7 billion by 2029, with a CAGR of 5.2% from 2024 to 2029 [7][8] PCB Technology Evolution - The evolution of PCB technology is driven by high line density and electrical performance. PCBs serve as critical interconnects in electronic products, supporting various components and providing electrical connections [10][11] - The PCB production technology is continuously updated in materials, processes, and architecture, with significant advancements in high-density interconnects and high-performance materials [18][19][20] Upstream Materials - The core materials for CCL are copper foil, resin, and fiberglass cloth, which significantly influence signal transmission speed and loss. The CCL accounts for 40% of the total PCB cost [39][46] - The global CCL industry is highly concentrated, with a CR10 of 77% in 2024, indicating a strong oligopoly in the market [41] - The demand for high-end HVLP copper foil and ultra-thin copper foil is surging, with Japanese and Taiwanese manufacturers dominating the high-end market [60][62][63] Market Dynamics - The PCB industry is experiencing a shift towards Southeast Asia, with China's share of the global PCB market expected to be around 50% by 2029. The industry has matured, with significant competition and a fragmented market [17] - The demand for special fiberglass cloth is increasing due to AI and high-speed communication, leading to upgrades in low-dielectric and quartz cloth [66][70] Future Outlook - The PCB market is expected to benefit from the ongoing technological advancements and increasing demand from AI and high-speed communication sectors. The integration of advanced packaging technologies like CoWoP and embedded power chips is anticipated to further enhance PCB value [23][32][34]

Group 1 - The core viewpoint is that the Low Dk electronic cloth industry chain presents significant investment opportunities due to the increasing demand for high-speed transmission scenarios, particularly in the context of 400G and above switch applications [2][3] - The Low Dk electronic cloth is essential for future high-speed server construction, with its application ratio expected to continuously increase as server transmission demands grow [2][3] - The market for Low Dk electronic cloth is still in a phase of continuous iteration and upgrade, with substantial market expansion potential driven by the increasing transmission rate requirements of downstream data center switches [3][4] Group 2 - The Low Dk electronic cloth industry chain has bright spots across all segments, with a favorable overall competitive landscape due to the complexity of processing and material formulation, resulting in relatively few global suppliers [4][5] - The upstream segment includes high-purity quartz fiberglass as a core material for the third generation of electronic cloth, with companies like Feilihua recommended for investment [4][5] - The midstream segment involves the manufacturing of electronic cloth, with domestic manufacturers like Zhongcai Technology and Honghe Technology expected to expand their production capacity [4][5] - The downstream segment focuses on copper-clad laminate (CCL) manufacturing, with companies like Shenghong Technology and Shenyang Technology anticipated to increase their market share [4][5] Group 3 - The market currently has a high focus on PCB units, often overlooking the upstream electronic cloth supply chain, which is a new category with low current attention [5][6] - The demand for Low Dk electronic cloth is expected to rise in both volume and price, driven by the increasing penetration rate in high-speed switch applications [5][6] - The Low Dk electronic cloth is crucial for meeting the dielectric loss requirements of high-frequency and high-speed copper-clad laminates, particularly for AI servers and other high-performance applications [5][6] Group 4 - The Low Dk electronic cloth industry chain can be divided into three parts: upstream (quartz fiberglass, resin, copper foil), midstream (electronic cloth R&D and manufacturing), and downstream (CCL supply) [31][32] - Upstream, quartz fiberglass is identified as a key positioning material, with its dielectric loss and thermal expansion properties superior to traditional fiberglass [33][34] - The midstream segment requires complex processing techniques for high-purity quartz fiberglass cloth, which significantly impacts the performance of electronic-grade applications [42][43] - The downstream segment is focused on the stringent requirements for PCB processing, particularly for 224G transmission technology, which poses significant challenges for manufacturers [50][51]

Investment Rating - The report maintains a "Positive" outlook on the Low Dk electronic fabric industry, highlighting significant growth potential driven by high-speed transmission demands [4][6]. Core Insights - The demand for Low Dk electronic fabric is driven by the need for high-speed transmission, particularly in AI servers and data centers, which are expected to become core growth points for the industry [5][7]. - The Low Dk electronic fabric industry chain presents opportunities across all segments, with a focus on high-barrier core areas such as quartz fiber manufacturing, Low Dk electronic fabric production, and high-frequency copper-clad laminate (CCL) manufacturing [6][8]. Summary by Sections 1. High-Speed Transmission Demand - Low Dk electronic fabric is essential for ensuring the structural safety and signal transmission quality of copper-clad laminates, with data centers and servers being key growth areas [16][18]. - The increasing penetration of AI servers is driving the demand for high-speed switches and optical modules, necessitating the use of Low Dk materials to reduce dielectric loss [23][25]. 2. Industry Chain Highlights - **Upstream**: Quartz fiber is identified as a critical component, with few manufacturers capable of mass production, giving companies like 菲利华 a competitive edge [39][44]. - **Midstream**: Leading manufacturers are rapidly expanding production capacity for Low Dk electronic fabrics, with companies like 中材科技 and 宏和科技 making significant advancements [47][48]. - **Downstream**: Attention is drawn to CCL manufacturers that supply to the NVIDIA chain, as their product development and testing progress will significantly impact market share [5][8]. 3. Recommended Core Stocks - **Upstream**: Focus on quartz fiber suppliers such as 菲利华 [6][17]. - **Midstream**: Monitor companies like 中材科技 and 宏和科技 that are expanding their Low Dk electronic fabric production capabilities [6][18]. - **Downstream**: Keep an eye on high-frequency CCL manufacturers like 生益科技 and 胜宏科技 [6][20].