Summary of Conference Call Notes Industry Overview - **Industry**: Taiwan PCB (Printed Circuit Board) and CCL (Copper Clad Laminate) - **Market Size**: The AI PCB/CCL Total Addressable Market (TAM) is revised to **US$26.6 billion** for PCB and **US$18.3 billion** for CCL by 2027, up from **US$17.4 billion** and **US$8 billion** respectively, indicating a **140% CAGR** for AI PCB and **178% CAGR** for AI CCL from 2025 to 2027 [1][2] Key Insights - **Demand Outlook**: Strong demand is expected for both PCB and CCL in 2026 and 2027, with YoY growth anticipated to accelerate in 2027 compared to 2026 [1] - **New Technology Impact**: The introduction of new PCB/CCL content in the VR200/300 rack is a significant factor in the upward revision of the TAM, which will enhance cost structures and computing performance [1] - **Production Yield Rate**: The overall AI PCB production yield rate is projected to decline from **73% in 2025** to **65% in 2026** and **62% in 2027**, due to increased complexity in PCB specifications and the entry of more second/third-tier suppliers [2] Company-Specific Insights GCE (Global Circuit Engineering) - **Revenue Projections**: Expected AI PCB revenue to reach **US$2.2 billion** in 2026 and **US$4.8 billion** in 2027, accounting for **68%** and **93%** of total revenue respectively [11] - **Market Share**: GCE's market share in AI PCB is projected to increase from **17% in 2025** to **22% in 2026** [11] - **Earnings Revision**: Revenue estimates for 2026/27 have been revised up by **3%/22%** due to a favorable outlook on the AI PCB industry [28] EMC (Electronics Manufacturing Company) - **Revenue Projections**: Expected AI revenue to reach **US$3.0 billion** in 2026 and **US$8.5 billion** in 2027, accounting for **63%** and **97%** of total revenue respectively [19] - **Market Share**: EMC's AI CCL market share is expected to remain around **50%** in the coming years [19] - **Earnings Revision**: Revenue estimates for 2026/27 have been revised up by **5%/36%** due to positive ASP outlook and solid AI CCL demand growth [32] TUC (Technology United Corporation) - **Revenue Projections**: Expected AI revenue to hit **~US$500 million** in 2026 and **~US$1.9 billion** in 2027, accounting for **32%** and **82%** of total revenue respectively [24] - **Market Share**: TUC's market share in the AI ASIC industry is projected to increase from **6% in 2025** to **27% in 2027** [37] - **Earnings Revision**: Revenue estimates for 2026/27 have been revised up by **4%/18%** due to solid market share gains [37] Financial Metrics - **GCE Financials**: - 2026 Revenue: **NT$96.017 billion** (up from **NT$93.344 billion**) - 2027 Revenue: **NT$154.762 billion** (up from **NT$131.608 billion**) [30] - **EMC Financials**: - 2026 Revenue: **NT$143.118 billion** (up from **NT$135.803 billion**) - 2027 Revenue: **NT$261.967 billion** (up from **NT$192.421 billion**) [35] - **TUC Financials**: - 2026 Revenue: **NT$46.101 billion** (up from **NT$45.081 billion**) - 2027 Revenue: **NT$68.097 billion** (up from **NT$59.937 billion**) [40] Conclusion - The Taiwan PCB and CCL industry is poised for significant growth driven by advancements in AI technology and increasing demand for high-performance computing solutions. Key players like GCE, EMC, and TUC are expected to benefit from this trend, with revised earnings estimates reflecting a more favorable market outlook.

Summary of the Conference Call on Taiwan PCB, CCL, and Substrates Industry Overview - The focus of the conference call was on the PCB (Printed Circuit Board), CCL (Copper Clad Laminate), and substrate industry, particularly in relation to HDI (High-Density Interconnect) technology adoption and its implications for ASIC (Application-Specific Integrated Circuit) servers [2][3]. Key Points and Arguments 1. **HDI Adoption Roadmap**: - There is a significant interest from long-term investors regarding the timeline for HDI technology adoption in ASIC servers, especially following Nvidia's extensive use in AI server boards. The adoption of TPU (Tensor Processing Unit) servers is anticipated by late-2027 or early-2028, with CCL shipments expected in Q4 2026 [2][3]. - Major AI HDI suppliers currently include VGT and Unimicron, both of which are closely tied to Nvidia. The inclusion of more AI HDI suppliers is expected as the industry prepares for v9 generation adoption [2][3]. 2. **Material Technology Insights**: - Nvidia is leading advancements in circuit board technology, particularly with high layer count AI HDI. The midplane PCB for the Rubin project will utilize M9 material, with a 20% probability of being used in NVLink switch boards, which could significantly benefit EMC if realized [2][3]. - There are two material options for ultra-high layer count boards: M9 PCB/HDI material and PTFE (Polytetrafluoroethylene). The potential inclusion of PTFE indicates a shift towards more demanding data loss requirements, although M9 is expected to be the prevailing choice due to fewer production challenges [2][3]. 3. **Unimicron's Capacity Expansion**: - Unimicron plans to increase its 2025 capital expenditure by NT$6 billion, raising it to NT$25.4 billion, primarily for substrate investments. This includes advancing the KF2 launch to mid-2026 and initiating the YM phase 2 project, which is expected to ramp up in late-2027/2028 [2][3]. - The KF2 capacity remains unchanged in size but is expected to be utilized for ASIC projects, indicating strong demand for advanced high-performance substrates [3]. 4. **Market Dynamics**: - The report highlights a strong demand for advanced high-performance substrates, with Unimicron positioned favorably among substrate suppliers for AI accelerators [3]. - The anticipated shipment timelines and material grades for TPU generations are outlined, indicating a structured approach to technology adoption and supplier engagement [4]. Additional Important Information - The dielectric loss comparison for various materials at 14GHz shows that PTFE has the lowest loss (<0.001), followed by M9 (0.001), M8 (0.0015-0.002), and M7 (0.004-0.005), which underscores the performance advantages of PTFE in specific applications [5]. - The report includes a detailed table of TPU CCL and PCB by generation, indicating the expected shipment start dates and material grades, which is crucial for understanding the supply chain dynamics [4]. Companies Discussed - **Elite Material Co** (Ticker: 2383.TW) - Current Price: NT$1,495.00, Rating: Overweight - **Unimicron** (Ticker: 3037.TW) - Current Price: NT$214.00, Rating: Overweight [7]. This summary encapsulates the critical insights and projections regarding the PCB, CCL, and substrate industry, particularly in the context of HDI technology and its implications for future market dynamics.

Summary of Conference Call Notes Industry Overview - The focus is on the Taiwan PCB (Printed Circuit Board), CCL (Copper Clad Laminate), and substrate industry, with expectations of solid demand driven by AI applications in 2026 and beyond [1][2]. Key Takeaways 1. **Positive Market Sentiment**: Investors remain optimistic about the PCB/CCL/substrate industry, anticipating improved pricing and shipment conditions [1]. 2. **Earnings Estimates Adjustments**: Earnings estimates for companies like EMC, TUC, and UMC have been fine-tuned upwards by up to 15% to reflect the positive outlook and gains from ASIC AI [1]. 3. **Market Share Gains**: Taiwan suppliers are expected to gain market share in ASIC PCB/CCL from competitors in mainland China and Korea [2][3]. 4. **Demand from Major Players**: Increased demand from companies like NVIDIA (NVDA) for AI server PCB/CCL is anticipated, with EMC expected to dominate high-end products [2][3]. 5. **Raw Material Supply Risks**: There are increasing supply risks for high-end copper foil and glass fiber, leading to expectations of higher pricing across all PCB/CCL/substrate products [2][13]. Company-Specific Insights EMC (Electronics Manufacturing Company) - **Market Position**: Expected to hold a 70% market share in CCL for AWS Trainium 3 servers by 2026, with a significant ASP increase anticipated due to M9 grade CCL adoption [3][11]. - **Earnings Revisions**: 2026E/2027E earnings estimates revised up by 2%/3% due to earlier-than-expected M9 grade CCL adoption, leading to a 3x+ higher ASP compared to M8 grade [23][24]. - **Target Price Revision**: Target price raised to NT$1,800 from NT$1,695, maintaining a Buy rating [26]. TUC (Taiwan United Corporation) - **Earnings Outlook**: Earnings estimates for 2025E-2027E revised up by 1-3% due to better-than-expected market share in ASIC AI projects [29]. - **Target Price Revision**: Target price increased to NT$540 from NT$470, reflecting a better pricing environment [31]. Unimicron - **Earnings Revisions**: 2026E/2027E earnings estimates revised up by 2%/2% due to increasing penetration of CPO substrate [34]. - **Target Price Revision**: Target price raised to NT$170 from NT$148.84, maintaining a Neutral rating [36]. Additional Insights - **Material Shortages**: Shortages in both high-end and mid- to low-end PCB materials are expected to lead to increased pricing, with lead times for low-end E glass now exceeding 10 weeks [13][14][15]. - **ABF/BT Substrate Pricing**: Positive pricing outlook for ABF substrates, with a projected 30-40% supply gap in 2026, leading to potential shortages in 2027 [17][22]. - **Competition Dynamics**: Taiwan PCB/CCL players are expected to maintain leadership in the ASIC AI server supply chain, while second-tier suppliers may struggle to meet quality standards in the short term [9]. Conclusion The Taiwan PCB/CCL/substrate industry is poised for significant growth driven by AI demand, with key players like EMC and TUC expected to benefit from improved market conditions and pricing dynamics. The ongoing material shortages present both challenges and opportunities for pricing adjustments across the sector.

Summary of Conference Call Notes Industry Overview - The focus is on the Taiwan PCB (Printed Circuit Board) and CCL (Copper Clad Laminate) industry, particularly the M9 grade CCL (Q-glass version) which is expected to see significant demand growth from 2026 to 2027 [1][12]. Key Companies - **EMC (Elite Material Co., Ltd.)** - Leading supplier of high-end HDI (High-Density Interconnect) and SLP (Substrate-Like PCB) materials with over 70% and 90% market share respectively [25]. - Expected to benefit from the adoption of M9 grade CCL due to its advanced technology and customer qualifications [1]. - Revised target price (TP) increased from NT$1,400 to NT$1,530 based on a 22x P/E ratio [19]. - **TUC (Taiwan Union Technology Corp.)** - Key supplier of high-end CCL with a market share of over 20% [28]. - Revised target price (TP) increased from NT$375 to NT$410 based on an 18.0x P/E ratio [22]. Core Insights - **M9 Grade CCL Demand** - Anticipated to exceed $400 per sheet, significantly higher than M7 ($100-110) and M8 ($160-180) grades [1]. - Strong demand expected for high-end PCB and CCL from Nvidia's backplane PCB launching in 2H27, with a total addressable market (TAM) of over $5 billion for Nvidia and $2 billion for CCL [10]. - **Revenue and Earnings Projections** - EMC's revenue estimates for 2026/27 revised up by 1-2% due to better profitability from M9 grade CCL [15]. - TUC's revenue estimates for 2026/27 revised up by 1-7% reflecting higher market share in AWS Trainium projects [17]. - **Market Trends** - Expected growth in high-end AI projects, with potential YoY growth accelerating from 50-60% in 2026 to over 100% in 2027 [12]. - Despite short-term challenges, any pullback in high-end PCB/CCL suppliers presents a good entry point for investors [12]. Financial Performance - **EMC Financials** - 2025E revenue estimate revised down by 1% due to AWS Trainium 3 delays, but 2026/27 estimates revised up by 2/3% [13][15]. - Key financial metrics for 2026E include sales of NT$123.523 billion and net income of NT$24.180 billion [16]. - **TUC Financials** - 2025E revenue and earnings estimates revised down by 3% and 8% respectively due to AWS Trainium 3 delays, but 2026/27 estimates revised up by 1/9% [17]. - Key financial metrics for 2026E include sales of NT$38.454 billion and net income of NT$6.317 billion [18]. Risks and Challenges - Potential risks include: - RCC technology potentially replacing high-end smartphone HDI designs [26]. - Rising trade tensions affecting smartphone and server shipments [26]. - Increased competition from mainland China peers [26][28]. Conclusion - The outlook for the Taiwan PCB/CCL industry is positive, driven by the adoption of advanced materials and strong demand from AI and high-speed server markets. Both EMC and TUC are positioned to benefit from these trends, with revised target prices reflecting their growth potential. However, investors should remain cautious of potential risks that could impact market dynamics.

Investment Rating - The report maintains a "Buy" rating on GCE, EMC, and TUC, with target prices revised upwards to NT$420, NT$1,080, and NT$330 respectively, reflecting a 13-28% upward revision in earnings estimates for 2026-2027 [12][20][76]. Core Insights - The AI server CCL/PCB total addressable market (TAM) is projected to grow significantly, reaching US$2.3 billion for CCL and US$5.3 billion for PCB in 2025, and expanding to US$8 billion and US$17.4 billion by 2027, indicating a compound annual growth rate (CAGR) of 88% and 80% respectively from 2024 to 2027 [14][25][33]. - The demand for high-end technology is expected to increase, benefiting first-tier suppliers like GCE, EMC, and TUC, as they are likely to maintain high utilization rates and improve their product mix due to the inability of first-tier suppliers to meet solid client demand [2][32][40]. - The report anticipates that the market share of EMC and TUC in the ASIC AI server CCL market will rise from 42% in 2024 to 85% by 2027, driven by proactive capacity expansion and increasing M8 grade CCL penetration [3][37][40]. Summary by Sections AI Server Market Outlook - The overall AI server CCL TAM is expected to account for approximately 71% of EMC's total revenue in 2025, increasing to 230% by 2027, while for GCE, the AI server PCB TAM will represent 230% of its total revenue in 2025 and 500% in 2027 [2][32]. - The report highlights that the ASIC AI server CCL/PCB TAM is projected to reach US$3.8 billion and US$9.1 billion in 2027, with GCE and EMC expected to gain significant market share [37][46]. Pricing and Profitability - There is a favorable outlook for average selling price (ASP) expansion for Taiwan CCL/PCB suppliers, with expectations of ASP increases of 19%, 11%, and 10% for GCE, EMC, and TUC respectively from 2024 to 2027 [8][64]. - The gross margins (GM) for GCE, EMC, and TUC are projected to improve significantly, with ASIC AI server average GM expected to be over 45% compared to the companies' average levels [63][74]. Capacity and Supply Dynamics - The report notes that the high-end CCL industry is expected to grow at a CAGR of 40% from 2024 to 2027, driven by increasing demand for M7+ grade CCL, while capacity expansion for high-end CCL is only expected to increase by 21% during the same period, leading to a supply-demand gap [15][26][58]. - The tightening supply conditions for high-end CCL and high layer count PCB are anticipated to lead to longer lead times and potential pricing hikes, benefiting key players in the industry [54][57].

Group 1 - The core viewpoint is that the computing power industry maintains high prosperity around investment opportunities in the Nvidia chain and ASIC chain [1] - The domestic PCB/CCL industry leaders are expected to benefit from the tight supply-demand situation in high-end capacity, indicating strong sustainability and high certainty in performance growth [1] - Companies positioned to capture core customer technology upgrade cycles and those with collaborative development capabilities are expected to continue to benefit deeply [1]