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]