Summary of Conference Call on China CCL Sector Industry Overview - The conference call focused on the China CCL (Copper Clad Laminate) sector, particularly in relation to advancements in AI and high-end CCL materials [1][2]. Key Companies Discussed - **Shengyi Technology (600183.SS)** - **Shennan Circuit (002916.SZ)** - **Kingboard Laminates Holdings (1888.HK)** - Other suppliers mentioned include EMC, Doosan, TUC, Panasonic, and ITEQ [1][2][3][4]. Core Insights and Arguments 1. **Growth in AI-CCL Materials**: - NVDA's recent results indicate a strong demand for high-end CCL materials, with a roadmap showing significant upgrades from 2020 to 2026 [1]. - The transition to advanced materials is expected to create opportunities for suppliers within the NVDA ecosystem [1]. 2. **Shengyi's Competitive Edge**: - Shengyi is the only certified supplier of M9 CCL by NVDA, achieving a production yield of over 90% for the Rubin platform [3]. - Projected earnings growth for Shengyi is over 33% to RMB 4.6 billion, with AI-CCL volume expected to double this year [3]. 3. **Market Demand Projections**: - AI-CCL volume is projected to reach 1.5-1.6 million sheets in 2026, accounting for over 15% of total capacity [3]. - The gross margin (GM) for AI-CCL is expected to exceed 40%, compared to an average of 28% for the CCL segment [3]. 4. **Shennan's Growth Potential**: - Shennan is expected to see a 39% CAGR in earnings from 2025 to 2027, driven by AI-PCB and BT substrate segments [10]. - The GM for AI-PCB is projected to be at least 45% in 2H25, supported by major customers like Huawei and increased AI capex among Chinese hyperscalers [10]. 5. **Kingboard Laminates' Strategy**: - KBL plans to enter the NVDA supply chain with its M9 CCL and is gaining momentum in upstream glass fabric production [4][9]. - The ASP of quartz fabric for M9 is significantly higher than E-glass, leading to a suspension of certain E-glass CCL products for a mix upgrade [7]. Additional Important Insights - **Material Shortages**: - There is a noted shortage of AI-fabric materials, particularly low Dk/gen 2 and Q-glass, with projected CAGRs of 387% and 471% respectively from 2025 to 2027 [8][11]. - Supply issues are expected to exacerbate delivery lead times, creating opportunities for price inflation [8]. - **Valuation and Risks**: - Target prices for Shengyi and Shennan reflect high P/E ratios due to expected earnings upgrades and market share gains [25][28]. - Risks include slower-than-expected customer certification, macroeconomic conditions in China, and demand fluctuations in electronic goods [24][26][29]. - **Future Production Plans**: - KBL aims to produce 2,000 tons of low Dk gen 1/gen 2 by 1Q26, with potential net profit contributions exceeding HK$400 million for 2026 [9]. This summary encapsulates the key points discussed during the conference call, highlighting the growth potential and strategic positioning of companies within the China CCL sector amidst the evolving landscape driven by AI advancements.

Summary of Key Points from Conference Call Industry Overview - **Industry**: ABF substrate and CCL (Copper Clad Laminate) within the Technology sector in the Asia-Pacific region - **Key Drivers**: The demand outlook is primarily driven by advancements in AI technology, which is expected to significantly influence supply and demand dynamics in the substrate market ABF Substrate Supply/Demand Outlook - **Supply/Demand Model Update**: - Expected undersupply of 1% in 2026 and 9% in 2027, revised from previous estimates of 1% and 6% undersupply respectively [2] - Anticipated oversupply of 5% in 2025, down from 6% [11][13] - **Demand Growth**: - Demand for substrates from AI accelerators projected to grow by over 50% CAGR towards 2027, up from approximately 40% [2] - Demand mix for AI accelerators expected to reach 38% in 2026 and 48% in 2027, compared to 25% in 2025 [2] CCL Market Developments - **Expansion Plans**: - Suppliers like EMC and Shengyi are expanding capacity, with Shengyi investing CNY 4.5 billion in Guangdong [3] - EMC is expected to gain market share in TPU, with potential for a 50-60% allocation if volume forecasts are revised upwards [3] - **Revenue Expectations**: - Record-high revenue anticipated for EMC and TUC in Q1 2026, attributed to new capacity and price hikes [3] Company Recommendations - **Buy Ratings**: - Reiterated Buy ratings for Unimicron, NYPCB, EMC, and TUC due to their higher exposure to AI server demand [4] - **Underperform Ratings**: - Underperform ratings for Kinsus and Shengyi due to stretched valuations [4] - **Price Objective Changes**: - Price objectives raised for Unimicron (NT$450), EMC (NT$2300), TUC (NT$665), and Shengyi (CNY 52) [8] Financial Adjustments - **Earnings Estimates**: - Unimicron's 2027E EPS raised by 10% reflecting a stronger pricing outlook and tighter supply/demand situation [23] - EMC's operating profit estimates for 2026 and 2027 raised by 2% and 5% respectively due to stronger revenue growth assumptions [27] Capacity Breakdown - **Market Leaders**: - Ibiden (22%) and Unimicron (18%) are the leading suppliers in terms of capacity for ABF substrates [21][22] Important Upcoming Events - **Watch for Updates**: - Commentary from Ibiden and AT&S on February 3, 2026, and Toppan on February 13, 2026, will be significant following upcoming results releases [2] Conclusion - The ABF substrate and CCL markets are poised for growth driven by AI advancements, with specific companies positioned favorably for this trend. Adjustments in earnings estimates reflect a positive outlook, while capacity expansions indicate a proactive approach to meet increasing demand.