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Summary of Conference Call Records Industry Overview - **Industry**: PCB (Printed Circuit Board) and Laminates - **Key Players**: Gold Circuit Electronics (GCE), Tripod Technology Core Insights and Arguments 1. **High-End PCB Shortage**: The high-end PCB market is expected to face a shortage due to increasing demand from AI applications and inefficient capacity ramp-up in Southeast Asia. US customers are actively securing high-end PCB capacity and qualifying new suppliers [1][2] 2. **GCE's Stable Position**: GCE is positioned firmly as a tier-1 supplier, while tier-2 Tripod is anticipated to benefit from outflow orders [1] 3. **Tripod's 2Q25 Performance**: Tripod reported a 5% QoQ sales growth in 2Q25, with a gross margin (GM) increase of 1.2 percentage points to a record 26.2%. This was attributed to a better product mix and rising unit transaction rates (UTR) [1][21] 4. **GCE's 2Q25 Results**: GCE's sales rose 15% QoQ, but GM declined by 1.7 percentage points due to FX headwinds. Overall earnings were 15% lower than forecasted due to significant FX losses [9][15] 5. **Future Growth Expectations**: Tripod is expected to continue its growth trajectory in 3Q25, with projected sales growth of 6% QoQ despite a 5% negative impact from FX headwinds [1][22] Financial Performance - **Tripod's Financials**: - 2Q25 revenue: NT$17.9 billion, up 5% QoQ - Gross profit: NT$4.7 billion, GM of 26.2% - Operating profit: NT$3.2 billion, OP margin of 18.0% [21] - **GCE's Financials**: - 2Q25 revenue: NT$13.9 billion, up 15% QoQ - Gross profit: NT$4.1 billion, GM of 29.6% - Net income: NT$1.7 billion, EPS of NT$3.34 [15][19] Earnings Revisions 1. **Tripod**: Earnings estimates for 2025, 2026, and 2027 have been revised upwards by 5%, 11%, and 10% respectively, reflecting a stronger GM profile. Target price raised to NT$370 from NT$300 [11] 2. **GCE**: 2025 earnings estimates slightly cut by 3% due to FX losses, but 2026 and 2027 estimates raised by 20% and 26% respectively due to stronger AI ASIC momentum [11] Market Positioning - **Valuation Comparison**: Tripod's PE has historically traded at a 23% discount to GCE's PE, with a current target price implying a fair valuation at 16x [11][14] - **Future Potential**: If Tripod secures mainboard contracts, further re-rating to 20x PE is possible [11] Additional Insights - **Capacity Utilization**: Tripod has unfulfilled capacity in Wuxi targeting high-end server and networking products, indicating potential for further market penetration [2] - **Sales Trends**: GCE's July sales showed a significant uptick of 22% MoM and 60% YoY, driven by AI ASIC demand [10] This summary encapsulates the key points from the conference call records, highlighting the performance and outlook of the PCB industry, particularly focusing on GCE and Tripod.

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China PCB (Printed Circuit Board) sector**, highlighting a **47% rally** in the sector over the past three months driven by increasing demand for **artificial intelligence (AI)** applications [1] - The demand for **High Layer Count (HLC) PCB** and **High Density Interconnect (HDI)** is particularly strong due to growth in **cloud service providers' (CSP)** AI capital expenditure budgets and ASIC server projects [1] Core Insights and Arguments - **Demand Dynamics**: - Strong demand from sectors such as **automotive**, **home appliances**, and **industrial applications** supports low-to-mid range order momentum, while demand for **smartphones** and **PCs** remains lukewarm, limiting growth for **Flexible Printed Circuit (FPC)** and **Substrate-Like PCB (SLP)** [1] - The **PCB production value** is expected to grow **6% in 2025E**, following a decline of **15%** in 2023 and a recovery of **7%** in 2024 [9] - The sector is anticipated to enter a mild **AI-driven upcycle**, with a **5% CAGR** from 2024 to 2029, compared to **2%** from 2018 to 2023 [9] - **Substrate Market**: - **BT (Bismaleimide-Triazine)** substrate makers in China are experiencing a dip in utilization rates, but a mild recovery is expected due to tariff-induced demand [2] - **ABF (Ajinomoto Build-up Film)** substrate demand is recovering globally, which is accelerating domestic semiconductor qualifications from local suppliers [2] - **Copper Clad Laminate (CCL)**: - Leading CCL makers in China are operating at full capacity, with a **10-15% price increase** expected in H225E due to rising raw material costs [3] - Demand for high-end CCL is driven by AI server projects and general-purpose server replacements [3] Stock Preferences and Recommendations - **Stock Ratings**: - Total EPS for the coverage is raised by **12%/14%/19%** for 2025-27E due to higher utilization and pricing from robust AI demand [4] - Price targets for companies in the sector have been increased by **47%–118%** based on higher EPS and upcycle PE multiples [4] - Preferred stocks include **Shennan** and **Shengyi Tech** due to their visibility in AI orders, while **FastPrint** has been downgraded to Neutral with a significant EPS cut due to delayed breakeven in ABF [4] Additional Insights - **Market Trends**: - The **server/data storage** segment is projected to grow at a **12% CAGR** from 2024 to 2029, becoming the largest and fastest-growing downstream application by output value [11] - The **automotive sector** is expected to see a **4% CAGR**, driven by electrification and smartification trends [11] - The **consumer electronics** segment is mixed, with near-term strength from subsidies but overall sluggish demand [9] - **Geopolitical Factors**: - Current US tariffs have limited direct exposure for PCB and CCL companies, which have a globally diversified manufacturing footprint [9] - The tariffs may expedite capacity expansion for Chinese producers in Southeast Asia due to the sector's upstream and highly pollutive nature [9] - **AI and Technology Adoption**: - The demand for AI servers is expected to significantly increase, with Nvidia projecting a **100x increase** in compute requirements for inference demand [17] - The introduction of new Nvidia GPUs is anticipated to drive down costs for AI training and inference, further boosting demand for high-end PCBs [17] Conclusion - The China PCB sector is poised for growth driven by AI demand, with specific segments like HLC PCB and HDI expected to outperform. Stock preferences reflect a bullish outlook on companies with strong AI order visibility, while geopolitical factors and market dynamics will continue to shape the landscape.