Summary of Key Points from the Conference Call Industry Overview - **Industry**: China PCB (Printed Circuit Board) Sector - **Key Focus**: AI demand and its impact on PCB design and production Core Insights 1. **AI Demand**: AI remains the most significant driver of demand in the PCB sector, particularly for High Density Interconnect (HDI) and High Layer Count (HLC) PCBs, with strong order visibility extending into Q3 and Q425 [2][3] 2. **Midplane Adoption**: Discussions indicate a potential shift towards midplane designs replacing copper cables in future AI systems, with clearer visibility expected by Q425 [2] 3. **Material Trends**: M9-grade high-speed Copper Clad Laminate (CCL) is anticipated for midplane PCBs, while interest in PTFE is declining due to its thermal expansion issues and processing challenges [2] 4. **Capacity Expansion**: Chinese PCB manufacturers are experiencing extended lead times for critical equipment due to aggressive capacity expansions, which are on schedule as orders were placed in advance [2] Company-Specific Insights Shennan 1. **Growth Drivers**: AI has significantly contributed to Shennan's growth in both data and wire communication sectors [3] 2. **Capacity Management**: Shennan is cautious about capacity expansion, resolving bottlenecks through technology upgrades and planning new capacity in Nantong and Thailand for late 2026 [3] 3. **Order Visibility**: Demand from domestic memory customers has kept order visibility strong, although there are concerns about potential double bookings due to raw material shortages [3] Dongshan 1. **Earnings Pressure**: Dongshan anticipates pressure on earnings for 2025 due to limited growth in smartphone FPC content and losses from a disposal of a non-profitable LED business [4] 2. **Consolidation Benefits**: The upcoming consolidation with Source Photonics and GMD is expected to enhance profitability through debt restructuring and operational synergies, with benefits starting in 2026 [4] Victory Giant (VGT) 1. **Capacity Expansion**: VGT is aggressively expanding its capacity, adding 15,000 sqm/month for HDI and 50,000 sqm/month for HLC in Huizhou and Thailand [5] 2. **Demand-Driven Growth**: The expansion is backed by demand from a major North American AI customer for next-gen PCB designs [5] Risks and Considerations 1. **Global AI Deployment**: Risks include slower-than-expected AI deployment both globally and in China, which could impact demand [7] 2. **CAPEX Plans**: Weaker-than-expected capital expenditure plans from hyperscalers for data centers and servers could pose risks [7] 3. **Tariffs and Regulations**: Higher tariffs affecting consumer electronics and potential tightening of environmental regulations in China are additional risks [7] Valuation and Risk Statements - **Shennan**: Valuation based on a sum-of-the-parts method, with risks including slower server demand and pricing pressures [8] - **Dongshan**: Valuation based on target PE multiples, with risks from ASP cuts and iPhone procurement challenges [8] This summary encapsulates the key points discussed in the conference call, highlighting the dynamics within the China PCB sector, company-specific developments, and associated risks.

Group 1 - The electronic ETF (515260) focusing on "semiconductors + consumer electronics + PCB" has seen a strong performance, with a peak increase of over 3.7% and currently up 2.38%, reaching a new high since its listing [1] - In the semiconductor sector, companies like SMIC have surged over 13%, while others like Rockchip and Cambricon have increased by more than 8% and 6% respectively [1] - The electronic sector has attracted significant capital inflow, with a net inflow of 13.5 billion yuan, and over the past 5 and 20 days, it has accumulated 83.1 billion yuan and 206.6 billion yuan respectively, leading all 31 first-level industries in the Shenwan classification [1] Group 2 - The total market capitalization of the electronic industry has surpassed that of the banking sector for the first time, reaching 11.54 trillion yuan as of August 22 [1] - As of August 27, among the 50 constituent stocks of the electronic ETF, 35 have disclosed their semi-annual reports, with 23 reporting positive net profit growth, and 4 achieving significant profit increases [1] - Four main driving forces for the electronic sector's future performance have been identified: 1. Semiconductor equipment chain with clear expansion needs in domestic storage and logic wafer factories [1] 2. Domestic computing power chain with an expanding supply-demand gap for AI chips due to U.S. restrictions [1] 3. Recovery in consumer electronics with new product launches expected in September [1] 4. Overseas computing power chain with increased capital expenditure from North American cloud vendors [1]

Investment Rating - The report indicates a positive outlook for the PCB industry, particularly for companies involved in AI-related applications, with specific mentions of WUS and Victory Giant as potential investment opportunities [1][4]. Core Insights - Taiwan PCB makers have experienced 15 consecutive months of year-over-year revenue growth, with a year-to-date (YTD) revenue increase of 20% [1][2]. - Taiwan CCL makers reported a 22nd consecutive month of year-over-year revenue growth, achieving a YTD revenue growth of 43% [1][2]. - The growth in revenue is attributed to strong demand from AI server and switch markets, particularly for ASIC products [1][4]. - Investor interest has shifted towards companies with clear capital expenditure and capacity plans for 2025-2026, particularly in the AI-PCB segment [1][4]. Revenue Trends - Taiwan CCL companies reported a combined May revenue growth of 27% year-over-year, marking the 22nd consecutive month of growth [2]. - Taiwan PCB companies recorded a May revenue growth of 20% year-over-year, continuing their growth streak for the 15th month [2]. - Year-to-date revenue growth for Taiwan CCL and PCB companies stands at 43% and 20% respectively [2]. Cost Analysis - The LME copper spot price increased by 4.7% in May, reaching US$9,548 per ton, while copper foil processing costs remained stable [3]. - The mid-price of epoxy resin decreased by 3.2% year-to-date due to oversupply conditions [3]. - Prices for electronic yarn and fabric showed slight fluctuations, with CPIC G75 yarn price down by 1% in May but up 2.9% year-to-date [3]. Investor Sentiment - Recent investor feedback indicates heightened interest in US ASIC-exposed companies and networking-exposed names like WUS, with expectations for upward revisions in earnings estimates for 2026 [4]. - Domestic investors have significantly revised their earnings expectations for Victory Giant, reflecting optimism regarding its AI-HDI yield and gross profit margin [4]. - There is a growing interest among Asian investors in upstream beneficiaries of the PCB supply chain, anticipating price hikes due to material upgrades [4].