Core Insights - The PCB industry is experiencing unprecedented growth opportunities driven by the surge in AI server demand and the unexpected recovery in traditional sectors [1][2] Demand Drivers - The resilience in PCB demand is attributed to a dual-driven model of emerging sectors' explosion and the recovery of traditional fields [2] - AI technology breakthroughs are pushing the industry into a "golden phase" of simultaneous volume and price increases [2] - AI server PCB demand is expected to significantly increase, with Nvidia's GB 200/300 NVL72 shipments projected to meet expectations by 2025, and Blackwell & Rubin series shipments potentially exceeding 50,000-60,000 units by 2026 [2][3] - The technical requirements for AI servers far exceed those of traditional servers, with high-layer count (HLC) and high-density interconnect (HDI) boards becoming core demands [2] Market Dynamics - UBS estimates that the single-unit PCB content for AI servers is 5-10 times higher than that of traditional servers, significantly driving the server PCB market [3] - The domestic AI chip and cluster solutions are accelerating the formation of a local AI server supply chain, benefiting companies like Shenzhen Circuits and Huitian Technology [3] - Traditional PCB demand is also recovering, contributing 70-80% of revenue from sectors like smartphones, PCs, and general servers [3] Sector-Specific Insights - The smartphone sector is benefiting from the unexpected shipment volume of the iPhone 17 series, with global smartphone shipment forecasts for 2025/26 raised to 1.26 billion and 1.27 billion units, reflecting year-on-year growth of 3% and 1% respectively [3] - The PC market is seeing a recovery driven by the replacement cycle following the end of Windows 10 support, with global PC shipment growth expected to exceed 4% in 2025/26 [3] - General server demand is notably resilient, with global shipments projected to grow by 8.6% and 8.0% in 2025/26, and hyperscale data center shipments expected to grow by 17.8% and 9.8% [4] Industry Chain Analysis - The PCB industry chain shows a concentration of value in upstream segments, with substrates and copper-clad laminates (CCL) being the most certain segments benefiting from AI demand [5] - BT substrates are experiencing high utilization rates due to the recovery in storage chip demand and supply shortages of key materials [7] - The price of BT substrates has increased by 30% this year, with further increases expected by year-end [8] - The high-speed CCL segment is seeing explosive demand driven by AI server upgrades, with prices expected to rise by 10-15% in the second half of 2025 [9] Company Profiles - Shenzhen Circuits: Covers major North American clients [10] - Huitian Technology: Main PCB supplier for Google and optical modules [11] - Shenghong Technology: Strong position with Nvidia and aggressive capacity expansion [12] - Sany Electronics: Significant orders from AWS leading to strong Q3 performance [13] - Sany Technology: Strong earnings certainty due to CCL price increases [14] - Dazhu CNC: Q3 performance exceeded expectations, reflecting PCB segment dynamics [15] - Ding Tai High-Tech: Facing process challenges due to high difficulty in Q fabric [16] - Zhongcai Technology: Expected to benefit from sustained PCB demand in the coming year [17] Conclusion - The Chinese PCB industry is entering a new upward cycle driven by AI, with upstream segments like substrates and CCL, along with leading companies in the AI server supply chain, being the primary beneficiaries [18]

Core Viewpoint - The PCB industry is experiencing unprecedented growth opportunities driven by the surge in AI server demand and the unexpected recovery in traditional sectors, marking the beginning of a new growth cycle for the industry [1][2]. Demand Drivers - The resilience in PCB demand is attributed to a dual-driven pattern of "emerging sectors' explosion + traditional sectors' recovery" [2]. - The demand for PCBs in AI servers has transitioned from a conceptual phase to actual performance, significantly increasing the industry's growth potential [3]. - AI servers require higher PCB content, with UBS estimating that the single-unit PCB content for AI servers is 5-10 times higher than traditional servers, leading to a rapid expansion of the server PCB market [4]. Traditional Sector Recovery - Traditional PCB demand is also recovering, contributing 70-80% of revenue for PCB companies, providing a solid foundation for the industry [5]. - The smartphone sector is benefiting from the unexpected shipment volumes of the iPhone 17 series, with global smartphone shipment forecasts for 2025/26 adjusted to 1.26 billion and 1.27 billion units, reflecting year-on-year growth of 3% and 1% respectively [5]. - The PC market is seeing a resurgence due to the replacement cycle following the end of Windows 10 support, with global PC shipment growth expected to exceed 4% in 2025/26 [5]. PCB Industry Chain Analysis - The PCB industry chain exhibits a concentrated value distribution, with substrates and copper-clad laminates (CCL) being the core raw materials benefiting from the AI demand explosion [7]. - BT substrates are experiencing high utilization rates due to the recovery in storage chip demand and supply shortages of key materials [8]. - The ABF substrate market is undergoing a domestic production acceleration, with potential for Chinese PCB companies to capture market share through cost advantages and localized services [9]. CCL Market Dynamics - The CCL market is characterized by a supply-demand imbalance in high-end products, with high-speed CCL being the most explosive segment due to AI server upgrades [10]. - UBS forecasts a 10-15% increase in high-speed CCL average selling prices (ASP) by the second half of 2025, with tight supply conditions expected to persist into 2026 [11]. Company Performance - Companies like Huadian and Shennan Circuits are well-positioned with full coverage of North American clients and strong relationships with major AI customers [12][13]. - Shenghong Technology is expanding aggressively and maintaining strong customer acquisition trends, while companies like Sinyi Electronics are benefiting from increased orders from AWS [13][14]. - The PCB sector's valuation reflects the industry's upward cycle expectations, with the PCB index rising 70% year-to-date, and a projected net profit CAGR of 42% from 2024 to 2027, indicating reasonable current valuations [17]. Conclusion - The Chinese PCB industry is entering a new upward cycle driven by AI, with upstream segments like substrates and CCL, along with leading companies in the AI server supply chain, being the primary beneficiaries [17].

Core Viewpoint - Market concerns about AI capital expenditure (capex) potentially peaking in 2026 are prevalent, but JPMorgan presents a counterargument based on four key points: no signs of overheating in generative AI, continuous entry of new investment players, significant expansion of AI application scenarios, and the potential demand release in the Chinese market [1][2]. Group 1: AI Capital Expenditure Insights - JPMorgan predicts that AI capex growth will reach at least 20% in 2026, with further growth expected in 2027 if the penetration rate of reasoning models continues to rise [3]. - The top four cloud service providers (CSPs) are expected to maintain strong capital expenditure supported by robust operating cash flow, with a projected cumulative EBITDA and operating cash flow CAGR of 23% from 2022 to 2026 [5][4]. - The capital expenditure of the top four CSPs is anticipated to increase from $150 billion in 2022 to a projected $398 billion in 2026, with a consensus forecast showing a cumulative free cash flow CAGR of 16% [7]. Group 2: New Investment Players and Market Dynamics - New players, including private AI labs and sovereign funds, are entering the AI capex space, enhancing investment capabilities despite concerns about spending stability [9]. - The Chinese CSP market is just beginning its AI investment journey, with significant spending intentions from companies like ByteDance and Alibaba, although supply constraints from GPU availability pose challenges [10]. Group 3: Supply Chain and Growth Projections - The Google TPU supply chain is expected to experience the fastest growth in 2026, driven by strong internal demand and recovery from previous supply issues [11]. - NVIDIA's supply chain is projected to maintain robust growth in 2026, with no significant delays anticipated in production schedules [13]. - The ODM sector is showing strong performance, particularly with companies like Hon Hai, which have seen significant stock price increases due to strong demand for NVIDIA products [15]. Group 4: Pricing Trends and Earnings Adjustments - Discussions of price increases across various non-AI sectors are emerging, which could drive the next round of earnings per share (EPS) adjustments [16]. - The Asian technology sector is experiencing a pause in earnings revisions, but future price increases and sustained AI demand are expected to be key drivers for further EPS adjustments [17][18].

Core Viewpoints - Concerns about AI capital expenditure (capex) peaking in 2026 are overstated, with strong growth certainty expected in 2026-2027 [1][2] - Major cloud service providers (CSPs) can sustain capital expenditure through increasing operating cash flow, with no signs of overheating in generative AI [2][4] - New investment players, including private AI labs and sovereign funds, are entering the market, further driving AI investment [2][9] AI Capital Expenditure Growth - Morgan Stanley predicts at least 20% growth in AI capex for 2026, with potential for further increases in 2027 if enterprise-level AI adoption continues [2][8] - The top four CSPs (Google, Amazon, Meta, Microsoft) are expected to see a compound annual growth rate (CAGR) of 23% in EBITDA and operating cash flow from 2022 to 2026 [6][7] - Capital expenditure for these CSPs is projected to rise from $150 billion in 2022 to $398 billion in 2026, with a CAGR of 16% in free cash flow [7][8] Investment Opportunities - The AI supply chain growth ranking for 2026 shows Google TPU leading, followed by NVIDIA, AMD, and AWS [3][11] - Non-AI sectors are experiencing price increases, which could drive the next round of earnings per share (EPS) adjustments in the tech sector [17] - Chinese CSPs are just beginning their AI investments, with significant potential for growth despite supply constraints [10][19] Supply Chain Dynamics - The supply chain for NVIDIA is expected to maintain strong growth in 2026, with no significant delays in production plans [13][14] - ODMs are experiencing a catch-up trend, with companies like Hon Hai (Foxconn) showing strong stock performance [15] - The Asian AI supply chain is benefiting from increased demand for Google TPU and other components, with PCB and CCL suppliers positioned to gain [11][12] Valuation and Earnings Adjustments - The recent stagnation in earnings adjustments for Asian tech stocks is attributed to currency fluctuations and preemptive demand ahead of tariffs [18][19] - Future price increases and sustained AI demand are expected to drive further EPS adjustments [18][21] - The valuation of Asian tech stocks remains reasonable, with no bubble expectations in most large tech segments [18][21]

Core Viewpoint - The departure of Dr. Gang Duan from Intel to Samsung signifies a shift in the semiconductor industry's glass substrate technology landscape, particularly in the context of rising AI chip demands [2][29]. Group 1: Intel's Historical Context and Innovations - Intel has historically led the transition from ceramic to organic packaging in the 1990s, developing the ABF substrate technology, which became a mainstream choice for high-end chip packaging [3]. - The limitations of ABF substrates have become apparent as AI chips demand higher performance, prompting a shift towards glass substrates, which offer superior electrical performance and manufacturing maturity [3][4]. - Intel's glass substrate research has been ongoing for over a decade, with significant breakthroughs achieved between 2021 and 2023, leading to the establishment of a scalable production line [7]. Group 2: Glass Substrate Advantages and Market Dynamics - Glass substrates provide design flexibility, improved power transmission, and enhanced signal integrity, making them suitable for AI and data center applications [8]. - Intel's announcement of the first glass substrates for advanced packaging in September 2023 has intensified competition in the industry [4]. - Despite the technological advancements, Intel's strategic focus has shifted towards core product lines, indicating a potential move towards outsourcing glass substrate production rather than in-house development [12][13]. Group 3: Samsung's Strategic Moves - Samsung has accelerated its plans for glass substrate production, aiming to establish a trial production line by late 2024 and achieve mass production by 2026 [15][16]. - The recruitment of Dr. Gang Duan enhances Samsung's capabilities in glass substrate technology, positioning the company to meet the growing demand for advanced packaging solutions [15][20]. - Samsung's strategy includes collaboration with its subsidiaries to leverage combined expertise in glass substrate development, contrasting with Intel's shift towards external procurement [21][29]. Group 4: Competitive Landscape and Future Outlook - Other players, including TSMC and various Taiwanese semiconductor equipment manufacturers, are also entering the glass substrate arena, indicating a competitive and rapidly evolving market [23][25]. - Companies like SKC and LG Innotek are actively developing glass substrates, with plans for mass production and partnerships with major tech firms [25][26]. - The overall trend suggests that the glass substrate technology will play a crucial role in the future of AI chips, potentially leading to a new wave of innovation and industry restructuring [29].

Core Viewpoint - Morgan Stanley reports that Nvidia is exploring a revolutionary chip packaging technology called CoWoP (Chip-on-Wafer-on-PCB), which is expected to replace the existing CoWoS packaging solution [4][5]. Group 1: CoWoP Technology Overview - CoWoP utilizes advanced high-density PCB technology to eliminate the ABF substrate layer found in CoWoS packaging, directly connecting the intermediary layer to the PCB [5][9]. - The potential advantages of CoWoP include simplified system architecture, improved thermal management, lower power consumption, and reduced substrate costs [18][20]. Group 2: Supply Chain Impact - The introduction of CoWoP is seen as negative news for ABF substrate manufacturers, as the added value of substrates may significantly decrease or disappear [14]. - Conversely, PCB manufacturers are presented with significant opportunities, as the technology shift may lead to increased demand for advanced PCB capabilities [15][6]. Group 3: Commercialization Challenges - Despite the potential benefits, Morgan Stanley analysts believe that the commercialization probability of CoWoP in the medium term remains low due to multiple technical challenges [7][17]. - Current PCB technologies, even with mSAP, can only achieve line/space widths of 20-30 microns, which is still far from the desired performance levels [20]. Group 4: Nvidia's Innovation Leadership - Regardless of the success of CoWoP, Nvidia continues to lead innovations in data center AI infrastructure through a system-level approach [23][24]. - Nvidia's ongoing exploration of CoWoS-L and CoPoS technologies, along with its potential leadership in large-scale CPO applications, is expected to maintain its competitive edge in the GPU market [24].

Core Viewpoint - The recent surge in interest around the semiconductor supply chain is driven by NVIDIA's proposal to use CoWoP (Chip-on-Wafer-on-PCB) technology as a potential replacement for CoWoS packaging technology, leveraging advanced high-density PCB techniques to simplify system structure and improve efficiency [5][9]. Group 1: CoWoP Technology Overview - CoWoP is defined as a method where the chip is directly mounted onto the PCB after the intermediary layer is manufactured, eliminating the need for the ABF substrate used in CoWoS [8]. - The potential advantages of CoWoP include simplified system architecture, reduced transmission losses, improved data transfer efficiency, enhanced thermal management, and lower substrate costs [9][10]. Group 2: Commercial Viability of CoWoP - The likelihood of CoWoP achieving commercial viability in the medium term is considered low due to several technical challenges, including the need for finer line widths and pitches that current PCB technologies cannot meet [11]. - The existing technology roadmap of NVIDIA, which focuses on CoWoS-L and CoPoS, conflicts with the new direction of CoWoP, further complicating its adoption [11][12]. Group 3: Impacts on the Semiconductor Supply Chain - If CoWoP is successfully implemented, it could shift complex signal routing to the re-routing layer, potentially reducing the value of ABF substrate manufacturers while benefiting PCB manufacturers through increased revenue from advanced PCB specifications [15]. - The balance between high-speed performance and the demands for high current/voltage in platform PCBs presents significant challenges, with companies like Unimicron positioned favorably due to their experience in both PCB and substrate technologies [16]. Group 4: Effects on Testing and Manufacturing - CoWoP may reduce the number of final and system-level testing steps, shifting towards board-level testing, although achieving high yield rates is critical for this transition [18]. - The impact on wafer foundries and OSATs is expected to be minimal, as the chip-on-wafer process remains largely unchanged, but the lack of involvement from major players like TSMC raises concerns about the technology's success [19].

Core Viewpoint - Morgan Stanley reports that Nvidia is exploring a revolutionary chip packaging technology called CoWoP (Chip-on-Wafer-on-PCB), which is expected to replace the existing CoWoS packaging solution [2][5]. Group 1: CoWoP Technology Overview - CoWoP utilizes advanced high-density PCB technology to eliminate the ABF substrate layer in CoWoS packaging, directly connecting the intermediary layer to the PCB [3][6]. - The potential advantages of CoWoP include simplified system structure, improved data transmission efficiency, better thermal management, and lower power consumption [9]. Group 2: Supply Chain Impact - The introduction of CoWoP is seen as negative news for ABF substrate manufacturers, as the added value of substrates may significantly decrease or disappear [10]. - Conversely, PCB manufacturers are presented with significant opportunities due to the shift in complexity and precision routing to the RDL layer [10][11]. Group 3: Commercialization Challenges - Morgan Stanley analysts believe that the probability of CoWoP's commercialization in the medium term is low due to multiple technical challenges [5][12]. - Current PCB technology, even with mSAP, can only achieve line/space widths of 20-30 microns, which is still far from the desired performance [13]. Group 4: Nvidia's Innovation Leadership - Regardless of whether CoWoP is successfully mass-produced, Nvidia continues to lead innovation in data center AI infrastructure through a system-level approach [17]. - Nvidia's roadmap, which includes advancements towards CoWoS-L and CoPoS, may conflict with the pursuit of CoWoP [15].

Core Viewpoint - Morgan Stanley believes that the transition from CoWoS to CoWoP faces significant technical challenges, and the reliance on ABF substrates is unlikely to change in the short term [1][2][8] Group 1: Technical Challenges - The CoWoP technology requires PCB line/space (L/S) to be reduced to below 10/10 microns, which is significantly more challenging than the current standards of ABF substrates [5][6] - The current high-density interconnect (HDI) PCB has an L/S of 40/50 microns, and even the PCB used in iPhone motherboards only reaches 20/35 microns, making the transition to CoWoP technically difficult [5][6] Group 2: Supply Chain Risks - Transitioning from CoWoS to CoWoP could introduce significant yield risks and necessitate a reconfiguration of the supply chain, which is not commercially logical given the timeline for mass production [8] - TSMC's CoWoS yield rate is nearly 100%, making a switch to a new technology unnecessarily risky [8] Group 3: Potential Advantages of CoWoP - Despite the short-term challenges, CoWoP technology has potential advantages, including shorter signal paths, improved thermal performance suitable for >1000W GPUs, better power integrity, and addressing organic substrate capacity bottlenecks [10] - The goals of adopting CoWoP include solving substrate warping issues, increasing NVLink coverage on PCBs without additional substrates, achieving higher thermal efficiency without packaging lids, and eliminating bottlenecks in certain packaging materials [10]

Investment Rating - The report maintains an investment rating of "Outperform" with a target to exceed the market by 10% or more over the next six months [6]. Core Insights - The report highlights a significant increase in DDR4 chip prices, which have surged by 200% due to supply constraints as major manufacturers plan to halt production by the end of 2025 [5][10]. - The development of AI is expected to profoundly impact the PCB industry, increasing demand for high-end CCL materials, which are crucial for PCB performance [2]. - The competitive landscape for 1.4nm process technology is becoming clearer, with TSMC, Intel, and Samsung each adopting different strategies to advance their capabilities [4][20]. Summary by Sections Industry Overview - The semiconductor industry is witnessing a shift with TSMC, Intel, and Samsung focusing on 1.4nm technology, with TSMC expected to achieve mass production by 2028 [20]. - AI technology is driving demand for PCBs, particularly high-end CCL, benefiting companies like Jingwei Technology and Shengyi Technology [2][13]. Market Performance - The electronic sector saw a modest increase of 0.74% in the past week, ranking 18th out of 31 sectors [12][28]. - The report notes that the electronic index's PE ratio stands at 52.63, with a 10-year percentile of 70.62%, indicating a relatively high valuation compared to historical averages [36][38]. Company Recommendations - The report suggests focusing on companies within the PCB supply chain such as Shenghong Technology and Huitian Technology, as well as storage sector companies like Zhaoyi Innovation and Bawei Storage [13].