Summary of Conference Call Notes Industry Overview - The conference call discusses the impact of new technologies on the PCB (Printed Circuit Board) manufacturing industry, particularly focusing on the CoWoP (Chip-on-Wafer-on-Panel) and Carop (Chip-on-Board) processes, which are expected to enhance performance and efficiency in high-performance computing applications, especially for NVIDIA's GPUs and CPUs. Key Points and Arguments 1. New PCB Manufacturing Techniques - NVIDIA's new scheme utilizes embedded substrate materials, increasing the complexity of PCB manufacturing, requiring 1/3 oz copper foil or peelable copper foil [1] - The Carop process eliminates ABF substrates, directly mounting chips on PCBs, which necessitates higher flatness and tighter spacing [2] 2. Material Demand Changes - The demand for Low CTE (Coefficient of Thermal Expansion) electronic cloth has significantly increased due to the larger area of embedded substrates, which is now 3-4 times larger than before [1][5] - The annual demand for Low CTE glass cloth is projected to be around 750,000 square meters, with a monthly increase of approximately 4 million square meters expected to start in 2027 [14][15] 3. Supplier Landscape - Major suppliers of embedded substrate materials include Taiko and Dousan, with specific models like EM526, EM528, EMC892, and EMC896 being highlighted [3][4] - The market is also seeing contributions from Korean companies, although their market share is smaller [4] 4. Technical Specifications and Requirements - The new PCB designs require a minimum of 18 layers of Low CTE electronic cloth for 7 to 9 stage HDI (High-Density Interconnect) technology, doubling the previous requirements [10][11] - The increase in glass cloth layers to 10 is necessary to accommodate complex circuit designs [8] 5. Performance Enhancements - The new scheme is expected to double the computational power due to increased pin counts and improved design methodologies [9] - The transition to higher performance, lower dielectric loss systems is anticipated by 2027, with corresponding increases in PCB area and material requirements [29] 6. Challenges and Future Outlook - The production of high-layer PCBs is challenging due to thickness, small holes, and stringent flatness requirements, which may take years to achieve high yield rates [19] - The new COOP scheme has been researched and applied domestically, with limited international attention [18] 7. Material Composition and Quality - The resin system primarily consists of PPO and hydrocarbon, with increased purity requirements leading to a projected 10% increase in demand [21] - The use of HVLP (High-Volume Low-Pressure) copper foil is critical for meeting the new performance standards [36] 8. Market Trends - The overall demand for Low CTE glass cloth is expected to quadruple as new projects progress, with current monthly demand only in the hundreds of thousands of square meters [16] - The industry is moving towards more advanced materials that meet stringent performance criteria, including low thermal expansion and low shrinkage stress [40] Additional Important Insights - The transition to new technologies is gradual, with major companies like Google, Meta, and Amazon unlikely to adopt these changes in the short term [28] - The expected completion of new projects is projected for late 2026 to 2027, with significant ramp-up in production anticipated thereafter [17]

Core Viewpoint - The PCB (Printed Circuit Board) industry is experiencing significant growth, driven by increased demand from major tech companies for high-end PCBs to support AI chip development and the recovery of automotive and consumer electronics sectors [1][3][9]. Group 1: Industry Performance - PCB stocks have surged, with notable gains: Shenghong Technology up over 145%, Dongshan Precision up over 88%, and Shengyi Technology up over 51% since April 8 [2][3]. - The electronic ETF (515260) has seen a strong performance, with a 1.2% increase in early trading, reflecting the robust demand in the PCB sector [1]. Group 2: Demand Drivers - Major tech companies like Meta, Google, and Amazon are investing in self-developed AI chips, leading to a surge in demand for high-end PCBs, with the number of layers in AI server PCBs increasing from 20 to over 40, raising their value by 3-5 times [3][4]. - The automotive sector is witnessing a shift towards smart vehicles, with the value of PCBs per electric vehicle rising from 500 yuan to 8000 yuan, driven by advancements in intelligent driving technologies [5]. - The consumer electronics sector is also evolving, with the demand for flexible PCBs and substrate-like PCBs increasing due to the rise of foldable and AI-enabled smartphones [6]. Group 3: Financial Trends - Over 13 billion yuan of net inflow into the electronic sector has been recorded, indicating strong investor interest and confidence in the PCB industry [7]. - The PCB industry's growth is supported by breakthroughs in high-frequency materials and processes, with domestic companies like Shengyi Technology challenging the dominance of Japanese firms [8]. Group 4: Future Outlook - The PCB industry's current growth is attributed to a combination of AI infrastructure development, technological upgrades, and domestic substitution, with expectations for continued high performance in AI servers and automotive electronics [9]. - Analysts predict a favorable outlook for the electronic sector, driven by macroeconomic policies, inventory cycles, and AI innovation, suggesting a potential for valuation expansion in 2025 [9].

Group 1 - Taiwan's authorities have placed Huawei and SMIC on an export blacklist, indicating a strong alignment with U.S. policies to suppress China's chip industry [2][13] - TSMC has already ceased orders from Huawei in 2023, and while SMIC faces equipment procurement restrictions, other mainland manufacturers are stepping in, limiting the impact on Huawei [2][6] - Taiwan's semiconductor manufacturers are heavily reliant on materials from mainland China, with over 90% of critical photolithography materials sourced from there, which poses a significant risk to their operations [4][6] Group 2 - The recent actions by Taiwan may lead to a dual loss scenario, as the U.S. has already imposed export taxes on Taiwan, and Taiwan's response could further harm its own interests [6][9] - If mainland China decides to restrict rare earth exports, it could severely impact various sectors in Taiwan, including chips, electronics, and renewable energy [6][12] - The global chip supply chain is undergoing restructuring, with efforts to relocate TSMC's operations to the U.S., but high-end packaging and silicon processing remain in Taiwan, highlighting its critical role [8][9] Group 3 - Taiwan's unilateral export control measures may backfire, potentially leading to a collapse of its chip industry if mainland China retaliates [13] - The call for "independence and self-sufficiency" in Taiwan's chip industry is undermined by its lack of control over the foundational supply chain [13][12] - The high stakes of Taiwan's current strategy could lead to severe consequences if the situation escalates, emphasizing the need for a balanced approach [12][13]

Summary of PCB Industry Conference Call Industry Overview - The PCB industry is experiencing significant growth driven by the surge in AI computing demand, with the market size exceeding $70 billion. The server-related segment is becoming the largest application market due to AI requirements, which has increased its share by 3% in 2024 [1][15][52]. Key Points and Arguments AI Computing Demand - The demand for AI computing PCBs, particularly in North America, remains strong, benefiting companies like Nvidia and Shenghong, which have significant market shares in computing and switching boards [1][5]. - The high-density interconnect (HDI) PCB manufacturers, such as Shenye Electronics and Gudian, are also performing well due to increased demand [1][5]. Capacity Expansion - Major PCB manufacturers are accelerating the expansion of high-end HDI and high-speed multilayer board capacities, primarily to serve overseas clients in the computing chain [1][3][6]. - The production capacity utilization rate is around 90% to 95%, with expectations for further increases in Q2 2025 [18]. Material Trends - The prices of high-end copper-clad laminate (CCL) materials are rising, driven by increased demand for high-density products [1][3][21]. - Domestic companies are making progress in the localization of high-frequency and high-speed materials, with Shengyi Technology achieving significant milestones in this area [7]. Market Dynamics - The ABF substrate market is expected to grow alongside the release of computing chips, with domestic leaders like Shenghong and Huidian actively increasing their capacities [1][9][10]. - The automotive sector is also seeing growth, with companies like Jingan and Shiyun Circuit making strides in smart vehicle PCB applications [14][47]. Investment Opportunities - The PCB industry is viewed as a key investment area, particularly in segments related to AI computing and domestic substitution [50][52]. - Companies like Shengyi Technology and Dongshan Precision are highlighted for their potential in the consumer electronics and automotive sectors [13][44]. Additional Important Insights - The overall PCB industry is maintaining a favorable outlook for 2025, with strong performance in AI-related circuit boards and materials [2][52]. - The supply chain is experiencing upward pressure on prices due to increased demand and limited supply of key materials like glass fiber cloth, which is expected to remain tight until 2026 [22][33]. - The Taiwanese PCB sector has shown robust growth, with a 15% year-on-year increase in revenue from January to April 2025, largely due to its strong ties to AI applications [24]. Conclusion - The PCB industry is poised for continued growth, driven by AI computing demands and capacity expansions. Companies that adapt to these trends and invest in high-end materials and technologies are likely to see significant benefits in the coming years.

Core Viewpoint - Taiwan's tightening of export controls on certain high-tech products is accelerating the push for self-sufficiency in the semiconductor supply chain, particularly in the area of ABF substrates [1][2]. Group 1: Export Control Measures - Taiwan's International Trade Administration has added entities such as SMIC and Huawei to a restricted export list, requiring permits for exports to these entities [1]. - A total of 601 entities, including those from Russia, Pakistan, Iran, Myanmar, and mainland China, have been added to the list due to concerns over military expansion activities [1]. Group 2: Domestic Industry Response - Domestic companies are actively working to support the supply chain, with companies like Xinsong Technology already supplying 20-layer substrates in bulk [2]. - Efforts are ongoing to validate and produce higher-layer substrates, indicating a potential breakthrough in domestic production capabilities [2]. Group 3: Technical Challenges - The ABF substrate segment remains one of the few areas in the Ascend supply chain that is not fully self-sufficient, with Taiwanese manufacturers holding a significant market share [1]. - The technical challenges in producing high-spec ABF substrates include maintaining layer alignment and thickness consistency, especially for larger and multi-layered products [1].

Summary of Conference Call Notes Industry Overview - The focus of the discussion is on the specialty glass fiber industry, particularly the Low CTE (Coefficient of Thermal Expansion) glass fiber cloth segment [1][1]. Key Points and Arguments 1. **Supply Shortage of Low CTE Glass Fiber Cloth** - Global leader in BT substrate materials, Mitsubishi Gas Chemical, has notified customers of delivery delays extending to 4-5 months [1]. - The demand for advanced packaging from TSMC's CoWoS is driving tight supply for ABF substrate materials, which is now affecting BT substrates [1]. - There is an expectation of price increases for upstream Low CTE glass fiber cloth due to rising substrate material prices [1]. 2. **Price Increase by Nitto Denko** - Nitto Denko announced a 20% price increase for its composite materials division, which includes products like woven fabrics and chopped strands [1]. - These products were previously operating at a loss, indicating a strategic shift to improve profitability [1]. 3. **Impact of Tariffs on Exports** - The price increase may be influenced by tariffs that have hindered some Chinese exports to the U.S., leading to tight overseas supply, particularly for chopped products [2]. 4. **Real Estate Market Trends** - In the real estate sector, the rolling weekly transaction area for new homes in 30 major cities has decreased by 3% year-on-year, consistent with the previous week [3]. - Conversely, the transaction area for second-hand homes in 12 cities has increased by 3% year-on-year, although this is a decline from the previous week's 16% [3]. Additional Insights - The price increase for Nitto Denko's products is expected to benefit Chinese companies with overseas production capabilities, such as China Jushi [3]. - A recommended investment strategy includes focusing on domestic substitution chains, with a preference for Zhongcai Technology, and considering companies like Keda Manufacturing and Huaxin Cement in the African supply chain [4]. - The report suggests that despite low market expectations, companies like Sankeshu and Rabbit Baby are showing signs of operational improvement in Q2 [4].

Investment Rating - The report upgrades the industry investment rating to "Recommended" [1] Core Insights - The semiconductor industry faces reduced visibility in the second half of 2025 due to tariff uncertainties, while the storage market shows positive trends in Q2 [1][3] - AI hardware demand remains strong, driven by cloud service providers and government sectors, suggesting a focus on leading companies in the AI hardware segment such as NVIDIA and TSMC [1][3] Semiconductor Sector - IC Design: In April 2025, MediaTek reported revenue of NT$48.8 billion, a month-on-month decrease of 12.9% but a year-on-year increase of 16.0%. The company noted uncertainty due to tariffs [3][11] - IC Manufacturing: TSMC achieved record revenue of NT$349.6 billion in April 2025, with a month-on-month increase of 22.2% and a year-on-year increase of 48.1% [3][14] - IC Testing: ASE Technology's revenue in April 2025 was NT$52.2 billion, a month-on-month decrease of 2.9% but a year-on-year increase of 13.9% [3][22] PC/Server Sector - The PC market is affected by tariff uncertainties, with companies like Hon Hai reporting April revenue of NT$641.4 billion, a month-on-month increase of 16.2% and a year-on-year increase of 25.5% [3][25] - Quanta's April revenue was NT$154 billion, a month-on-month decrease of 20.0% but a year-on-year increase of 58.2% [3][25] PCB Sector - The PCB manufacturing sector saw overall revenue increase by 5.6% month-on-month and 18.6% year-on-year in April 2025, driven by demand for AI servers and high-end networking [3][27] - Zhen Ding's revenue reached NT$13.6 billion in April, a year-on-year increase of 22.9% [3][27] Optical Components Sector - The optical components sector is experiencing a traditional off-season, with Largan Precision reporting April revenue of NT$4.4 billion, a month-on-month decrease of 10.6% but a year-on-year increase of 26.5% [3][28] Storage Sector - The storage market is showing positive signs, with companies like Nanya Technology reporting a month-on-month revenue increase of 13.3% in April 2025 [3][4] - DRAM prices are expected to rise, with TrendForce adjusting its Q2 price forecast from -5% to +8% [3][4]

Company Performance - Company achieved operating revenue of 5.817 billion yuan in 2024, representing a year-on-year increase of 8.53% [2] - Net profit attributable to shareholders was -198 million yuan, a year-on-year decline of 193.88%, primarily due to high investments in FCBGA packaging substrate projects and losses from subsidiaries [2] Industry Overview - The global PCB industry is experiencing a structural recovery in 2024, with high-layer boards (18 layers and above) and HDI boards showing year-on-year growth of approximately 40% and 18.8%, respectively, driven by demand from AI, communications, and satellite sectors [2] - Overall demand in the packaging substrate industry is currently insufficient, but a recovery is expected in 2025, with BT substrates likely to outperform ABF substrates [2] Company Strategy - Company is in the small-batch production stage for FCBGA packaging substrates, with future mass production dependent on industry demand recovery, customer production progress, and supplier management strategies [2] - Company is focusing on market expansion and customer certification, aiming to achieve large-scale production by enhancing technical capabilities, optimizing processes, and improving yield and delivery performance [2] - Beijing Xinfai plans to upgrade production lines in mid-2024, focusing on expanding capacity for AI server accelerator cards and high-end optical module products [3] - Revenue from semiconductor test boards increased by over 30% year-on-year, with a continuous rise in the proportion of high-end products [3] - Future profit growth will focus on the steady development of PCB samples and test board businesses, as well as improving capacity utilization and cost optimization for CSP and FCBGA packaging substrates [3]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 15.00 [7][15]. Core Insights - The company reported a revenue of RMB 5.8 billion for 2024, representing a year-over-year increase of 9%. However, it faced a net loss of RMB 200 million due to high costs associated with the ABF substrate project and underperformance of the BT substrate factory [1][4]. - In Q1 2025, the company achieved a revenue of RMB 1.58 billion, a 14% year-over-year increase, with a gross margin of 17.2%, slightly improving from the previous quarter [1][2]. - The report highlights that the demand for domestic IC substrates has increased due to tariff conflicts, leading to an upward revision of the target price [1][4]. Summary by Sections Financial Performance - For 2024, the company reported a revenue of RMB 5.8 billion and a gross margin of 15.9%, down 7.4 percentage points year-over-year. The net loss attributable to shareholders was RMB 200 million [1][4]. - In Q1 2025, the company recorded a revenue of RMB 1.58 billion and a net profit of RMB 9 million, although this was a 62% decline year-over-year [2][3]. 2025 Outlook - The company plans to focus on new products and customer integration for ABF substrates, expecting a revenue contribution of RMB 58 million in 2025. The BT substrate segment is anticipated to improve profitability, with projected revenue of RMB 1.3 billion [3][4]. - The report indicates that the company is experiencing a ramp-up in production capacity, particularly in its Guangzhou and Zhuhai factories, which is expected to enhance profitability in the BT substrate segment [3][4]. Valuation Adjustments - The target price was raised to RMB 15.00, reflecting a more favorable outlook for the company's IC substrate business amid increased domestic demand. The valuation multiples for PCB and semiconductor businesses were adjusted to 25.0x PE and 8.0x PS, respectively [4][15]. - The report also notes a downward revision of net profit expectations for 2025 and 2026 due to ongoing adjustments in the PCB business and high initial costs for new ABF substrate lines [4][12].

Group 1: Company Performance and Financials - The company's net profit for Q1 2025 has significantly increased, achieving a historical high with a year-on-year growth of multiple times [6] - The net cash flow from operating activities for 2024 is notably lagging behind the net profit growth, with accounts receivable reaching 3.887 billion yuan, accounting for 336.67% of the net profit attributable to the parent company [3] - The company's asset-liability ratio as of the end of 2024 is 53.44%, indicating a relatively high level [12] Group 2: Research and Development - The company's R&D investment for 2024 is only 4.2% of operating revenue, significantly lower than the industry average of 8%-10% [3] - The company has over 1,000 professional R&D personnel and holds 399 effective patents in the field of circuit boards, including 172 invention patents [3] - The company plans to continue increasing R&D investment to maintain competitiveness in high-end fields such as AI servers and data centers [3] Group 3: Impact of Tariffs and Trade - The company is minimally affected by the "reciprocal tariffs" as direct exports to the U.S. are very low, and the import tariffs are borne by the importers (customers) [4] - The company maintains close communication with clients regarding international trade disputes and is monitoring the situation closely [4] - The company has a 60% export ratio, but the impact of tariffs on overseas business is limited due to the low direct export percentage to the U.S. [4] Group 4: Market Outlook and Strategy - The global PCB market is projected to reach a value of $73.565 billion in 2024, with a year-on-year growth of 5.8%, and is expected to grow to $94.661 billion by 2029 [11] - The company is focusing on AI technology development as a key driver for business growth, establishing partnerships with several international companies [7] - The company is confident in its performance for the upcoming quarters, with a full order book and plans for steady capacity expansion based on industry developments and customer orders [8]