Summary of Taiwan PCB & Laminates Conference Call Industry Overview - The focus is on the copper clad laminate (CCL) sector, which is expected to see unit and average selling price (ASP) growth in 2026E [1] - The recent share price correction in the sector is viewed as healthy, as initial expectations for M9-grade CCL adoption were overly optimistic [1][3] - AI server production is anticipated to ramp up more aggressively in 2026 compared to 2025, driven by the launch of more AI ASICs [1][2] Core Insights - **AI Demand and Production Bottlenecks**: Despite concerns about an AI bubble, demand for AI servers is expected to remain strong in 2026 due to unresolved production bottlenecks in the AI supply chain [2][11] - **ASP Growth Drivers**: The CCL sector is expected to benefit from spec migration and price hikes on low-end products, with multiple favorable ASP trends anticipated from 2026E onward [3][31] - **Southeast Asia Capacity Expansion**: While there is ongoing capacity expansion in Southeast Asia (SEA), production efficiency is likely lower than expected, leading to a preference for Chinese capacity in the short term [4][11] Company-Specific Insights - **Initiation of Coverage**: Coverage has been initiated on EMC and TUC with target prices set at NT$2,100 and NT$600, respectively, reflecting strong growth potential in high-end CCL for AI applications [1] - **EMC and TUC Positioning**: EMC is recognized as a leading player in high-end CCL for AI GPU/ASIC, while TUC is noted for its strength in high-end networking applications [1][27] Market Dynamics - **AI as a Growth Driver**: AI-driven server and networking demand is projected to underpin structural growth in the PCB industry, with server and data storage PCB demand expected to grow at an ~11% CAGR from 2025 to 2029 [14][15] - **Material Shortages**: Key materials such as low dielectric constant (Dk) glass fiber and high-end HVLP copper foil are in significant shortage, impacting the competitive landscape of the CCL industry [32][61] Risks and Considerations - **Investment Risks**: Key risks include slower-than-expected AI server demand and challenges in CCL upgrades [4] - **Supply Chain Challenges**: The transition to higher-grade materials like HVLP4 copper foil may lead to supply bottlenecks, as upgrading production lines can take 1-2 years [62][63] Conclusion - The CCL sector is poised for growth driven by AI demand, with specific companies like EMC and TUC positioned to capitalize on this trend. However, challenges such as material shortages and production inefficiencies in SEA could impact overall market dynamics.