2025-09-07 16:19Summary 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.