Summary of Key Points
The surge in demand for AI servers has led to a severe shortage of upstream electronic fabric (the core material for PCBs), resulting in substantial price increases and virtually zero inventory in the industry. To pursue higher profits, companies have shifted their production capacity towards premium types of fabric such as thin and special-purpose materials, which in turn has caused shortages and price hikes for regular electronic fabric. Although leading firms are accelerating expansion, it will take at least two years for new capacity to be fully operational, so the short-term supply-demand imbalance is unlikely to ease. Quartz fiber electronic fabric (Q-fabric), considered a high-end option due to its improved signal transmission efficiency, faces technical and cost challenges and has not yet been widely adopted.
1. AI Demand “Siphons” Away Electronic Fabric, Affecting Regular Types
AI servers require 2-6 times more PCB layers than traditional servers, leading to a 3-8 times increase in the consumption of electronic fabric per unit. Firms have realized that high-end electronic fabrics (thin and special-purpose types) offer higher gross margins, so they have diverted their production from regular fabrics. As a result, the supply of regular electronic fabric has decreased, while the demand from traditional consumer electronics and automotive industries remains strong, creating a situation where there is a severe shortage of high-end fabrics and an even larger gap in the supply of regular types. With almost no inventory left, small customers are being turned away, and manufacturers must prioritize supplying large clients.
2. Prices Have Soared!
Electronic fabric prices have doubled in just half a year:
- Thick fabrics (such as the 7628 type) have doubled in price from the end of last year, with monthly increases of 17%-18%;
- Thin fabrics (2116, 1080 types) have seen cumulative price increases of over 140% this year;
- The cost of electronic yarn (a raw material) has risen by 53%, with even higher prices for urgent orders.
The sharp increase in prices for thin fabrics is due to the high demand and limited supply of the high-end types required by AI servers.
3. Expansion Cannot Alleviate Immediate Shortages
Several listed companies (such as China Jushi and Filicore) are expanding their electronic fabric production capacity, but it takes at least two years to build a new furnace. Firms were hesitant to expand during the market downturn, and now the sudden surge in demand has outpaced capacity expansion. Industry experts predict that demand will grow much faster than supply this year, leading to continued tight supply and further price increases; the situation next year is uncertain, depending on the pace of capacity expansion.
4. Q-Fabric: The “Top Student” Among Electronic Fabrics—Promising but with Current Challenges
Q-fabric is made from quartz fiber and offers significant advantages in signal transmission speed and stability (its dielectric constant is half that of traditional fabrics, reducing signal resistance). It is essential for AI servers and next-generation optical modules. Currently, the global market is dominated by Japanese manufacturers, but domestic firms (such as Filicore and Honghe Technology) have overcome technical barriers and are starting to sell small quantities. However, Q-fabric faces two main issues: low drilling yield during processing (which can lead to defects) and high costs, which limit its widespread use. Nevertheless, with advancing technology, Q-fabric is expected to become the industry's mainstream product in the future.
5. Market Outlook: Prices Expected to Rise Further, with High-End Fabrics Being the Trend
Industry insiders believe that the wave of AI infrastructure development will continue to drive demand for electronic fabric, and the tight supply will persist in the short term. The slow release of new capacity, combined with cost pressures and strong demand, is likely to support further price increases. High-end fabrics (especially Q-fabric) represent the direction of industry development, but only leading firms will have a competitive advantage. The gap in the supply of regular electronic fabric is expected to widen by 2026 and will be difficult to resolve in the short term.
By breaking down these points in this manner, even non-financial professionals can easily understand the logic behind the price increases and the industry trends related to electronic fabric.