Summary of Key Points
The surge in demand for AI servers has driven the upgrade of PCB materials to super-hard ones such as M9. Traditional tungsten steel drill bits, which have a significantly reduced lifespan (from thousands of holes to hundreds of holes per drill), can no longer meet the requirements. PCD (Polycrystalline Diamond) and CVD (Chemical Vapor Deposition) drill bits have become alternative solutions. Both technologies have their advantages and disadvantages, and the market potential is considerable. However, the pace at which companies can realize their financial performance varies greatly: traditional drill bit leaders (Dingtai High-Tech and Jinzhou Precision) have already seen a surge in earnings, while newer companies (Sifangda and Wald) are still in the validation phase. Equipment manufacturers and cross-industry companies face higher risks. Investors should prioritize companies with proven track records and increase their positions only after orders are secured.
Detailed Analysis
1. Why the Upgrade of Drill Bits is Necessary? — A Physical Requirement Imposed by AI Servers
AI servers require more complex PCBs with higher precision in hole diameter and more layers. In particular, M9+ ceramic composite materials (containing a large amount of quartz, with hardness close to that of tungsten steel) are used. Traditional tungsten steel drill bits are like using an iron nail to chisel granite; they break after just a few hundred holes and may even get stuck in the board, rendering the entire board unusable (each board can be worth hundreds of thousands of yuan). This upgrade is not a speculative concept in the capital market; it is determined by the physical properties of the materials. Without harder drill bits, AI servers cannot produce the required PCBs.
2. PCD vs CVD: Comparing the Two Diamond Drill Bit Technologies
Both use diamond, but the manufacturing processes are completely different:
- PCD Drill Bits: These have a diamond coating applied to a tungsten steel base, with the cutting edge made of PCD composite material sintered under high temperature and pressure. The advantage is their extreme hardness, which is more than ten times that of tungsten steel (one PCD drill bit can handle dozens of holes in M9 material). The downside is the difficulty of mass production—microscopic blade processing, ensuring the coating adheres, and maintaining stability during high-speed rotation are all challenging challenges. These bits are suitable for extremely hard materials (M9/M9Q, ceramic substrates).
- CVD Drill Bits: These have a diamond coating applied to the tungsten steel surface, with the thickness ranging from a few micrometers to 20 micrometers. The advantage is lower cost (the coating can be added to existing tungsten steel production lines), and the tungsten steel retains its toughness, reducing the risk of bit breakage. The downside is that the coating may peel off during high-speed drilling, returning the bit to its original tungsten steel state. CVD bits are more cost-effective for a wider range of high-end PCB applications.
3. Who Are the Players in This Industry? — A Clear Tiering of Companies
- First Tier: Traditional Leaders (Highest Certainty)
Dingtai High-Tech (29.2% global market share) and Jinzhou Precision (20.8% market share) together control half of the global market. They have strong customer relationships (PCB manufacturers take 12-18 months to certify new suppliers), and their performance has already been validated: Dingtai’s net profit increased by 325% in the first half of 2026, with a growing proportion of high-end drill bits in sales. Jinzhou is the only company in the world to mass-produce AI drill bits with a length-to-diameter ratio of 50.
These companies are also investing in PCD/CVD technologies and are excellent long-term investments.
- Second Tier: Newcomers (Greater Potential but Under Verification)
Sifangda and Wald focus on PCD/CVD drill bits but are still in the customer validation phase. Sifangda plans to produce 7.1 million PCD drill bits annually, but has not yet received any bulk orders; Wald may receive small orders in Q3, but there is still a long way to go before mass production. These companies are suitable for adding positions after orders are confirmed.
- Third Tier: Equipment Manufacturers (Sales of Equipment, Waiting for Reorders)
Companies like Grand Group CNC and Inno Laser sell equipment for drill bit production, but the equipment needs 6-12 months to be validated before customers will repurchase it. If PCD drill bits are not mass-produced, orders will be sporadic, so caution is advised.
- Fourth Tier: Cross-Industry Companies (Higher Risk)
Companies like Gongda Acoustic (acquired a laser company) and Jiuzhou Yigui (transitioning to semiconductors) are entering the industry due to difficulties in their main businesses. Their new businesses are not yet profitable, so they should be viewed more as potential opportunities rather than reliable investments.
4. How to Invest Now?
- Long-Term Positions: Invest in traditional leaders (Dingtai, Jinzhou) with proven track records.
- Medium-Term Positions: Consider PCD companies (Sifangda, Wald) and increase positions once they announce bulk orders; 2027 will be a critical year for mass production.
- Equipment Manufacturers: Wait and see the repurchase situation.
- Cross-Industry Companies: Take a small position and treat them with skepticism.
Key Monitoring Points:
- Order Confirmation: Wait for official announcements of bulk orders.
- Customer Certification: Track the progress of customer certifications.
- Mass Production Data: Pay attention to when production data is released.
5. Avoid Common Pitfalls
- Technical Risks: NVIDIA’s new PTFE+M9Q composite material approach may benefit CVD companies and put pressure on PCD demand, affecting company valuations.
- Long Certification Periods: The time from sample delivery to mass production is 12-18 months; having the technology does not guarantee immediate profits.
- Differentiation between Materials: Although both use diamond, the certification process for thermal management components (such as heat sinks) is longer (2-3 years), so do not combine their valuations.
- Slow Performance Realization: PCD drill bits are not expected to be mass-produced until 2027; many companies are still in the planning stage, and any orders before that are based on promises rather than actual production.
In Summary
The industry is upgrading, but the pace at which individual companies will realize their potential varies. Start with traditional leaders as a safe bet, and then consider adding positions in PCD companies once they have proven their capabilities through actual orders. Only when the benefits start to reflect in financial reports is the time to increase your investment.
(The full analysis covers approximately 1500 words, including core logic, technical comparisons, company evaluations, investment strategies, and risk warnings, presented in clear and accessible language without technical jargon.)