Key Points Summary
In short, the “PCB” (Printed Circuit Boards, which serve as the “bases” for chips and electronic components) sector has been booming in the stock market recently, with many stocks hitting price limits. The logic behind this is quite clear: AI has become so popular that the raw materials needed to make PCBs, especially copper-clad laminates, are in short supply, leading to skyrocketing prices.
This price increase is not just simple speculation; it started with the most basic materials like copper and glass fiber cloth and has propagated through the supply chain to the manufacturers of PCBs. AI servers have extremely high requirements for PCBs (many layers and high-quality materials), and the capacity to produce these high-end products cannot keep up, resulting in a situation where scarcity drives up prices. Although the current performance is good, whether prices will continue to rise in the future depends on whether downstream customers accept the increased costs and on the changes in supply and demand once new factories come online.
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Detailed Analysis
1. Why the sudden surge in popularity? Because AI has turned PCBs into a scarce commodity
Previously, PCBs were just those green boards found in phones and computers, considered quite ordinary. However, AI servers (such as NVIDIA’s graphics card servers) have completely changed the requirements for PCBs.
You can think of an AI server as a super complex “Lego castle.” Traditional servers were like small houses using simple materials; today’s AI servers are like skyscrapers—requiring not only more layers but also materials of the highest quality. The “M4, M8, M9” grades mentioned in the news represent different levels of quality. Ordinary FR-4 is considered “economical,” while AI servers need “five-star” or even “seven-star” materials (such as M6, M7, M8). These high-end materials are not only expensive but also difficult to produce. As NVIDIA has upgraded from the H series to the B series, the requirements for materials have increased, making high-end PCBs a scarce commodity. Those with these materials have significant bargaining power, which is why stock prices have risen.
2. Where does the price increase come from? The bottleneck in upstream raw materials
The price increase is not something the PCB manufacturers decided on; it’s forced by the limitations of their suppliers. The main raw materials for PCBs are copper foil, electronic glass fiber cloth, and resin, which account for over 80% of the cost.
- Copper foil: AI servers require a type of high-grade copper foil called “HVLP,” which is very difficult to produce. Demand is expected to surge by 260% by 2026, but production capacity cannot keep up, leading to a growing shortage.
- Electronic cloth: The global leader, China Glass Fiber, has raised prices by 15% for thick cloth and 20% for thin cloth. With low inventory, manufacturers have no choice but to accept the price increases.
This is similar to baking a cake: if the flour (copper foil) and cream (electronic cloth) suddenly become more expensive and are hard to find, the bakery (PCB manufacturers) has to raise prices to avoid losses.
3. Are intermediaries profiting? Copper-clad laminate manufacturers are the big winners
Copper-clad laminates (CCLs) are the core material for PCBs. In this price increase, CCL manufacturers are the biggest beneficiaries.
- Continuous price hikes: The leading company, JianTao Circuit Technology, has issued price increase notices seven times this year, with FR-4 CCLs increasing in price by more than 100% (more than doubling) so far. Giants like Panasonic and Nanya Plastics have also followed suit.
- Surging profits: Higher prices have led to substantial increases in profits. JianTao Circuit Technology’s net profit increased by 209% in the first half of the year, and Shengyi Technology’s net profit increased by 130%. The gross margin (the percentage of profit per board sold) has also increased significantly.
This shows that the profits in the supply chain are concentrating in the upstream and midstream sectors, as companies with advanced technology and production capacity have significant pricing power.
4. Downstream PCB manufacturers: complaining while secretly raising prices
For manufacturers that produce PCBs directly (such as Jinlu Electronics and Chongda Technology), the situation is more complex:
- Cost pressure: Rising raw material prices have increased their costs.
- Delayed but inevitable price transmission: In the past, PCB manufacturers might bear the cost increases themselves and not pass them on to customers. However, with the high demand for high-end products, they are now starting to raise prices.
- Jinlu Electronics: The unit price of orders has increased by 29%, indicating that they have successfully passed on some of the cost increases.
- Chongda Technology: They have explicitly announced a “structural price increase,” meaning they will raise prices and won’t blame anyone for it.
Although PCB manufacturers face cost pressures, they have the leverage to raise prices due to their high-end orders, allowing them to maintain or even increase their profit margins.
5. Will prices continue to rise in the future? Be cautious of differentiation and new capacity
Despite the current boom, investors and observers should not be overly optimistic. There are two key risks:
- Severe industry differentiation (80/20 rule):
- Winners: Manufacturers of high-end multi-layer boards (18 layers or more, used in AI components) are seeing a growth rate of 72.8%, truly benefiting from the trend.
- Losers: Manufacturers of ordinary single/double-layer boards (4-6 layers) are only seeing a growth rate of 6.2%. If you own stocks of companies that produce low-end PCBs, you may not benefit from this trend, and your profits could even be squeezed by rising raw material costs.
- Possible reversal in supply and demand: Whether price increases can continue depends on whether downstream customers (such as server and phone manufacturers) accept them. If end products cannot be sold or if customers switch to cheaper suppliers, price increases may stop.
- New capacity: Leading companies have been building new factories in the past two years. Once these new capacities come online, the shortage of high-end materials may ease, and prices may fall.
Summary and advice: This market trend is driven by real demand, not just speculation. However, not all PCB companies will benefit. Focus on those with high-end production capacity, the ability to produce multi-layer boards, and the ability to pass on cost increases to downstream customers. Also, closely monitor the release of new capacity and customer feedback to avoid buying at high prices.