The upstream of the printed circuit board (PCB) manufacturing industry mainly consists of raw material manufacturers such as copper foil, wood pulp, fiberglass yarn, resin, etc; The midstream mainly consists of PCB manufacturers, with copper clad plates being the core raw material for PCB manufacturing; Downstream mainly include companies in fields such as communication, electronics, semiconductors, and computers.

Upstream and midstream: PCB raw material costs have fallen, and CCL manufacturers are building a foundation

The main raw materials for PCB and CCL include copper foil, epoxy resin, and fiberglass cloth. In addition to labor and manufacturing costs, PCB raw materials mainly include copper clad plates, copper foil, phosphor copper balls, solder resistant ink, etc. Copper clad panels account for the highest proportion of PCB raw material costs, reaching 30%. The main raw material for copper foil is copper, and since 2023, LME copper spot prices have fluctuated and declined.

The prosperity level of the upper and middle tier A-shares on the PCB is low. Copper prices have fluctuated downward, with epoxy resin and electronic grade fiberglass fabric prices at relatively low historical levels. Affected by the continuous decline in prices, the main targets of copper foil, fiberglass cloth, and epoxy resin experienced lower than expected revenue and net profit recoveries for the entire year of 2022 and the first quarter of 2023. The overall copper clad board is still in the bottoming period, and the revenue and profits of major A-share listed companies continue to decline. The CCL sector needs to wait for the recovery of downstream demand and the emergence of new demand growth points to drive an orderly recovery of the sector.

Downstream PCB manufacturers: tracking production and sales, inventory, and expansion status

The production and sales of major domestic PCB manufacturers are relatively stable, waiting for the demand turning point after the inventory is cleared. In 2022, the production and sales of major domestic PCB manufacturers are relatively matched. In terms of sales, most major domestic manufacturers have maintained stable sales, with Xingsen Technology's sales growth rate reaching 7.27% in 2022. In terms of production, Dongshan Precision has seen rapid growth, with a growth rate of 4.99%. From the perspective of product area and output value, the production of Jingwang Electronics has reached 9.2697 million square meters, and the production of Pengding Holdings has reached 27.1 billion yuan. Stimulated by the overall prosperity of the PCB industry and objective factors, manufacturers have previously tried to prevent supply chain risks from causing inventory pressure. We believe that the gradual digestion of inventory levels will be beneficial for the PCB industry to recover.

When domestic PCB manufacturers expand their production, the direction of expansion is towards high-density and high-performance PCBs. The global PCB production capacity has been transferred to Chinese Mainland, and the mainland PCB manufacturers have achieved rapid development and expanded production layout this year. The expansion plans of major manufacturers mainly include HDI boards, IC packaging substrates, and high multilayer boards, which are in line with the development trend of the PCB industry towards high-density and high-performance.

Downstream prosperity trend: Stimulating PCB demand in multiple sub sectors in multiple fields, paying attention to changes in market space and competitive landscape

The main downstream applications of PCB include communication, consumer electronics, automotive electronics, computers, industrial control and medical, and military aerospace. According to Prismark's statistics, in 2021, the largest downstream application in the global PCB industry was computers, accounting for 34%; Next is the communication industry, accounting for 32%; The consumer electronics industry ranks third, accounting for 15%.

Consumer electronics: We are optimistic that global electronics will enter the innovation cycle, boosting the demand for FPC soft boards. The recovery of consumer electronics demand and the innovation of various segmented products will bring broader market space for PCBs. Consumer electronics includes segmented product areas such as mobile phones, computers, smart homes, and wearable devices. With the rapid development of the global consumer electronics industry, new consumption hotspots emerging from new series of products such as smart phones, tablets, wearables, AR, VR, etc. will lead a round of iterations of Consumer electronics, thereby driving the demand for PCBs.