AI servers give rise to high-end PCB demand!

China's PCB output value occupies the global "half of the river mountain"!

Printed circuit board (PCB) is a substrate for loading electronic parts, to provide support for electronic components and provide electrical connections, is the basic necessities of almost all electronic equipment.

Currently the industry according to the number of layers of printed circuit boards, structure and process will be mainly divided into single-panel products, double-sided boards, multilayer boards, RF boards, flexible boards, rigid-flex combined boards and other special boards (high-frequency boards, aluminium substrates, thick copper boards, etc.).

PCB industry chain, the upstream for the copper foil, fiberglass cloth, wood pulp paper, synthetic resin, etc.; midstream for the copper-clad board and PCB, which is the upstream of the PCB, is an important part of the PCB raw materials; downstream is communication equipment, semiconductors, computers, automotive electronics, consumer electronics, industrial control, aerospace, data centres, etc., a wide range of applications.

According to the China Business Industrial Research Institute, PCB cost is mainly composed of direct raw materials such as copper-clad laminates, accounting for nearly 50%, of which copper-clad laminates occupy 30%. Since labour cost and manufacturing cost changes are small, the main determinant of PCB cost is the price of raw materials, especially copper cladding boards; the cost of copper cladding boards is mainly composed of copper foil, resin and glass fibre cloth, accounting for 42.1%, 26.1% and 19.1% respectively, totalling 87.3%.

According to Yidu data statistics, in 2020, the market share of the top 5 enterprises of copper-clad board reached 52%, with a high degree of concentration, while the concentration of the midstream PCB industry is relatively low compared to the concentration of the upstream copper-clad board industry, and the market share of the top 5 enterprises is only 20.84%, and the PCB manufacturers face the weak bargaining power of upstream copper-clad board manufacturers.

Currently the global PCB manufacturing enterprises are mainly distributed in mainland China, Taiwan, Japan, South Korea, the United States, Europe and Southeast Asia and other regions. China is the PCB industry's largest global production scale production base.

Due to the de-inventorying pressure and curbing inflation hike, the global PCB market size has shrunk in 2023. According to the data, the global PCB output value in 2023 fell 15% year-on-year to $69.517 billion.

According to Founder Securities analysis, from the inventory point of view, since the first quarter of 2022, PCB manufacturers inventory gradually reduced, de-inventorying has basically ended, 2023 three quarters to start the industry or has entered the replenishment stage. However, with the market inventory adjustment, weak demand for consumer electronics and other issues into the closing stage, as well as the accelerated evolution of AI applications, PCB will enter a new growth cycle, is expected to grow by about 5% year-on-year in 2024, PCB manufacturers are expected to pick up the crop rate.

In the medium and long term, the global PCB industry will usher in a revival, the data predicts that the global PCB output value compound growth rate of about 5.4% in 2023-2028, and the global PCB output value will reach about $90.413 billion in 2028.

In 2023, mainland China's PCB output value of $37.794 billion, accounting for more than 50% of the global market share. The data predicts that China will continue to remain the industry's leading manufacturing centre, but due to the product mix of China's PCB industry and some production shifts, China's PCB output value is expected to grow at a CAGR of about 4.1% from 2023-2028, and China's PCB output value will reach about US$46.180 billion in 2028.

AI server driven HDI and other high-end PCB demand explosion!

PCB industry downstream applications, downstream PC and server/data storage accounted for a relatively high proportion, accounting for 14% and 12% respectively in 2023.

In the long term, the server industry growth rate is high, 2022-2027 compound growth rate is expected to reach 6.5%, of which the main growth driver for the continuous upgrade of the server platform and AI server driven by the volume and price of PCB demand.

In addition, automotive PCB in 2022-2027 compound growth rate is expected to reach 4.8%, the main growth driver from the development of automotive intelligence, including autonomous driving and intelligent cockpit driven by the continued growth of PCB demand.

Sub-products, high-level boards, RF and other products leading the growth rate, high-end products in strong demand.PCB industry is mainly divided into single and double-sided boards, multilayer boards, RF boards, flexible boards and IC carrier boards and other types of different types of products on the manufacturing process of the exposure accuracy (line minimum line width) requirements are different, high-end products such as multilayer boards, HDI boards and flexible boards, such as the product of the minimum line width requirements are higher. Downstream application of the upgrade iteration, enhance the demand for high-end PCB products.

According to the data, RF boards are expected to grow at a compound rate of 6.2% from 2023-2028, higher than the industry average growth rate of 5.4%. Looking forward, along with the increase in integration and complexity of terminal products represented by AI servers and the continuous upgrading of performance indicators such as transmission rate, the demand for G-high frequency products is expected to continue to grow by virtue of heat dissipation, high transmission rate and other advantages.

Servers require a variety of forms of internal PCB, usually including server motherboards, CPU boards, hard disc backplanes, power supply backplanes, memory, network cards and other PCB products of different specifications.

Upgrade of the server platform will drive the number of internal PCB layers, material characteristics, etc., corresponding to the value of the volume will also increase significantly. AI server compared to traditional servers, the incremental increase in the GPU board (UBB), GPU acceleration card (OAM), and Switch Board and other products. In addition, the network interface, hard drive, memory, power supply, fan, etc. will contribute to the corresponding amount of PCB, AI servers used on the PCB value of a single unit compared to traditional servers increased significantly.

It is estimated that the annual shipments of AI servers accounted for about 8% of the overall server in 2023, and it is estimated that AI server shipments accounted for about 12.1% in 2024.

Benefit from the AI server accounted for the proportion of enhancement and server platform upgrade, Founder Securities expects the server PCB will usher in the volume and price, is expected to 2026 global server PCB market size of $16 billion, 2022-2026 compound growth rate of 12.8%, of which the AI server PCB market size of $4.7 billion in 2026, 2022-2026 compound growth rate of 38.3%.

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