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PCB Mild Recovery: AI Boost Demand

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AI-driven data computing demand continues to grow, PCB will follow the iteration of servers, switches, data centers and other hardware and continue to upgrade; IC packaging substrate for high-end logic chip application value can be highlighted, and become the focus of the layout of material manufacturers and PCB manufacturers.

Over the past three years, hyperscale cloud service providers have experienced a strong expansion cycle, and began to prudently carry out capital expenditure in the economic downturn cycle, and the growth rate of global data center capital expenditure may fall back to single digits in 2023.

With the rise of AI, meta-universe and other applications, the demand for arithmetic power continues to be released, driving the arithmetic infrastructure industry to usher in a growth cycle. In the long run, the industry expects that data center capital expenditures will continue to expand, injecting new vitality into the upstream printed circuit board industry. According to forecasts, in 2022, global server shipments of 15.16 million units, an increase of 12% year-on-year, the output value of $ 121.6 billion, is expected to 2026 global server PCB market size of $ 16 billion, of which 2026 AI server PCB market size of $ 4.7 billion.

In 2023, the global PCB output value was $73.9 billion, a decline of 15.6%, the circuit board industry will usher in the next growth cycle due to inventory replenishment, downstream warming, brokerage firms estimate that the global PCB output value in 2024 will rebound to $78.2 billion, an increase of 6.3% over 2023. High-speed, high-frequency and high system integration are the main development direction of PCB products in the future, and it is expected that the overall scale of the global IC package substrate industry will reach 21.4 billion U.S. dollars in 2026.


"Wave" Forward

In 2021, the market share of the top ten global PCB enterprises was 36%, with a low degree of concentration and a fragmented competitive pattern. 21st century, the printed circuit board industry chain has been shifted from developed countries to developing countries, and in recent years, China's output value accounted for a stable proportion of 53.27%, and it is expected that the proportion in 2027 will be 51.97%, keeping the status of a manufacturing center, and the trend is showing a shift to other Asian countries or regions except Japan and China. The trend shows a shift to other Asian countries or regions other than Japan and China.

The direct upstream of PCB manufacturing is copper-clad materials, and the downstream industries are mainly consumer electronics, automotive, telecommunications, aerospace, medical equipment and so on. The cost of copper-clad laminates mainly consists of copper foil, resin and glass fiber cloth, accounting for 42.1%, 26.1% and 19.1% respectively, and price fluctuations of raw materials are usually passed on to PCB manufacturers through copper-clad laminates. Copper prices have been climbing strongly since the second quarter of 2020 and oscillated to the first half of 2022, and copper prices are still at a higher level in the past ten years, while resin and glass fiber prices have been oscillating downward since September 2021, with a downward trend, and are currently at a low level. This round of rising raw material prices had once to PCB company's performance caused by the squeeze, the industry downturn, the head of manufacturers on the one hand to strengthen cost management, downward adjustment of the crop rate, on the other hand, planning for new production capacity, for products, technology updates and electronics industry boom rebound to make preparations.

By specific categories of PCB, 2021-2026 annualized average growth rate of 11.60% of packaging substrate, high-density interconnect boards reached 5.30%, flexible circuit boards reached 5.10%, more than 18 layers of multilayer boards reached 4.90%. In recent years, the consumer electronics boom fluctuations, automotive electronics, data centers and servers have become PCB downstream fast-growing industries.

According to forecasts, global server shipments in 2026 will reach 18.85 million units, 5-year compound annual growth rate of 6.8%, the output value will reach $ 166.5 billion, 5-year compound annual growth rate of 10.2%. 2022-2024, the global data center capital expenditures increased by 15 percent year-on-year, 4% and 11%, is expected to 2027 will reach $ 500 billion.

The automotive market is an area where PCB manufacturers are competing for layout, and the cost of automotive electronics in mid-range and high-grade sedans currently accounts for 28%, hybrids for 47%, and pure electric vehicles up to 65%. The study pointed out that the difference between new energy vehicles and traditional fuel vehicles mainly lies in the three electric systems, namely, battery management system BMS, vehicle controller VCU and motor controller MCU, of which the PCB required by the BMS includes the main control circuit PCB and single management unit PCB, the amount of about 0.15 square meters and 3-5 square meters, respectively; the VCU and the MCU PCB required by the use of a relatively small amount of about 0.03 square meters and 0.03 square meters and 0.03 square meters, respectively, and MCU PCB required by the amount of about 0.03 square meters and 0.03 square meters. VCU and MCU require a relatively small amount of PCBs, about 0.03 square meters and 0.15 square meters, respectively. Taking Tesla Model3 as an example, the value of PCB for the whole car is more than RMB 2,500, which is more than 6 times of that of traditional fuel cars. It is expected that the value of PCB required for new energy vehicles in 2025 will reach USD 8.4 billion.

Huden's development in recent years is a microcosm of the PCB industry change, 5G base station business had doubled the company's earnings, 5G construction peak, domestic sales of large customers by the U.S. suppression, the company's PCB business domestic sales revenue declined sharply, the company took three years to complete the conversion from the wireless base station to the digital communication market. In 2022, during the industry downturn, HEC chose to build a factory in Thailand to further develop overseas major customers.

In the first half of 2023, Huden's AI server and HPC-related PCB products accounted for approximately 13.6% of the revenue from the enterprise communication market board business, up from approximately 7.9% in 2022. Benefiting from the structural demand for high-multilayer boards in emerging computing scenarios such as high-speed computing servers and artificial intelligence, the company's PCB business is expected to realize operating revenue of about 8.572 billion yuan in 2023, an increase of about 8.09% year-on-year, with the gross profit margin rising to about 32.46%.


AI Opens Up Market Space

It is predicted that the global data center capital expenditure will reach 500 billion U.S. dollars in 2027, more than 20% of the server deployment may be accelerated type, edge computing is expected to account for nearly 8% of the total data center infrastructure expenditure, PCB will also follow the iteration of the data center hardware and continuous upgrading. pcie bus standard is an important standard for high-speed connectivity to achieve high-speed interconnections between the memory and the CPU, GPU and the CPU, pcie bus standard is an important standard for high-speed connectivity to achieve high-speed interconnections between memory and CPU, GPU and CPU. The PCIE bus standard is an important standard for high-speed connectivity, enabling high-speed interconnections between memory and CPU, GPU and CPU.

Influenced by the weak downstream demand and the continuous adjustment of terminal inventory, research institutes forecast that global server shipments will decline by 5.9% year-on-year in 2023, but with the return of downstream inventory to the normal level in 2024 and the rapid growth of AI servers, the overall server shipments will return to growth in 2024. ai is becoming the core driver of global science and technology innovation, and the arithmetic power, as a driving force for the development of ai, has ushered in exponential growth, with ai servers increasing at a rapid rate. AI is becoming the core driver of global scientific and technological innovation, and arithmetic power, as the driving force of AI development, has ushered in exponential growth, and the acceleration of the iteration of AI servers and switches has pushed the rapid expansion of high-end digital communication PCB.

IFC Securities pointed out that the growth of AI servers will significantly drive the value of PCBs to improve, through the disassembly of Huawei 2288H, NVIDIA DGXA100 and NVIDIA DGXH100 PCB boards composed of architecture, and ultimately calculated that the value of PCBs for ordinary servers is 1,125 yuan, while the value of PCBs for AI servers has reached 7,000-1,000 yuan, and AI server products are still being upgraded and iterated, and AI servers are still upgraded and iterated. Moreover, AI server products are still being upgraded and iterated, and it is estimated that the year-on-year growth of AI server shipments will be more than 38% in 2023, which will provide a strong impetus for the improvement of PCB value.

From text to pictures to videos, the training and dissemination of AI large models consume a lot of network bandwidth, and CRE Securities believes that the switch market is expected to take over AI servers to usher in accelerated growth, and 800G switches to accelerate penetration. From the end-customer demand, cloud computing vendors and Internet vendors are the main demand side of the arithmetic hardware procurement, North American cloud vendors in the second half of 2024 quarterly capital expenditures have been ringing growth. In data center applications, 400G and above switches will account for more than 70% in 2027, and 800G will become the mainstream. The outbreak of AI arithmetic demand will also drive the accelerated upgrading of data center switches to 800G, and some enterprises have already put their 800G switch products on the market.


Continuous Evolution of Packaging Substrate

As the core material of chip packaging, the packaging substrate protects, fixes, and supports the chip, enhances the heat conduction and dissipation performance of the chip, and ensures that the chip is not physically damaged on the one hand; on the other hand, the upper layer of the packaging substrate is connected to the chip, and the lower layer is connected to the PCB, so as to realize the functions of electrical and physical connection, power distribution, signal distribution, and communication between the chip's internal and external circuits, etc. The correlation between the IC carrier board and the chip is high. There is a high correlation between IC carrier boards and chips, and different chips usually need to design special IC carrier boards to match with them. IC carrier boards account for 40%-50% of the material cost in low-end and middle-end packages, and account for a higher proportion in high-end packages. According to statistics, the overall scale of the global IC packaging substrate industry will reach 17.4 billion U.S. dollars in 2022, a year-on-year growth of 20.90%, and is expected to reach 21.4 billion U.S. dollars in 2026.

Compared with ordinary PCBs, IC packaging substrates require higher requirements in terms of line width, line spacing, board thickness, preparation process, etc. PCB board line width and line spacing are usually 50-100 μ m, and board thickness is usually 0.3-7 mm, which can not meet the technological requirements of chip packaging.HDI board line width and line spacing are usually 40-60 μ m, and board thickness is usually 0.25-2 mm.IC packaging IC package substrate line width, line spacing of 8-40 μ m, plate thickness of 0.1-1.5 mm.

According to the base material, the package substrate can be divided into three categories: rigid, flexible and ceramic, of which the rigid package substrate is the most widely used. Rigid packaging substrates can be divided into BT, ABF and MIS according to the main raw materials. BT packaging substrates are used in MEMS, memory chips, LED chips, etc. ABF packaging substrates are used in high-end logic chips such as CPUs, GPUs, field-programmable gate arrays, and special-purpose integrated circuits, and MIS packaging substrates are used in analog and power chips and digital currency. In the era of computing power, high-performance computing and AI inject growth momentum into ABF carrier boards. From the perspective of downstream market scale, personal computer is still the largest downstream market of ABF carrier board usage, while the ABF usage of server, converter, AI chip and 5G base station chip is growing faster. According to statistics, in 2021, the global ABF carrier board market size of about 7 billion U.S. dollars, by 2026 is expected to grow to 12.1 billion U.S. dollars.

Domestic manufacturers actively put into production in the field of IC carrier plate, Huazheng new materials, days and defense and other companies are expected to break the monopoly pattern of upstream ABF film; Xingsen science and technology FCBGA encapsulated substrate business continues to promote investment and production expansion, 2023 is still in the stage of customer certification, proofing and trial production; SZDEC FCBGA encapsulated substrate part of the product has been completed to send samples to the authentication in the production line to validate the stage of introduction.

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