The global PCB industry is picking up, and the domestic PCB industry has huge potential.

The structure of PCB products is complex, and the product types are constantly evolving according to the requirements of the terminal: the demand for terminal electronic products to light, thin, and versatile changes, which promotes the rapid improvement of product performance and integration of electronic components. Generally speaking, from single and double panels, multi-layer boards, HDI boards (low-order → high-order), any layer interconnection board, to SLP type carrier board, package substrate, the integration degree is getting higher and higher, and the design and processing are more complicated. .

Multi-layer boards, FPCs and HDI boards are the main force in the market, and high-end PCB products have a large room for growth. According to Prismark, the total proportion of multi-layer boards, FPCs and HDI boards in 2017 is as high as 74% in the PCB market. It is expected that the compound growth of FPC, HDI and multi-layer boards will reach 3%, 2.8% and 2.4% by 2021. The cycle of PCB products is mainly related to terminal requirements.

Driven by the rising prices of raw materials and changes in downstream demand in 2017, the global PCB market showed a more-than-expected growth. The annual output value increased by 8.6%, exceeding the growth rate of the entire electronic system products and far exceeding the GDP growth rate. The demand for pulling the PCB downstream market in 2017 mainly comes from:

First, the price increase of high-end intelligent machine innovation and upgrade will stimulate the output value of the entire PCB market. The design of the Apple iPhoneX has changed greatly. The motherboard adopts a more advanced MSAP stacking solution, and the value of the single machine has nearly tripled, reaching more than 20 US dollars. Innovative appearances and functional parts such as full-screen and 3Dsensing directly increase the demand for rigid-flexible boards and flexible FPC boards. The value of the FPC board's stand-alone value has increased to more than $40. Other non-Ping smart machines quickly followed Apple's innovation in the launch of new products, and vigorously promoted the application of new concepts such as full screen, 3Dsensing, and wireless charging. Although the overall shipment growth rate of smart phones is still declining, the value of single-machine parts and components has rapidly increased, driving the output value of mobile phone boards to exceed the expected growth.

Second, the virtual currency mining boom has driven the surge in demand for mining machine motherboards and chip carrier boards. In 2017, the price of virtual currency led by Bitcoin and Ethereum surged. The price of Bitcoin in the past 17 years has increased 14 times. The supply of upstream mining equipment is in short supply, and the price of mining machines has also risen with the investment boom. The cost of mining machine is mainly composed of main board and chip. The circuit board for main board is mainly 4, 6 and 8 layers. The price of ordinary multi-layer board is 600-800 yuan per square meter, and the price of multi-layer board for bitcoin main board is increased to Square meters 1200-1500 yuan, such boards are mostly domestic low-end board manufacturers supply. The package carrier board for mining machine chips is mainly provided by Japanese and Taiwanese carrier board manufacturers. Although the market generally expects that the virtual currency market is not sustainable, the short-term impact on PCB performance is significant. The monthly demand exceeds 560,000 square meters. It is estimated that the market size of the mining machine board for 2017 is about 1.24 billion US dollars.

Third, the service/storage market in the computer field has begun to improve, driving the output value of the entire computer system to further expand. Since the cloud, data center, and artificial intelligence currently require huge storage space and powerful computing power, the scale of the service/storage market will grow rapidly with the gradual penetration of the Internet of Things. The PCB for computer is mainly used for the 6-16 layer multi-layer board and memory chip package substrate for graphics cards.

In the short-term, the impact of Apple's mobile phone on PCB production value and technology will continue into 2018. SLP-type carrier board has become the trend of high-end mobile phone motherboards. The loading rate of FPC flexible board on new mobile phones will continue to increase in 2018, but Due to the rapid expansion of production capacity, the rigid-flexible board, which is sought after by the market, mainly consumes the original inventory in the first half of 2018. The demand for storage, server graphics boards and IC package substrates continues to increase. In the medium and long term, in the period of steady economic growth, the third large-scale development of the PCB industry will be the further penetration of automotive electronics, and the resonance era of various fields such as communication, consumer electronics and computers promoted by technologies such as 5G and AI. .

 

1

The global PCB market continues to maintain a high boom in 2018

The data of the first quarter of 2018 in overseas regions showed that the prosperity of the PCB industry only increased. The North American printed circuit board BB value has exceeded 1 since February 2017, and it has been standing at 1.1 or above in July last year from April of last year to a record high of 5 years. The monthly output value of Japan's PCB has maintained positive growth since the fourth quarter of 2017. The growth rate of the output value of package substrates has been leading year-on-year. The monthly growth rate of the board in February was 20.67%. The growth rate of the hard board was relatively stable at around 2%. The output value fell by 4% year-on-year. In addition, we have calculated the monthly revenue of the top ten PCB manufacturers in Taiwan. The high growth trend of total revenue has continued from the second half of 2017 to January 2018. The sales of Yanding, Xinxing and Jianding 18Q1 are among the top gainers. , respectively, 29.77%, 12.96%, 12.08%.

 

Domestic PCB manufacturers' average revenue in the first quarter of 2018 increased by 20.57% year-on-year. Although the orders were full, domestic PCB export trade was greatly affected by exchange rate fluctuations. Exchange losses directly reduced the profit margin, resulting in the lower-than-expected performance of most companies in 2018Q1. In the long run, the exchange rate issue is a macroscopic effect and does not represent the operating capacity of the company. Since April, the RMB has depreciated against the US dollar, and the export-oriented domestic PCB enterprise profit data has significantly improved.

 

2

China's industry growth rate is leading globally, and domestic-funded enterprises are accelerating

China's PCB production value accounts for more than 50% of the world's total, and the growth rate is leading the world. As early as 2008, China's output value accounted for 31.11%, but the initial output value of the transfer was mainly from foreign capital production capacity in China. At that time, the proportion of domestic enterprises accounted for less than 5%. With the continuous improvement of the domestic PCB industry chain and the demand of the domestic large consumer electronics market, local PCB companies have been able to develop rapidly, changing the situation that PCB demand has been dependent on imports for many years. In 2014, the trade surplus was realized for the first time. Local companies are heading to overseas markets and gradually realize the true meaning of “domestic substitution”.

Throughout the global PCB production value data, China's regional output value has hit a record high in recent years. In the past eight years, the compound growth rate has been leading the world, reaching 9.63%. In the same period, Japan, Europe and the United States have negative growth rates. According to the latest statistics of Prismark, the PCB production value in China in the past 17 years accounted for 50.53%.

2.1 “Industry Transfer” is constantly upgrading, and the domestic first-tier global echelon

China's electronic circuit industry has gradually upgraded from “production transfer” to “property transfer” on the path of “industrial transfer”. After years of accumulation, the domestic PCB industry has gradually matured. However, compared with Japan, South Korea, Taiwan and other regions, PCB products in mainland China are mainly low-end products such as single and double panels and multi-layer boards with less than 8 layers. According to the latest statistics of domestic PCB companies by CPCA, the proportion of foreign-invested manufacturers in China is 58%, while the number of domestic-funded manufacturers has increased, but the scale is relatively small. From the revenue data of domestic PCB companies in 2017. In view, the proportion of domestic enterprises with a scale of more than 1 billion is less than 30%.

Japan is currently dominated by large-scale manufacturers such as Qisheng and Sumitomo Electric, leading the global mid-to-high-end FPC market. Korean PCB companies mainly rely on the local market, and the products range from low-end to high-end, and they have competitive advantages in rigid-flex boards and package carriers. The scale of Taiwan-funded enterprises is generally 2-3 times or more than that of domestic-funded PCB manufacturers. The low-end production capacity has been transferred to the mainland. High-end products such as high-end HDI, IC carrier boards and carrier-like boards are mainly concentrated in Taiwan. The product market is mainly in the fields of computers, consumer electronics and smart phones.

Judging from the data changes of the top 100 global enterprises, the number and output value of local enterprises in mainland China continued to rise. In 2016, there were 41 selected companies, far exceeding other countries (24 in Taiwan, 19 in Japan, 14 in South Korea, and 4 in the United States). Home, 4 in Europe). According to Prismark's latest statistics, in 2017, two domestic companies have entered the top 20 in the world (12 Dongshan Precision, 19 Shennan Circuit), filling the vacancy of the first echelon of the domestic industry for many years in the PCB industry. This year, Dongshan Precision acquired Multek It will leap into the top five PCB manufacturers in the world. Compared with Taiwanese and Japanese capital, the proportion of local enterprises selected by China to the top 100 is still relatively low, and there is still much room for growth in individual output value. Then China will gradually upgrade from “production transfer” to “property transfer” ( The transfer of the investor's place), to achieve a real "industry eastward move."

2.2 Taking advantage of the development of the electronics industry to enter the east wind, step into the tens of billions of sprint fast track

As one of the three pillar industries of the electronics industry, PCB is closely related to the overall development of the electronic information industry. Domestic PCB companies have fully benefited from the policy dividend, and they have timely improved their product lines while docking with the capital market. Through industrial optimization and upgrading, they have moved closer to the world's leading manufacturers.

The domestic PCB-dominant enterprises have grown rapidly and are promoted to the scale of 10 billion. As mentioned earlier, domestic-funded PCB companies have begun to take shape, and the development path of Taiwan-funded enterprises is similar in terms of industrial structure. Taiwan-funded PCB enterprises have effectively grasped the historical opportunities of the era of PCs and smart phones. After ten years of gold growth, they have gradually emerged outstanding enterprises such as Yiding, Xinxing, Jianding, and Haoyu Bode, but due to the local market The limitations and the growth of the PC and smart phone sectors are weak, and Taiwan-funded PCB companies are gradually entering the platform period. This also provides opportunities for domestic companies to catch up. In contrast, domestic PCB companies have more growth momentum.

1) PCB is a heavy asset industry and requires a large amount of capital investment to gain scale competitive advantage. The automation and intelligence of production equipment directly determines the cost of production. The cost of retrofitting equipment in old plants is higher than that of investing in new plants. Domestic-funded enterprises enjoy the national policy dividend, low financing costs, short investment cycle, and can quickly respond to market demand.

2) The domestic industrial chain is well-equipped, and diversified market demand drives the development of the PCB industry. The development of China's PCB industry has accelerated the localization of local equipment and materials. At present, more than 80% of newly-built domestically produced equipment has been produced. The raw materials also rank among the top companies in the global market. In the original Pearl River and Yangtze River Delta areas, the industrial cluster continued to expand to the central region, with Jiangxi, Hubei and Anhui as new investment priorities. From the demand side, the domestic terminal market is more diversified, and its own brands are all in the fields of communication, smart phones, computers, automobiles, home appliances, industrial control medical, aviation and military, etc., providing strong support for the development of local PCB enterprises.

3) Domestic PCB companies are in the process of developing into a high-speed growth period of 10 billion scale, and the future potential is huge. Analogous to the development history of Taiwan-funded billion-dollar PCB companies, domestic PCB manufacturers are still at the starting point of 10 billion yuan (10-300 million yuan), and it takes about 8-10 years for Taiwan-funded enterprises to grow to 10 billion scale. Time, but the average compound growth rate during this period was as high as 26.12%.

The PCB industry has entered a high-cost era, and the advantages of leading enterprises have become prominent

1

Raw materials continue to rise in price to break the original pattern of the industry

There are many kinds of raw materials required for PCB production, mainly copper clad laminates (CCL), prepreg (PP), copper foil, copper balls, gold salts, inks, dry films and other materials. Generally speaking, PCB cost constitutes 37% of CCL, 13% of prepreg, 8% of gold salt, 5% of copper foil, and the proportion of labor cost is about 11% higher. Slightly adjusted.

According to the thickness of the CCL sheet, the cost of the fiberglass fabric accounts for 25% to 40% of the cost, the resin cost accounts for 25% to 30%, and the copper foil accounts for 30% to 50%. Due to the high concentration of the CCL industry, the bargaining power is strong, and the price is relatively smooth to the PCB industry. Therefore, the cost of the PCB company is sensitive to the price of the main raw materials such as electrolytic copper foil, fiberglass cloth and synthetic resin. The price increase effect will put a lot of pressure on the profitability of PCB companies.

1.1. Copper foil prices fluctuate at high levels, and supply and demand will ease in the second half of the year.

This round of copper foil enterprises is affected by the rising demand for lithium battery copper foil by new energy vehicles, and the lithium foil copper foil is actively converted. The standard copper foil used for the production of PCB boards is reduced, resulting in the rapid increase of copper foil since the beginning of 2016. There are differences in production equipment and process between standard copper foil and lithium battery copper foil. Lithium copper foil processing steps are few, the process is simple, and the gross profit is higher than the standard copper foil for PCB.

With the promotion of China's new energy vehicle incentive policy, the production of new energy vehicles has expanded, and the demand for copper foil used as a negative electrode carrier for lithium-ion batteries has also increased dramatically. The enthusiasm of domestic and foreign manufacturers to switch production is high. According to the CCL industry association, in 2015, Taiwan, Japan and South Korea produced 62,000 tons of lithium copper foil, accounting for 30.62% of the total output of electrolytic copper foil. In 2016, the domestic new lithium-ion copper foil (including conversion) was 16,700 tons, making the proportion of standard copper foil to the total annual domestic electrolytic copper foil production capacity reduced from 82.3% in 2015 to 79.8% in 2016.

The price of copper has been going up since the beginning of 2016. In the second half of 2017, it hit an all-time high. Domestic Shandong Jinbao announced a price increase of 1,000 yuan per ton of copper on July 5, 2017. On July 11, 2017, Willibang Electronics also announced the upward adjustment of copper foil. 2000 yuan / ton. In the same period, due to the withdrawal of about 157,000 tons of copper foil from the supply chain of FR-4, this part accounted for about 31% of the total amount of standard copper foil, resulting in a serious contraction of copper foil supply for PCB production, and copper foil processing fees rose sharply. . Since the beginning of 2018, the copper price has been slightly adjusted at a high level, but the copper foil processing fee has not been adjusted.

The newly added capacity of copper foil will be released as soon as possible from the second half of 2018, partially alleviating the pressure of supply and demand in the upstream and downstream. The difficulty in expanding the copper foil is due to the titanium cathode roll production equipment imported from Japan. Japanese manufacturers usually do not expand the cathode roll because of the increased demand for copper foil. The tight supply of equipment led to an increase in the copper foil expansion cycle from 1-1.5 years to 1.5-2 years. According to the statistics of the domestic CCL industry association, in the 17 years, 69,000 tons of new electrolytic copper foil production capacity was released, of which 81.2% was lithium battery copper foil production capacity; in 18 years, 7 copper foil enterprises in China increased their production capacity by 68,500 tons. 89.1% is lithium copper foil production capacity, so by the end of 18 lithium battery copper foil market is likely to exceed supply.

The price increase of copper foil is the main driving force for the price increase of CCL. It is indirectly transmitted to PCB companies through CCL. Through sensitivity analysis, each 10% increase in copper foil will lead to a PCB cost increase of 1.6% to 2.35%. Copper foil is a capital-intensive industry with large-scale production, relatively high market concentration, and strong bargaining power for downstream. The price increase of copper foil will put a lot of pressure on downstream costs.

1.2. Industry cycle superimposed environmental pressure, two-wheel drive fiberglass cloth price increase

The capital-intensive glass yarn industry has a high market concentration and strong bargaining power. The construction of the kiln is huge, and it is a capital-intensive industry. The fiberglass cloth industry has a high concentration, and 70% of global production capacity is concentrated in China's Boulder, OCV, NEG, Chongqing International.