The Development Prospects Of The PCB Sector Are Full Of Expectations And Opportunities

The development prospects of the PCB sector are full of expectations and opportunities
In 2024, the PCB sector will be driven by the dual logic of "cycle + growth", and is expected to show a strong growth trend. Its internal driving force and development logic will continue to resonate and jointly shape a new look for the industry.
China Bank Securities recently released a PCB industry tracking report: the recovery of the downstream drives the recovery of the economy, and the cost drives the copper clad laminate first.
The following is a summary of the research report:
The PCB industry is a basic industry for the manufacture of electronic information products and is greatly affected by the cyclical fluctuations of the macro economy. In 2023, the global political and economic landscape is complex and changeable, and the PCB industry is also affected accordingly. Looking forward to 2024, with the recovery of the global semiconductor cycle and the launch of terminal innovations represented by Apple XR, AI PC, etc., the industry's dual logic of "cycle + growth" is expected to continue to resonate.
Key points supporting the rating

Summary of the 2023 annual report and the first quarter report of 2024 of the PCB sector: In 2023, the revenue and profit of the PCB sector were both under pressure, but the quarter-on-quarter recovery trend has been shown, and 24Q1 has no lack of outstanding performance. From the revenue side, the PCB sector will achieve an operating income of 196.973 billion yuan in 2023, a year-on-year decrease of 4.11%. From the profit side, the PCB sector will achieve a net profit of 12.016 billion yuan attributable to the parent company in 2023, a year-on-year decrease of 29.94%. Compared with the decline in revenue, the decline in profit is more obvious. In the first half of 2023, the PCB industry was affected by multiple factors such as the downward trend of the macro economy and the continuous destocking of downstream customers. The prosperity of the industry improved in the second half of the year, so the revenue side showed a quarterly improvement. Entering 2024, the PCB sector achieved an overall operating income of 48.978 billion yuan in 24Q1, a month-on-month decrease of 15.22%/a year-on-year increase of 14.69%. The net profit attributable to the parent company was 3.237 billion yuan, a month-on-month increase of 28.33%, showing a trend of improvement in prosperity.

PCB may continue to recover in 2024, and servers + automobiles are high-growth downstream. According to Prismark's estimates, the global PCB output value in 2023 will be approximately US$69.517 billion, a year-on-year decrease of approximately 14.96%, while the PCB output area will only decrease by approximately 4.7% year-on-year. Compared with the output area, the sharp decline in PCB output value highlights the serious price erosion. However, in the medium and long term, the strong demand for artificial intelligence, high-speed networks and automotive systems will continue to support the growth of high-end HDI, high-speed high-layer and packaging substrate market segments, and bring a new round of growth cycle to the PCB industry. In the future, the global PCB industry will continue to show a growth trend. In the future, the increase in PCB may be concentrated in the server/data transmission and automotive industries. According to Prismark's forecast, the global PCB annual average output value compound growth rate from 2022 to 2027 will be approximately 2%, while the server/data transmission sector will grow by 6.5%, much higher than the average, and the automotive sector will grow by 4.8%, second only to the server/data transmission.

Fundamental tracking: All raw materials have risen, and the recovery in demand may drive the smooth transmission of CCL prices. The upstream of the PCB industry chain is raw materials, and the cost of direct materials accounts for about 55%, of which copper clad laminate materials account for more than 30%, copper foil accounts for about 9%, steel balls account for about 6%, and gold salt ink accounts for about 3%. Changes in the price of upstream copper clad laminates have a greater impact on midstream PCB manufacturers. Copper clad laminates are the main substrate for PCB conductivity, insulation and support. The three main raw materials, copper foil, resin and glass fiber cloth, have all seen a price increase. When the industry chain's expectations for future demand began to improve, downstream fields actively stocked up. At the same time, the overall global macro-improvement and repair have led to the establishment of a trend of continued upward movement in copper prices. The radiation effect of copper prices will further promote the transfer of relatively high-concentration copper clad laminate fields to downstream. At the same time, the full recovery of PCB demand driven by AI has also provided a hotbed for price increases.