Gf Securities has released a research report stating that the electronic fabric industry currently has almost zero inventory, creating a supply-demand gap with significant room for further price increases. Standard electronic fabric continues to experience high demand, while AI electronic fabric is seeing growth in both volume and price. The fiberglass industry has a clear upward profit trend from 2026 to 2028. This cycle is characterized by strong supply constraints, with AI demand injecting powerful growth momentum, suggesting corporate earnings elasticity may exceed expectations. The main points from Gf Securities are as follows:

Standard E-glass Fabric Enters Major Price Cycle Amid AI Demand and Loom Shortages

Since Q4 2025, shortages of standard electronic fabric have intensified, accelerating price increases as E-glass enters a major upward price cycle. Driven by AI demand and a shortage of weaving looms, industry inventory has rapidly declined since Q4 2025, with prices continuing to rise. According to SCI99 data, standard electronic fabric prices increased month-on-month from October/December 2025 through January-July 2026. The price for 7628 thick fabric rose by 0.2/0.2/0.2/0.5/0.5/0.5/0.5/0.7/1.2 RMB per meter, with thin fabric seeing even larger increases. The industry is currently operating with near-zero inventory amid a supply-demand gap, indicating substantial potential for further price hikes.

Projected Supply-Demand Gap for Standard Electronic Fabric in 2026-2027

According to CCLA, China's demand for electronic fiberglass fabric used in copper-clad laminate production was approximately 3.5 billion meters annually in 2024, with an expected increase to 3.7 billion meters in 2025. The firm's calculations show that under pessimistic, neutral, and optimistic scenarios for 2026, demand for standard electronic fabric would be 3.707 billion, 3.781 billion, and 3.855 billion meters, respectively, with corresponding supply gaps of 39 million, 113 million, and 187 million meters. Under the neutral expectation, a supply-demand gap exists for standard electronic fabric in 2026, which is projected to widen further in 2027. The primary reasons are supply-side constraints: AI and thin fabrics are competing for limited loom capacity, and new electronic yarn capacity is limited. Demand-side factors are also significant: despite weak consumer electronics demand, overall E-glass demand growth is better than expected, driven by AI, alongside growing demand from new energy vehicles, charging piles, and energy storage, with an ongoing optimization in the thick-to-thin fabric structure.

Strong Supply Constraints and Sustained AI Demand Point to a Prolonged High-Cycle

The supply side is characterized by strong constraints, with ongoing limitations in loom and electronic yarn supply expected to persist from 2026 through 2028. Concurrently, AI-driven demand growth shows strong sustainability, suggesting this period of high demand for electronic yarn and fabric will be prolonged.

(1) The core constraint on the supply side is the shortage of weaving looms. A loom deficit is expected in 2026, potentially widening in 2027. Calculations show that under pessimistic, neutral, and optimistic demand assumptions, the combined new loom demand for AI electronic fabric and standard electronic fabric in 2026 is 2,184, 2,608, and 3,032 units, respectively. Supply-demand gaps are anticipated for 2026-2027, with electronic fabric loom deficits of 608 and 1,050 units in 2026 and 2027, respectively, under the neutral scenario. The loom shortage is primarily due to rapid AI demand growth and an increasing proportion of E-glass thin fabric. More profitable AI electronic fabric and thin fabric are crowding out loom capacity for other products. Loom efficiency is lower for AI electronic fabric compared to E-glass thin fabric, which in turn is lower than for E-glass thick fabric. Demand and profitability follow the order: AI electronic fabric > thin fabric > thick fabric. The industry shortage has propagated from AI electronic fabric to thin and thick fabrics.

(2) Beyond the loom shortage, limited new capacity for electronic yarn is also contributing to relative tightness in yarn supply. Electronic yarn is expected to face a tight supply situation from 2026 through 2028. Based on SCI99 data and project construction announcements from China Jushi Co., Ltd., net new actual capacity additions in 2026-2028 are expected to be limited. The capital-intensive nature of fabric production and the industry's strategic shift towards AI electronic fabric suggest that new supply for standard electronic yarn will likely remain low, extending the duration of this high-demand cycle.

Key Risks to Consider

The report highlights risks including lower-than-expected demand for electronic fabric, significant expansion in electronic yarn and fabric loom capacity, and rising costs of raw materials and fuel.