On October 31, Jiangxi Hongban Technology Co., Ltd. ("Hongban Technology") faced a review by the Shanghai Stock Exchange's main board listing committee. The company, specializing in printed circuit boards (PCBs), plans to raise 2.057 billion yuan to fund an annual production project of 1.2 million square meters of high-precision circuit boards.

From its acceptance on June 28 to the review on October 31, the less-than-four-month review cycle far exceeded the average timeline for main board listings. However, over 400 pages of disclosures in response to two rounds of inquiries revealed risks such as lower gross margins compared to industry peers and questions about the necessity of the capacity expansion. These factors cast uncertainty on the company's successful listing.

**01. Expansion Faces Market Capacity Constraints** The necessity of the fundraising project is a key focus of the review.

Hongban Technology focuses on R&D, production, and sales of PCBs, targeting mid-to-high-end applications, including HDI boards, rigid boards, flexible boards, and rigid-flex boards. Its downstream markets span consumer electronics, automotive electronics, and high-end displays. The IPO aims to fully allocate the 2.057 billion yuan toward the high-precision circuit board project.

From 2022 to H1 2024, the company's capacity utilization rates were 71.96%, 85.01%, 88.51%, and 88.51%, respectively—relatively high but not yet at full capacity.

Moreover, the mid-to-high-end PCB market Hongban serves has limited capacity, raising concerns about absorbing the new output. Regulatory inquiries also highlighted this issue.

In 2024, China's PCB industry was valued at $41.213 billion, with rigid boards dominating (58.92%), mostly low-to-mid-tier products. In contrast, HDI boards, flexible boards, and IC substrates accounted for 19.04%, 14.52%, and 7.52%, respectively—a narrower market where scale effects are harder to achieve.

Hongban's mid-to-high-end PCBs represented ~76% of 2024 revenue, while rigid boards contributed 22.79%, primarily high-layer multilayer boards. The company acknowledged that while these products ensure higher profits and technical barriers, growth is capped by market size.

Despite admitting to limited market capacity, Hongban cited rising demand for HDI boards from AI and high-performance computing, arguing that expansion is critical to meet growing needs.

**02. Gross Margins Lag Behind Peers for Three Years** Another concern is Hongban's lower gross margins versus industry averages, flagged in both inquiry rounds.

Despite its mid-to-high-end focus (76% of 2024 revenue), 2022–2024 gross margins were 13.28%, 11.04%, and 13.98%, below industry averages of 16.98%, 15.35%, and 15.26%. The company attributed this to product mix, new factory inefficiencies, and consumer electronics demand fluctuations.

In 2023, intensified competition squeezed pricing power, forcing Hongban to accept lower-margin orders to maintain utilization—slashing HDI board prices by 19.94% and hurting profitability.

Since 2020, Hongban has ventured into IC substrates, but its new factory's high fixed costs led to gross margins of -202.50%, -452.04%, and -141.86% from 2022–2024, dragging down overall performance.

H1 2024 saw a rebound to 21.36%, outperforming peers (17.95%) and doubling Bomin Electronics' margin (similar consumer electronics focus). Hongban credited this to optimized orders and higher technical complexity, while peers faced new factory drags.

However, post-expansion, higher depreciation costs could pressure margins if returns lag. Downstream demand shifts, pricing pressures, or competition may also impact profitability.