AI is boosting industry prosperity, while upstream high-end materials face supply constraints, including shortages in capacity for Low Dk electronic glass fabric/quartz fabric and HVLP copper foil. With the anticipated launch of NVIDIA's (NVDA.US) Rubin platform in 2026, M9-grade CCL is expected to require Q-glass fabric to meet its dielectric performance requirements, potentially leading to a surge in market demand and a supply shortage in the high-performance electronic glass fabric market. The main views of Shanghai Securities are as follows.
AI is driving both volume and price increases for high-speed materials, with key upstream materials facing shortages. The value of high-tier CCL used in AI servers is 5-7 times that of traditional servers. This is due to AI server motherboards having more layers and larger surface areas, coupled with higher material unit prices. The AI-driven boom is exacerbating supply tightness for upstream high-end materials, including constrained capacity for Low Dk electronic glass fabric/quartz fabric and HVLP copper foil.
High-speed CCL is upgrading towards M9, with this generational shift revolving around four core materials: electronic glass fabric, HVLP copper foil, electronic resin, and fillers. With the expected launch of Rubin in 2026, the upstream material system is undergoing a comprehensive upgrade. M9 CCL is anticipated to be paired with high-performance quartz fabric (Q-glass), HVLP4 is set to become the next mainstream standard, the proportion of hydrocarbon resin usage will significantly increase, and the use of functional fillers will rise substantially.
Low Dielectric Electronic Glass Fabric: Transition from LDK to second-generation fabric, evolution to third-generation Q-glass with M9. M9 is expected to be paired with Q-glass, marking the first year of significant demand growth. As NVIDIA's Rubin platform is anticipated to launch in 2026, M9-grade CCL will require Q-glass to meet dielectric performance specs, potentially triggering a demand surge and creating a supply deficit for high-performance electronic glass fabric. Supply shortages are forecast to persist at least until the second half of 2027, prompting capacity expansions by players including Nittobo, Honghe Technology, Taishan Fiberglass, Guangyuan New Materials, and Feilihua.
HVLP Copper Foil: HVLP4 set to become the next mainstream, high-tier foil faces tight supply. HVLP has progressed to HVLP4 and is advancing towards even higher grades like HVLP5. AI server copper foil has already advanced from HVLP3 to HVLP4, which is poised to become the mainstream PCB copper foil for GPU and ASIC AI applications by 2026. High-tier copper foil supply is tight, leading to increased processing fees and accelerated capacity expansion by major manufacturers like Mitsui Mining & Smelting and GCE. Driven by AI server demand, a significant supply gap exists for high-tier foil, with major suppliers in Mainland China, Taiwan, and Japan announcing price hikes; the supply-demand imbalance is unlikely to reverse soon, granting high-end products strong pricing power.
Electronic Resin: Proportion of hydrocarbon resin usage in M9 to increase significantly. New resin types are becoming the mainstream direction for iteration, with their value share rising substantially in M9. Hydrocarbon resin is the preferred resin material for next-generation high-speed, high-frequency CCL. In M9, the ratio of hydrocarbon resin to PPO increases to 2:1, and coupled with hydrocarbon resin's higher unit price, this drives up the value contribution of resin in the M9 material system.
Fillers: Proportion of spherical silica micro-powder in M9 to rise substantially. Silica produced via the liquid-phase method can meet the requirements for M7 and above grades, with the filling ratio of high-performance spherical silica expanding annually to over 40%. Liquid-phase silica is a critical functional filler for high-speed substrates, applicable to the performance demands of M8, M9, and beyond. As downstream end-product performance upgrades, the filling ratio of high-performance spherical silica micro-powder continues to increase.
Other PCB Upstream Materials: Focus on electronic-grade copper oxide powder and PCB-specific electronic chemicals. Electronic-grade copper oxide powder aligns with the trend of high-tier PCB upgrades. PCB-specific electronic chemicals are used in key processes like electroless copper plating and electroplating; the expansion of high-end PCB capacity drives product iteration, and supplier switching accelerates import substitution.
Regarding investment targets, it is advised to focus on: 1) Low dielectric electronic glass fabric: Honghe Technology (603256.SH), Feilihua (300395.SZ), Zhongcai Tech (002080.SZ); 2) HVLP copper foil: Tongguan Copper Foil (301217.SZ), Defu Technology (301511.SZ), Longyang Electronic (301389.SZ); 3) Electronic resin: Dongcai Technology (601208.SH), Shengquan Group (605589.SH), Hongchang Electronics (603002.SH), Tongyu New Material (301630.SZ); 4) Fillers: Lianrui New Materials (688300.SH); 5) Other PCB upstream materials: Electronic-grade copper oxide powder: Jiangnan New Materials (603255.SH); PCB-specific electronic chemicals: Tiancheng Technology (688609.SH).
Risk warnings include intensifying industry competition risks; downstream end-demand falling short of expectations; industry capacity expansion outpacing demand, leading to price decline risks.