Huachuang Securities: Computing power is the cornerstone to catalyze the high-end demand for electronic glass fiber cloth, and the supply-demand mismatch opens up an upward cycle.

Huachuang Securities released a research report stating that the AI computing power infrastructure is still in its early stages, and the demand for AI servers and switches remains strong, driving the rapid growth of Low Dk/Low CTE fabric demand. In addition, as top manufacturers are gradually transitioning to high-end glass fiber fabrics, the capacity of middle and low-end products is shrinking passively, which is expected to further push up the prices of glass fiber fabrics. It is recommended to focus on companies with large openings in electronic glass fiber fabric or those involved in special electronic fabric layouts. Huachuang Securities' main points are as follows: Industry bottoming out and AI wave opens a new cycle of prosperity for electronic fabrics As the core substrate for copper-clad laminate (CCL) and printed circuit boards (PCB), electronic fabric is the "invisible backbone" supporting the electronics industry. After a period of deep adjustment, the current destocking cycle in the industry is coming to an end. With the outbreak of the AI industry revolution, the construction of computing power infrastructure has driven strong downstream demand recovery, reshaping the industry's supply and demand pattern. The electronic fabric industry has hit bottom and shown a clear reversal trend, ushering in a new cycle of high prosperity. Upgrade of computing power drives material iteration, explosion of demand for Low Dk and ample domestic substitution space The evolution of computing power networks has put forward more stringent requirements for data transfer rates, directly driving the accelerated iteration of upstream materials. The acceleration of AI servers and 800G/1.6T high-speed switches has stimulated a phase of explosive demand for Low Dk (low dielectric constant) electronic fabrics. Meanwhile, faced with the surge in high-end demand, overseas traditional large manufacturers have shown a strong caution in expanding capacity, creating a historic opportunity for domestic leading manufacturers with the ability to produce high-end electronic fabrics to fully undertake overseas high-end orders, accelerating the process of localization. In addition, in the quartz fabric field, domestic manufacturers such as Hubei Feilihua Quartz Glass have deepened their involvement in the quartz fabric field, and with the scaling up of high-end products such as 1.6T switches, the demand for quartz fabric is expected to grow rapidly, and domestic manufacturers are expected to achieve a breakthrough. Advanced packaging is the trend, strategic importance of Low CTE electronic fabrics increasingly prominent Against the backdrop of the slowing of Moore's Law, advanced packaging technologies such as Chiplet have become the core path to improve chip computing power. Advanced packaging places high demands on the dimensional stability and reliability of IC carrier boards, and the application of Low CTE (low coefficient of thermal expansion) electronic fabrics becomes a key breakthrough to effectively solve the warping problems caused by thermal expansion mismatch in the packaging process. As high-end substrate materials continue to upgrade, the market importance and penetration rate of Low CTE electronic fabrics will continue to rise rapidly. The intensification of high-end capacity squeeze exacerbates structural mismatch, supply-demand "scissors difference" drives price center upward The comprehensive improvement of the industry fundamentals is not limited to the high-end market, but also transmitted downstream to the overall industry. Due to the sustained strong demand for high-end (Low Dk/Low CTE) electronic fabrics and their stronger profitability, top glass fiber manufacturers are shifting their production lines to high-end products. This phenomenon of "high-end squeezing out low-end" directly exacerbates the accelerated shrinking of the capacity of common middle and low-end electronic fabrics. In this structural mismatch, the supply-demand "scissors difference" continues to widen, not only supporting the stabilization of electronic fabric prices but also expected to drive the overall product prices upward in a new cycle, leading to a comprehensive restoration of industry profit margins. Risk warning: AI industry development falls short of expectations, industry oversupply, product iteration falls short of expectations, capacity release falls short of expectations.