China Securities Co., Ltd.: T cloth is an advanced packaging physical foundation computing power upgrade driving inflation acceleration.

China Securities Co., Ltd. published a research report stating that AI computing power is driving the iteration and upgrade of IC carrier boards, and T cloth is becoming one of the fastest-growing essential materials in advanced packaging. The company estimates that the global demand for T cloth will reach 96.314, 204.16, 402.658, and 695.956 million meters from 2025 to 2028. Currently, Nittobo holds a monopoly position (85% market share), and the reality that effective supply will only be released in 2027 provides a window of opportunity for domestic enterprises to enter the high-end T cloth market for about a year. The company is optimistic about the opportunity for domestic surpassing, and major electronic cloth manufacturers are also expected to gain a share with their research and development capabilities, customer expansion, and capital expenditure speed. The main points of China Securities Co., Ltd. are as follows: T cloth: an essential material in advanced packaging T cloth is used for IC carrier boards to ensure the flatness and reliability of the structure and solder joints of the carrier board in large size and high computing environments by matching the thermal expansion coefficient of silicon chips. It is a "magic wand" in advanced packaging to resist "thermal mismatch" stress. About 70% of T cloth demand is used for ABF carrier boards for FCBGA, and 30% is used for BT carrier boards for mobile phones, FCCSP, and other applications. AI computing power is driving the iteration and upgrade of IC carrier boards, making T cloth one of the fastest-growing essential materials in advanced packaging. Non-linear growth in T cloth demand due to the resonance upgrade of cloud AI + edge AI Cloud AI: iteration of computing chips increase in packaging area simultaneous increase in layers and sizes of ABF carrier boards complexity of core layer structure exponential increase in T cloth consumption. Edge AI: mass production of edge AI increase in penetration rate of main board mSAP technology/chip packaging size increase in penetration rate of T cloth on main boards/ simultaneous increase in layers and sizes of ABF carrier boards complexity of core layer structure rapid increase in T cloth consumption. The company estimates that the global total demand for T cloth from 2025 to 2028 will be 963.14, 2041.6, 4026.58, and 6959.56 million meters, with year-over-year increases of +111.97%, +97.23%, and +72.84% from 2026 to 2028, respectively. There is a significant gap between supply and demand for T cloth, and the company is optimistic about the opportunity for domestic surpassing The demand for T cloth is growing non-linearly, and the supply growth is unable to keep up with the demand growth, resulting in a clear basis for price increases. The Taiwan Industrial Technology Research Institute estimates that the supply-demand gap for T cloth will expand from 14 points in 2025 to 18 points in 2026, and then decrease to 8 points in 2027. Taiwan Fubon Investment Consulting estimates that the global T cloth market will still be in a state of undersupply by 2027, with a gap of up to 27%. Currently, Nittobo holds a monopoly position (85% market share), and the reality that effective supply will only be released in 2027 provides a window of opportunity for domestic enterprises to enter the high-end T cloth market for about a year. The company is optimistic about the opportunity for domestic surpassing: 1) Since 2025, Nittobo has continuously raised prices but has been unable to fully suppress the high-demand increase, creating a clear space for domestic enterprises to upgrade their products. 2) Domestic enterprises represented by Grace Fabric Technology have responded rapidly to customer needs, actively cooperated in expanding production, and made intensive capital expenditures. The performance indicators of Grace Fabric Technology's T cloth have reached 2.9-3ppm/C, close to Nittobo's product level, and are expected to break Nittobo's monopoly. The company's customer progress is positive, and intensive capital expenditures aimed at rapidly expanding T cloth production capacity have the potential to surpass Nittobo in the T cloth market. In addition, major electronic cloth manufacturers such as Sinoma Science & Technology, Chongqing Polycomp International Corporation, and China Jushi Co., Ltd also have the potential to gain a share with their research and development capabilities, customer expansion, and capital expenditure speed. Risk warning: risks of downstream demand falling short of expectations; risks of disorderly expansion of production capacity; risks of slower-than-expected expansion of terminal customer base; risks of delayed information update.