GF Securities: Textile machinery and electronic yarn supply dual constraints, this round of electronic cloth price increase sustainability strong

GF SEC released a research report stating that the electronic cloth industry currently has almost zero inventory, leading to a supply-demand gap, with potential for significant price increases in the future. Ordinary electronic cloth continues to be in high demand, AI electronic cloth prices and quantities are rising together, and the profit trend of the glass fiber industry is clear towards the years 2026-2028. This round of supply is highly constrained, with AI demand injecting strong growth momentum, and corporate profit elasticity expected to exceed expectations. GF SEC's main points are as follows: Since 25Q4, the shortage of ordinary electronic cloth has worsened and prices have accelerated, with E-glass entering a period of price increases. Due to AI demand and shortages of weaving machines, the inventory in the electronic cloth industry has rapidly declined since 25Q4, with prices continuing to rise. According to Sublime China Information, from October to December 2025 and from January to July 2026, ordinary electronic cloth prices have increased each month, with the 7628 thick cloth increasing by 0.2/0.2/0.2/0.5/0.5/0.5/0.5/0.7/1.2 yuan per meter, with even greater increases for thin cloth. Currently, the industry has almost zero inventory and there is a supply-demand gap, with significant room for future price increases. It is expected that there will be a supply-demand gap in ordinary electronic cloth from 2026-2027. According to CCLA, in 2024, the demand for electronic glass fiber cloth in China's copper clad laminate industry was about 3.5 billion meters per year, and it is expected that the demand for electronic glass fiber cloth will increase to 3.7 billion meters in 2025. The industry predicts that in 2026, under pessimistic/neutral/optimistic scenarios, the demand for ordinary electronic cloth will be 3.707/3.781/3.855 billion meters, with supply-demand gaps of 0.39/1.13/1.87 billion meters, indicating a supply-demand gap for ordinary electronic cloth in 2026 under neutral expectations, and the gap will further widen in 2027. The main reasons are supply-side factors: AI and thin cloth occupying weaving machines, limited new production capacity for electronic yarn; demand-side factors are also important: although consumer electronics demand is weak, overall demand for E-glass is better than expected, AI driving demand for E-glass, growth in demand for new energy vehicles, charging stations, and energy storage, and optimization of thick-thin structures. The supply has strong constraints, and the constraints on weaving machines and electronic yarn will continue to exist from 2026-2028, while the sustained growth in AI-driven demand will lead to a longer period of high demand for electronic yarn/cloth in this round. (1) The shortage of weaving machines on the supply side is a key constraint, with a shortage of weaving machines in 2026, and the shortage is expected to expand in 2027. According to calculations, under pessimistic/neutral/optimistic demand assumptions, in 2026, the total additional demand for AI electronic cloth and ordinary electronic cloth weaving machines is expected to be 2184/2608/3032 units. There will be a supply-demand gap in 2026-2027, with the supply-demand gap for electronic cloth weaving machines in 2026/2027 being 608/1050 units under neutral conditions. The shortage of weaving machines is mainly due to the rapid growth in AI demand, as well as the increasing proportion of E-glass thin cloth, with the more profitable AI electronic cloth and thin cloth occupying weaving machines, AI electronic cloth efficiency < E-glass thin cloth < E-glass thick cloth, with demand and profitability of AI electronic cloth better than thin cloth better than thick cloth, and industry shortages spreading from AI electronic cloth to thin cloth and thick cloth. (2) In addition to the shortage of weaving machines, the limited new production capacity for electronic yarn has made electronic yarn relatively scarce, with electronic yarn expected to face supply shortages from 2026-2028. According to Sublime China Information and China Jushi Co., Ltd's production line project construction announcement, it is expected that from 2026-2028, the net increase in actual production capacity of electronic yarn will have asset characteristics, and the industry will shift its focus to AI electronic cloth, with future new supply of ordinary electronic yarn expected to remain low, extending the duration of this round of high demand cycle. Risk warning Lower-than-expected demand for electronic cloth, large-scale expansion of electronic yarn and electronic cloth weaving machine capacity, and risks such as rising raw material costs.