CITIC SEC: AI volume ramp-up accelerating in the PCB/CCL industry; traditional CCL price increases taking effect, with strong earnings momentum.

CITIC SEC released a research report stating that it is bullish on the sustainability of the PCB/CCL prosperity cycle. In the short term, it will benefit from the iterative volume ramp-up in the AI sector and price increases in traditional sectors, and earnings are expected to be strong in 26H2; in the medium to long term, it is expected to benefit from the continuous iterative upgrading of PCB processes and materials, and subdirections such as ASIC, substrates, mSAP, and PTFE are all expected to achieve excess growth. Among these, the following investment mainlines are recommended for attention: 1) Leading AI PCB/CCL companies: strong short-term earnings performance + increased visibility for high medium-term earnings growth; 2) Companies that previously had a high proportion of traditional PCB business and faced earnings pressure. As mid-year price increases are transmitted, 26H2 is expected to usher in a clear earnings reversal, while the AI PCB earnings growth expectation is expected to be further strengthened; 3) Benefiting from the continued implementation of CCL price increases, earnings release is expected to exceed expectations. The main views of CITIC SEC are as follows: AI PCB demand/capacity release + traditional PCB earnings reversal, strong short-term earnings momentum In the AI PCB field, since 26H2, Rubin/Trainium 3 has begun large-scale pull-in (according to each company's earnings call, Taiwan Union Technology's 2026H2 AI CCL shipments are expected to increase by about 40% QoQ, and Accton guided Q3 revenue to grow 32% QoQ), while TPU v8 pull-in is expected to start in Q4. At the same time, PCB-side yield rates are steadily improving, and newly added capacity has been accelerating its release since 26H2. Under the resonance of production and demand, the earnings growth slope is expected to increase; in the traditional PCB field, manufacturers with material procurement capability concentrated price increases of 20%+ from June to August, and the pace of price increases has significantly accelerated. The bank judges that starting from 26Q3, the profitability of related PCB manufacturers is expected to improve substantially. In summary, the bank is bullish on the earnings growth momentum of leading PCB companies in 26Q3/4. Medium- to long-term supply-demand tightness continues, and visibility for high PCB earnings growth increases Demand continues to be revised upward. Nvidia's Rubin ultra PCB solution is gradually becoming clearer, and the bank estimates that ASP is expected to continue to increase by 50%+ compared with Rubin. The penetration rate of M9/ultra-high multilayer designs will further increase. At the same time, the PTFE + thermosetting material hybrid lamination solution is progressing smoothly and is expected to be implemented first in Switch Tray. Subsequent upgrades and introduction of orthogonal backplanes also present opportunities to exceed expectations; institutions such as Trendforce continue to revise upward their 2026 shipment forecasts for Google TPU, AWS, and others. v9/T4 PCB upgrades continue, while domestic computing power is also entering a period of accelerated volume release; the supply side remains relatively tight. The bank judges that delivery lead times for core drilling machines, exposure machines, electroplating, and other equipment continue to lengthen, and according to Prismark, new orders for core equipment have already been scheduled out to two years later, so the short-term capacity expansion bottleneck is clear. The bank believes that in the medium term, strong constraints on supply capacity will continue, and the visibility for high PCB growth will continue to increase. Traditional CCL price increase trend continues, AI CCL accelerates volume release In the traditional CCL field, the bank sees that upstream materials remain in a tight and out-of-stock state. The latest traditional CCL price increase in August has begun to be implemented in September. Currently, PCB price pass-through is smooth, and CCL manufacturers have a strong desire to raise prices. The bank judges that under continued supply-demand tightness, the subsequent traditional CCL price increase trend is expected to continue, and starting from 26Q3, related manufacturers' profits are expected to be released at an accelerated pace. In the AI CCL field, overseas computing power prosperity remains high. At the CCL level, core materials are out of stock, while capacity supply from leading overseas CCL manufacturers is tight. Domestic CCL manufacturers are ushering in opportunities for accelerated volume release. At the same time, starting in 2026, demand for domestic computing power PCB/CCL is expected to grow strongly, and leading domestic AI CCL manufacturers are expected to benefit deeply. Currently, the shipment pace of domestic AI CCL continues to exceed expectations, and the bank is bullish on domestic manufacturers accelerating profit release from AI CCL in the future. The substrate trend is accelerating, further extending the prosperity cycle of substrates and mSAP In the substrate field, global supply shortage and the price increase trend are clear. Capacity in Japan, South Korea, and China Taiwan is all locked in through long-term agreements. The equipment expansion cycle is long, and delivery lead times for core equipment have lengthened significantly. Therefore, the scarcity of domestic substrate capacity continues to increase. Domestic BT substrates are expected to accelerate profit release as capacity is released, while ABF substrate yield rates and capacity are poised for growth. In 26H1, the introduction of many core customers and products has been completed, and 26H2 is expected to usher in full-scale ramp-up. In the substrate-like field, the shortage of high-end optical modules/mSAP PCBs continues. Driven by both volume and price increases, demand for mSAP PCB is expected to surge in 2027, and with the implementation of large-board applications, demand still has room for growth. By reviewing the actual expansion progress and equipment delivery disclosed in each company's announcements or earnings calls, the bank judges that the mSAP industry will still maintain a supply-demand tight state in 2027, and related companies' earnings are expected to be released at a high slope. Risk factors Macroeconomic fluctuations and geopolitical risks, the risk of intensified competition in the PCB industry, the risk of raw material price fluctuations, overseas computing power leaders' new product volume release falling short of expectations, AI market demand growth falling short of expectations, risks from technological change and product iteration, policy regulation and data privacy risks, high customer concentration risk, and the risk that CCL/PCB price increases fall short of expectations.