Zhongtai: High power consumption of AI computing drives demand upward; rare earth supply constraints open up substitution space.

Zhongtai released a research report stating that against the backdrop of exponential growth in AI computing power consumption, ceramic substrates are upgrading from traditional packaging materials to core rigid-demand components for computing hardware. Among them, aluminum nitride (AlN) substrates, with comprehensive advantages such as excellent thermal conductivity, suitable coefficient of thermal expansion, low dielectric loss, and good mechanical properties, have become key substrate materials for heat dissipation and circuit carrying in power semiconductor devices. The global AlN substrate market shows a competitive landscape dominated by Japan with China catching up. Domestic enterprises are facing historic substitution opportunities and are accelerating the construction of a vertically integrated layout spanning "powder-substrate-metallization." Zhongtai's main views are as follows: Demand side: Four major scenarios in the AI industry chain resonate, driving both volume and price of AlN substrates upward High-speed optical modules: 800G has begun adopting AlN materials, and 1.6T makes them mandatory. Typical products include ceramic substrates and TEC cooling plates. According to estimates, total demand for AlN substrates (including ceramic substrates for TEC cooling plates) in 2026 and 2027 will be 594 million and 896 million units respectively, with 2027 growing 50.84% year-on-year; corresponding market sizes will be US$750 million and US$1.318 billion respectively, with 2027 growing 75.73% year-on-year. Subsequently, as 3.2T and higher-speed optical modules gradually achieve large-scale deployment, chip heat dissipation demand in computing scenarios will further increase, and the market space for AlN substrates is expected to continue rising. CPO co-packaged optics/NPO near-packaged optics: High-density integration of optical engines with switching/computing chips brings severe thermal crosstalk. TEC cooling plates are the core solution for precise temperature control of lasers. AlN substrates, as indispensable core base materials in the TEC sandwich structure, are expected to see demand increase in new scenarios. GPU-HBM thermal management: Increasing HBM stacking layers lead to concentrated hot spots and limited heat dissipation paths. TEC active cooling has become a key solution to address stacked hot spots. AlN substrates, as core structural materials for TECs, are expected to fully benefit from this trend. PCB/ceramic HDI hybrid lamination: Computing chip power consumption continues to break through the performance boundaries of traditional materials, and the industry currently adopts a hybrid lamination solution of HDI PCB plus locally embedded ceramic substrates. In current AI server boards, the substitution ratio of ceramic substrates for traditional PCBs has approached 30%, mainly locally applied in high-heat areas such as the GPU bottom and orthogonal backplanes. As chip power consumption rises, the substitution space will continue to expand. Supply side: Rare earth controls accelerate local integrated layout, overseas barriers in the high-end market loosen, and domestic enterprises usher in good entry opportunities The global AlN substrate market shows a competitive landscape dominated by Japan with China catching up. Japanese enterprises, leveraging advantages in powder, sintering, metallization, and other segments, dominate the high-end market. Kyocera, Maruwa, and Nippon Precision Ceramics monopolize more than 80% of the high-end DPC substrate market. Domestic manufacturers have achieved large-scale supply in the mid-to-low-end substrate field and are currently accelerating their breakthrough into the high-end market. Under rare earth controls, AlN powder has become a bottleneck segment Upstream powder is the core determinant of substrate performance, with oxygen content, impurities, and particle size directly affecting the thermal conductivity of finished products. High-end AlN powder has long been monopolized by Japanese and American enterprises. Japan's Tokuyama holds more than 70% of the global high-end powder share, and overseas players together account for 90% of the high-end powder market. Yttrium oxide is an essential rare earth additive for AlN sintering. Affected by China's export controls on medium and heavy rare earths, overseas manufacturers face raw material supply disruptions and extended delivery times, limiting capacity release. Domestic enterprises are facing historic substitution opportunities and are accelerating the construction of a vertically integrated layout spanning "powder-substrate-metallization." Key stocks The aluminum nitride industry chain covers upstream high-purity powder and midstream electronic ceramic products (including bare boards and metallized products). Currently, a small number of leading enterprises have connected the entire chain and achieved a vertically integrated layout. Around the above industry chain segments and technology evolution trends, it is recommended to focus on: 1) Powder-metallization-substrate integrated targets: Shandong Sinocera Functional Material, Chengdu Xuguang Electronics; 2) Emerging players in aluminum nitride powder: Kbc Corporation, Ltd.; 3) Leading manufacturers of DPC carrier boards, optical communication substrates, and packages: Ferrotec, Hebei Sinopack Electronic Technology; 4) Major manufacturers of ceramic hybrid PCBs: Guangdong Kingshine Electronic Technology. Risk warnings: Downstream demand falling short of expectations, technology iteration and route substitution risks, intensifying industry competition, uncertainty in rare earth export policies, distortion of third-party data and information lag, and deviation risks in data calculation results.