China Securities Co., Ltd.: Clothless technology is driving industry chain value to concentrate in the CCL/PP segments; attention should be paid to incremental opportunities in PCB processing and upstream materials.

China Securities Co., Ltd. released a research report stating that clothless technology is a key step in the upgrade of high-speed copper interconnect, but it does not mean removing all glass fiber cloth from the entire PCB. Rather, based on performance and reliability constraints, it implements reduced-cloth or clothless designs in specific dielectric layers. The bank expects that the NVL576 rack switch board will form four combination schemes of PTFE/hydrocarbon clothless CCL paired respectively with M9 Q-cloth PP/hydrocarbon clothless PP, with the fully clothless scheme expected to be implemented first; the Q-cloth-containing scheme serves as a backup when processing or supply reliability is insufficient. Driven by NVL576 rack shipments, clothless PCB, CCL/PP, and upstream materials are expected to ramp up starting in 2028. Clothless technology is driving industry chain value to concentrate in the CCL/PP segments; priority should be given to CCL/PP leaders, while attention should also be paid to incremental opportunities in PCB processing and upstream materials. China Securities Co., Ltd.'s main views are as follows: Clothless technology is a key step in the upgrade of high-speed copper interconnect, but it does not mean removing all glass fiber cloth from the entire PCB. Rather, based on performance and reliability constraints, it implements reduced-cloth or clothless designs in specific dielectric layers. As AI rack interconnect rates continue to increase, the difference in dielectric constant between glass fiber cloth and resin triggers the glass fiber effect, and traditional cloth-containing structures are gradually approaching bottlenecks in dielectric uniformity, loss, and signal integrity; removing localized glass fiber cloth can reduce dielectric loss and support thinner dielectrics, laser microvias, and fine lines. The material forms of clothless technology can be divided into clothless CCL, clothless PP/resin film, and RCC: clothless CCL is used for core boards, clothless PP is used for interlayer insulating bonding, and RCC/resin film is used for build-up layers outside the core board. As high-speed CCL grades upgrade to M10 and above, the industry change is not only "clothless or reduced-cloth," but also that resin, spherical silica, and other fillers together with high-grade copper foil jointly undertake dielectric, reinforcement, and processing functions, with incremental value concentrating in the CCL/PP manufacturing segment. Q-cloth is expected to remain in reduced-cloth schemes at M10 and above. Clothless applications are divided into two scenarios: computing-power PCB and optical modules. The common goal is to reduce loss and improve signal integrity, with differences in entry position and material form. Computing-power PCB adopts clothless CCL/PP, penetrating from the signal layer toward the core board skeleton, targeting high-layer-count, large-size switch boards. The bank expects that Rubin Ultra (VR300) NVL576 currently forms four combinations of PTFE/hydrocarbon clothless CCL paired respectively with M9 Q-cloth PP/hydrocarbon clothless PP. The fully clothless scheme combines high-frequency performance with material economics and is expected to be implemented first, while the Q-cloth-containing scheme serves as a backup when processing or supply reliability is insufficient. The Core layer has a greater impact on transmission performance than PP, and it is expected that the Core will be upgraded first before gradually promoting clothless PP; computing boards are subject to packaging and dimensional stability constraints, making introduction more difficult, so the Rubin Ultra (VR300) NVL576 switch board is the scenario most likely to be the first to adopt clothless/reduced-cloth schemes at scale. Optical modules adopt RCC/clothless resin film focused on build-up layers outside the core board, using thin dielectrics and mSAP to achieve microvias and fine lines; mSAP and carrier copper foil applications have already appeared in 1.6T, Zhongji Innolight's licensed patent clearly specifies the RCC+mSAP scheme, Sihui Fuji Electronics Technology's 800G RCC board has already entered mass production and its 1.6T sample has obtained end-customer certification, and Epoxy Base Electronic Material Corporation, Shenzhen Xunjiexing Technology Corp., Nuopei Core Materials, ZECHENG ELECTRONICS, and others continue to advance material certification or R&D, with industrialization visibility gradually improving. Driven by NVL576, clothless PCB, CCL/PP, and upstream materials are expected to enter a ramp-up period starting in 2028. The bank estimates that the market space for clothless PCB in 2027E/2028E/2029E is approximately RMB105.54 billion/RMB1,124.56 billion/RMB1,600 billion, respectively, and that for clothless CCL is approximately RMB12.36 billion/RMB116.26 billion/RMB210 billion, respectively; supporting PP in 2027E/2028E is RMB10.86 billion/RMB131.15 billion, respectively, with CCL and PP combined at RMB23.22 billion/RMB247.41 billion. The market space for upstream materials in 2027E/2028E is RMB5.84 billion/RMB58.33 billion, respectively, of which hydrocarbon resin in 2028 is RMB27.41 billion, accounting for about 47%, making it the upstream material with the highest value. Investment recommendation Priority should be given to CCL/PP leaders, while attention should also be paid to incremental opportunities in PCB processing and upstream materials. As high-speed copper interconnect upgrades toward reduced-cloth/clothless, CCL/PP is expected to become the core beneficiary segment. At the same time, increased PCB processing difficulty and growing demand for upstream materials such as resin and spherical silica are expected to bring new opportunities. Risk warning Risk that the next-generation platform material route and clothless penetration fall short of expectations; risk that processing yield and customer certification progress fall short of expectations; risk that downstream platform iteration and industrialization ramp-up fall short of expectations.