The rising demand for computing power drives an increase in capital expenditures in the PCB industry.

According to the Zhitong Finance APP, Soochow Securities has released a research report stating that, based on IDC data, global server sales will reach USD 95.2 billion in Q1 2025, a year-on-year increase of 134.1%. It is expected that the global server market size will reach USD 366 billion in 2025, a year-on-year increase of 44.6%. The demand in the PCB industry is driven upwards by the computing power gap. According to Prismark data, the global PCB market size is expected to be CNY 73.565 billion in 2024, a year-on-year increase of 5.8%, and is projected to grow to CNY 78.562 billion in 2025, a year-on-year increase of 6.8%, with the growth rate further increasing.

It is recommended to focus on the core drilling, exposure, and plating processes in PCB production: for drilling, attention should be paid to the equipment side with Dazhu CNC (301200.SZ) (which has layouts in both mechanical and laser drilling) as well as the consumables side with Dingtai Gaoke (301377.SZ) and China Tungsten and Hightech Materials (000657.SZ). For exposure, attention should be focused on Suzhou TZTEK Technology and Tianzhun Technology. For the plating process, Eastway Technology should be considered, and for solder paste printing, Kaige Precision Machinery is recommended.

The main points from Soochow are as follows:

The rising demand for computing power drives an increase in capital expenditures in the PCB industry.

According to IDC data, global server sales will reach USD 95.2 billion in Q1 2025, a year-on-year increase of 134.1%. It is expected that the global server market size will reach USD 366 billion in 2025, a year-on-year increase of 44.6%. The demand in the PCB industry is driven upwards by the computing power gap. According to Prismark data, the global PCB market size is expected to be CNY 73.565 billion in 2024, a year-on-year increase of 5.8%, and is projected to grow to CNY 78.562 billion in 2025, a year-on-year increase of 6.8%, with the growth rate further increasing. The demand for servers is the primary driver for the expansion of the PCB market, with the output value of the server/storage direction in the PCB downstream expected to reach CNY 10.916 billion in 2024, a year-on-year increase of 33%, accounting for approximately 15% of the total. By type, the output value of multilayer boards with 18 layers or more is expected to increase by 40.2% year-on-year in 2024, while the output value of HDI boards is projected to grow by 18.8%, both significantly exceeding the overall growth rate of the PCB industry at 5.8%.

Drilling, exposure, and testing are the core processes in PCB production, and the difficulty of processing high-end boards is increasing.

PCB production requires processes such as material preparation, drilling, electroplating, exposure, developing and etching, testing, and laminating, with drilling, exposure, and testing being the core steps in PCB production. In 2024, the value of drilling equipment accounted for approximately 20% of the entire Industry Chain, while exposure, testing, and electroplating equipment accounted for 17%, 15%, and 7%, respectively. Currently, the high growth in PCB demand is driven by the need for computing servers, resulting in increased demand for multilayer boards, HDI, and high-frequency high-speed boards. For instance, HDI boards have more layers, denser circuits, and smaller hole diameters, which impose new requirements on the drilling, exposure, and electroplating processes.

Drilling stage: The increase in layers drives the rise in the number of blind holes and buried holes, leading to a heightened demand for drilling processing. Additionally, the smaller hole diameters increase the demand for high-precision mechanical drilling and laser drilling. Exposure stage: The higher circuit density of HDI boards fosters the replacement of traditional photolithography with laser direct imaging technology. Electroplating stage: With the increase in the number of high aspect ratio through holes, blind holes, and buried holes, the requirements for electroplating processes are elevated. Currently, the domestic production rate of mechanical drilling is relatively high, while there are opportunities for domestic substitution in laser drilling and imaging processes.

The emergence of CoWoP technology further promotes the development of PCBs towards high density and high precision.

Compared to CoWoS technology, CoWoP technology eliminates the need for a packaging substrate, allowing chips to be directly packaged onto the PCB through a silicon interposer, thereby simplifying the process steps. It is expected to become the next generation of mainstream packaging technology. The CoWoP technology requires PCBs to possess high-density wiring capabilities and high precision similar to packaging substrates, with the line width decreasing from 20-30μm in the CoWoS-P process to 10μm in the CoWoP process, necessitating the use of MSAP technology to achieve fine wiring. The shift of PCBs towards high density and high precision raises higher requirements for drilling, exposure, and electroplating processes, which is expected to increase the value of the corresponding equipment.

Risk Factors

Macroeconomic risks, PCB production process progress not meeting expectations, and computing server demand falling short of expectations.