CITIC Securities has released a research report expressing a bullish outlook on the sustained prosperity cycle of the PCB/CCL industry. In the short term, the sector is poised to benefit from accelerated volume growth driven by AI iterations and price increases in traditional segments, with expectations of robust performance in 2H26. Over the medium to long term, the sector stands to gain from continuous process and material upgrades in PCB manufacturing, with sub-segments like ASIC, substrates, mSAP, and PTFE all projected to achieve excess growth.
The report highlights several key investment themes: 1) Leading AI PCB/CCL companies, which exhibit strong short-term earnings and improved visibility for medium-term high growth; 2) Companies with a previously high proportion of traditional PCB business that have faced earnings pressure, which are expected to see a clear earnings reversal in 2H26 as mid-year price hikes take effect, alongside strengthened expectations for AI PCB growth; 3) Companies poised for earnings releases that could exceed forecasts, benefiting from the successful implementation of sustained CCL price increases.
Short-Term Earnings Momentum: AI PCB Demand/Capacity Release and Traditional PCB Reversal
In the AI PCB segment, significant procurement of Rubin and Trainium 3 has been underway since 2H26. According to company earnings calls, Taiwan Union Technology expects its AI CCL shipments to grow by approximately 40% quarter-on-quarter in 2H26, while Accton Technology guides for 32% sequential revenue growth in Q3. TPU v8 procurement is anticipated to commence in Q4. Concurrently, PCB yields are steadily improving, and new capacity has been accelerating its release since 2H26. This confluence of demand and supply is expected to steepen the earnings growth trajectory. In the traditional PCB sector, manufacturers with material sourcing capabilities implemented concentrated price increases of over 20% between June and August, marking a significant acceleration in pricing momentum. The firm estimates that profitability for these PCB makers could improve substantially starting from Q3 2026, leading to a positive outlook on the earnings growth momentum of top-tier PCB companies in Q3 and Q4 of this year.
Medium-Term Supply-Demand Tightness Persists, Enhancing Visibility of High PCB Earnings Growth
Demand forecasts continue to be revised upward. Nvidia's Rubin Ultra PCB specifications are becoming clearer, with the firm calculating that the average selling price could increase by over 50% compared to Rubin. Penetration rates for M9 and ultra-high-layer designs are expected to rise further. Additionally, progress on hybrid lamination solutions using PTFE and thermoset materials is smooth, with potential first implementation in Switch Tray applications. There are also opportunities for surprises in the upgrade and adoption of orthogonal backplanes. Institutions like TrendForce are consistently raising shipment forecasts for Google TPU and AWS for 2026, with ongoing PCB upgrades for v9/T4 platforms. Domestic computing power is also entering a phase of accelerated volume growth. On the supply side, constraints remain stringent. The firm notes that lead times for core equipment such as drilling machines, exposure tools, and plating systems continue to lengthen, and according to Prismark, new orders for core equipment are already scheduled out two years. This clearly establishes short-term expansion bottlenecks. The firm believes that tight supply constraints will persist over the medium term, continuously enhancing the visibility of high PCB earnings growth.
Sustained Traditional CCL Price Hikes and Accelerated AI CCL Volume Growth
In the traditional CCL segment, upstream raw materials remain in a tight supply and shortage status. The latest price increases announced in August for traditional CCL have begun implementation in September. With smooth downstream pass-through of PCB price increases and strong pricing power among CCL manufacturers, the firm predicts that the trend of traditional CCL price hikes will continue under persistent supply-demand tightness. Profit acceleration for related manufacturers is expected from Q3 2026 onwards. In the AI CCL arena, overseas computing power demand remains robust, leading to shortages of core materials. Additionally, given the tight capacity supply from overseas leading CCL producers, domestic CCL manufacturers are presented with an opportunity for accelerated volume growth. Starting in 2026, demand for domestic computing power PCB/CCL is expected to surge, significantly benefiting leading domestic AI CCL companies. With current shipment pacing for domestic AI CCL continually exceeding expectations, the firm is optimistic about the accelerated profit release from domestic manufacturers in the AI CCL space moving forward.
Accelerating Substrate Trend Extends the Prosperity Cycle for Substrates and mSAP
In the substrate market, global supply shortages and price increase trends are clear. Capacity in Japan, South Korea, and Taiwan is largely committed through long-term agreements. Equipment expansion lead times are long, with core equipment delivery times significantly extended, thereby increasing the scarcity value of domestic substrate capacity. Domestic BT substrates are expected to accelerate profit release as capacity ramps up. Meanwhile, ABF substrates are poised for a full-scale ramp-up in 2H26, having completed the adoption process with numerous core customers and products in the first half of the year. In the similar-substrate field, the shortage of high-end optical module and mSAP PCBs persists. Driven by both volume and price increases, mSAP PCB demand is projected to surge in 2027. With the implementation of larger panel applications, there remains further upside for demand. Based on a review of expansion progress and equipment delivery schedules disclosed in company announcements or earnings calls, the firm estimates that the mSAP industry will maintain a tight supply-demand balance through 2027, positioning related companies for a steep earnings growth trajectory.
Risk Factors
Risks include macroeconomic fluctuations and geopolitical risks, intensified competition in the PCB industry, volatility in raw material prices, slower-than-expected volume growth for overseas computing power leaders, AI market demand growth falling short of expectations, risks related to technological changes and product iterations, policy regulation and data privacy risks, high customer concentration, and the risk that CCL/PCB price increases may fail to meet expectations.