PCB Tech - PCB industry: innovation catalyzed frequently

1. The PCB industry is booming, which is good for the leaders

In 2016, the global PCB industry (printed circuit board) output value fell by 2.02%, reaching 54.2 billion U.S. dollars, of which the output value of communications, 3C, and automotive accounted for 27.3%, 13.55%, and 9.09%, respectively. Benefiting from the smart phone innovation cycle initiated by the iPhone X, the rapid growth of automotive electronics promoted by Tesla, rising costs and the clearing of outdated production capacity on the supply side brought about by environmental restrictions on production, during the period from February to October 2017, The BB value of the North American PCB industry was greater than 1 for 9 consecutive months. During the period from January to September 2017, the average PCB price in Japan increased by 10.58%. It can be seen that the industry's prosperity continues to rise, and Prismark predicts that the global PCB output value in 2017 is expected to increase by more than 2% year-on-year. In this macro environment, we expect that the transfer of industrial centers and downstream application innovation will push the scale of the local PCB industry to a higher level, and the concentration of large factories will further increase.

Second, the mainland has a wide alternative space for single and double panels

According to WECC data, China's single and double panel output value accounted for 36.51% of the world in 2016, while the global share of multilayer boards and HDI both exceeded 60%. This phenomenon is mainly caused by the local stock production capacity of Japan, South Korea and Taiwan. Taking into account the maturity of the single and double panel industry, referring to the development history of LCD and LED in the past two years, we believe that local PCB companies are expected to directly benefit from the single and double panel industry. The center shifted to the mainland. In order to achieve rapid expansion and seize share, more and more PCB industry chain companies are choosing to rely on the power of capital. There are 7 PCB-related companies newly listed in only 17 years, according to the prospectus data of Shennan Circuits (002916, diagnosis stock), Seven of the top ten domestic PCB manufacturers that have been on the market in 2016 have clear plans for large-scale production expansion.

3. Environmental protection and production restrictions have led to an increase in industry concentration

The "Environmental Protection Tax Law of the People's Republic of China" was officially implemented on January 1, 2018. Recently, Kunshan and Zhuhai have issued production restriction notices due to environmental issues, involving many large PCB industry chain manufacturers. This series of changes has fully released environmental protection supervision Signs of continued tightening. Under the influence of the previous environmental supervision, a large-scale and large-scale centralized price adjustment of PCB raw materials, inks and solvents has taken place in August 2017. We believe that raw material shortages and rising prices make small and medium PCB industry companies face challenges in the stability of the capital chain and supply chain; at the same time, the tightening of environmental protection supervision will cause some small and medium PCB companies to have disadvantages in production technology and investment in environmental protection facilities. The shortcomings of PCB manufacturers have been exposed, which will increase production costs and even directly face the risk of closing factories. Therefore, the concentration of PCB manufacturers is expected to further increase, and large manufacturers will benefit significantly.

Fourth, innovation and catalysis frequently occur

Communication is the largest downstream application of PCB. In 2016, single and double panels and multi-layer boards accounted for 84.5% of communication PCBs. The upcoming 5G construction is expected to open a new round of high growth for high-frequency and high-speed CCL and communication PCBs. PCBs are widely used in automobiles. In the fourth quarter of 2016, single-sided, double-sided and multi-layer boards accounted for about 73% of automotive PCBs. We expect that in 2020, automotive electronics will increase global automotive PCB demand by about US$950 million, New energy vehicle VCU, MCU, BMS will increase the domestic demand for automotive PCB by about 430 million US dollars. In addition, Apple’s new models of 17 years are equipped with FPC wireless charging as standard, iPhoneX adopts COF full screen and further improves the integration through SLP, which makes the use of iPhone stand-alone FPC increased again. Therefore, the FPC industry will usher in the follow-up innovation of domestic mobile phones. New opportunities.