The demand for mobile phones causes PCB production capacity to be tight and the automotive electronics market adds fuel to the fire. Institutions are optimistic about these two types of companies.

SMM: according to media reports, PCB factory third quarter HDI (high-density link board) production capacity continued to the fourth quarter, orders have been scheduled for the Spring Festival next year or so.

The tight production capacity of HDI is mainly due to the number of orders placed on HDI boards by manufacturers such as OPPO, Vivo and Xiaomi, which is significantly higher than that in the same period last year. After the launch of Apple's annual flagship mobile phone iPhone12 series, Apple has achieved success in sales, resulting in a rolling forecast order for the first quarter of the Taiwan zero-component chain. At the same time, there is speculation that Huawei may be interested in restarting the production line of 4G phones.

At present, the HDI production capacity of the PCB factory Jianding, Huatong and Baicheng are all booked by customers, and the high capacity utilization rate will continue until the Spring Festival in February next year, while the crystal technology production capacity of the frequency component factory is also tight, and the monthly shipments in the fourth quarter will be maintained at the historical high-end level of more than 1 billion yuan. Due to the current limited production capacity and strong market pursuit, next year's mainland factories will continue to produce the same as this year without a holiday.

Signs of a recovery in PCB demand have long been evident. Open source securities released a research report on November 24th, saying that the global PCB market presents the attribute of "cycle + growth", and the electronic trend of downstream terminals promotes the long-term space of PCB. Looking to the future, manufacturers are expected to gradually turn to "One-avary" one-stop electronic services and achieve the expansion of business revenue. In 2019, the largest factory in the PCB industry accounts for only 6.3% of the global market share, and there is still room for concentration.

And the upstream copper clad laminate price rise further established the PCB plate recovery signal. Data show that copper clad laminate manufacturers have raised prices and digested the rising pressure of raw material prices, and the time of price increase is 1-2 months earlier than in previous years. The 2020Q3 PCB industry begins to pick up, and the recovery in downstream demand will support the sustainability of the rise in the price of copper clad laminate.

It is worth noting that in addition to mobile phones, automotive PCB is also expected to usher in a new wave of investment opportunities.

The above-mentioned institutions further said that the recovery of automobile sales, the resonance of automotive electronization and the penetration trend of new energy vehicles will lead to the rapid expansion of the automotive PCB market, and it is estimated that the global automotive PCB market space will reach 505.5pm 591.8 / 67.39 billion yuan respectively from 2020 to 2022. Taiwan-funded enterprises account for 29% of the automotive plate supply, while domestic manufacturers account for only 10%. Domestic manufacturers will accelerate the matching of automotive PCB products.

Specifically, five major automotive electronic systems, such as power engine control system, body control safety system, on-board communication system, interior installation system and lighting system, promote the upgrade of PCB system. At present, the automobile PCB mainly consists of 4-6 floors, accounting for 51%. In-car entertainment, new energy vehicles, and millimeter wave radar will increase the proportion of HDI, thick copper plate and high-frequency plate.

Open source securities said that in terms of manufacturer competitiveness, the current pace of capital expenditure of A-share listed PCB companies maintained a medium-high pace, with capital expenditure of listed PCB companies rising 25 per cent year-on-year in the first three quarters of 2020. The late-development advantage of advanced production capacity will be accelerated, and the focus of competition between manufacturers will turn to the ability of fine cost management. Manufacturers who are optimistic about expanding the advantages of large-scale production and improving the ability of cost control include: Sheng Hong Technology, Shengyi Technology, South Asia New Materials, Shennan Circuit.

From the downstream demand recovery dimension, optimistic about the improvement of HDI and automotive PCB segments, the beneficiaries are Zhongjing Electronics, Jingwang Electronics and World Games Circuits.