Image source @ Visual China
Text | damask
Yesterday (February 9) after hours, pcB leader Shennan Circuit announced the results of the fixed increase. The company raised more than 2.5 billion yuan in this time; the issue price was only 4% discounted from the closing price of the day.
It is particularly noteworthy that the list of targets of this offering can be called "luxury tiantuan": in addition to the second phase of the National Integrated Circuit Fund (commonly known as the big fund) as the first subscription of 300 million yuan, foreign capital such as Xiaomo, UBS AG, BNP, and a number of fund companies such as Caitong, CEIBS, and Nord have also appeared.
And this is also the first order of the Year of the National Big Fund Tiger.
In fact, at the end of April 2021, the author discussed the opportunities of PCBs (printed circuit boards) and copper clad laminates, and most of the PCB companies now have better growth.
So based on the current and long-term, what are the new trends, new highlights and new developments in the PCB industry?
We know that PCB, upper bearing electronic components, the lower electronic terminal, so this article first starts from the downstream demand of PCB, focusing on the core driving force of automotive electronics, and then combined with the upstream raw material price changes, the short-term profitability level and medium- and long-term prosperity of the PCB industry are judged.
Secondly, as the mother of electronic products, PCB reflects the technical level of a country or region's IT industry to a considerable extent, and Chinese mainland has become the focus of the global PCB industry, so we also need to discuss the transfer of global industries and the blessing of domestic substitution.
In addition, FPC, that is, flexible printed circuit board (Flexible Printed Circuit), as an important branch of PCB, has superior performance, and the industrial scale rises faster than the overall PCB industry, which is also worthy of further exploration.
Finally, we briefly introduce some of the leading companies in the industry, high-quality PCB manufacturers have core competitive advantages and long-term high growth under the multi-factor bonus, and interested friends can track themselves.
The following is the table of contents and the main text of this article. It is for informational purposes only and does not constitute any trading advice.
(1) The demand side blossoms at many points, and new energy vehicles are growing vigorously
(2) There are many strong customers downstream, and the PCB is in a weak position in the industrial chain
(3) Raw materials to the top and cost pass-on, PCB manufacturers profit repair
(4) Industrial transfer and domestic substitution
(5) The most prominent subdivision: FPC
(6) Focus on enterprises
01 The demand side blossoms at many points, and new energy vehicles grow vigorously
In 2021, under the overall situation of economic recovery, the PCB demand side will blossom more. For example, PC increased by 15% year-on-year, smart phones also bottomed out, domestic sales of 314 million units, an increase of 3% year-on-year, ending three consecutive years of year-on-year decline, new energy vehicles are nearly 160% year-on-year growth, strongly driving the PCB industry to increase by more than 20% year-on-year, the largest increase in the past 11 years.
The downstream demand for PCB is extremely extensive, but it is mainly in three aspects, communication electronics, automotive electronics, and consumer electronics, accounting for about two-thirds of the share, which directly determines the prosperity of the PCB industry.
In communication electronics, the first 5G base station of the new infrastructure is of course the most representative, because the frequency of 5G communication is higher, the performance demand for PCB is greater, and the unit price of PCB for 5G base stations is higher than that of 4G base stations, maintaining large-scale demand.
According to the latest data from the Ministry of Industry and Information Technology this month, in 2021, the number of new 5G base stations added to the mainland reached 654,000, and a total of 1.425 million 5G base stations were completed and opened. The 5G network has covered all prefecture-level urban areas on the mainland, more than 98% of the county towns and urban areas and 80% of the townships and towns, and the number of 5G mobile phone terminal connections has reached 518 million households, which is equivalent to an average of 540,000 new mobile phones added to the network every day since the date of 5G license issuance.
According to the "14th Five-Year Plan" National Informatization Plan, 5G user penetration is expected to reach 56% in 2025, and it seems that the number of users is likely to exceed expectations, and Prismark expects the output value of communication PCBs to reach 27.84 billion US dollars by 2024. In 2022, the number of annual construction of 5G base stations planned by operators will also peak, possibly exceeding 1 million.
In terms of consumer electronics, under the prospect of new growth of wearable devices and AR/VR devices, the overall consumer electronics PCB market is still stable and improving.
In our Column in June 2021, we have already judged that VR, one of the foundations of the metaverse, will explode beyond expectations, and it is true that in recent months it has been extremely hot in the stock market, and the metacosm has also increased the PCB growth of AR/VR devices.
Because AR and VR devices require high accuracy and reaction speed, and need to integrate a large number of electronic components in a limited space, they require higher performance PCB boards, such as high-end HDI boards and FPC. According to HIS calculation of meta Oculus Quest 2, the cost of a single-device PCB is about $30, accounting for about 9% of the equipment cost, which can effectively benefit the new consumer demand brought by the metacosm.
Finally, under the ultra-high-speed penetration of new energy vehicles into traditional fuel vehicles, automotive electronics, one of the three downstream, has become the most core driving force in the demand side to drive the PCB market prosperity.
In the automotive industry, the four major trends of electrification, intelligence, lightweighting and networking contribute to the incremental source of automotive electronic PCBs, which are mainly manifested in the rapid penetration of new energy vehicles and the increase in the value of single-vehicle PCBs.
First, the mainland predicts the growth rate of new energy vehicles at 40% in the next five years, but in fact, market sales far exceed this plan. According to the news of the Federation of Automobile Manufacturers, in the whole year of 2021, the mainland new energy vehicle retail sales of 2.989 million units, the penetration rate reached 14.8%, more than double the penetration rate of 5.8% in 2020, in 2022, sales are expected to exceed 6 million, the automobile market continues to accelerate the transformation to new energy.
Second, the PCB board of traditional fuel vehicles is mostly ordinary multi-layer board and double-sided board, and the amount of bicycles is 0.6-1 square meters, so the value of PCB is low, about 400-600 yuan / car. In the new energy vehicles, ADAS, electric drive system, electronic control system and power battery module need to use the number of PCBs are much higher than the traditional car, car navigation systems, radar, cameras, displays, airbags, relays and major control components have increased the demand for PCB, PCB use area increased to 3-5 square meters, and there are higher requirements for performance, the value of single PCB more than 2000 yuan.
For example, in tesla model 3, the PCB value of ADAS sensors alone is between 536-1364 yuan, which is significantly higher than that of traditional fuel vehicles.
Under the superposition of the above two factors, according to the calculation of Yiou, EVTank, Yiwei Think Tank, Prismark, CPCA, Tianfeng Securities and other institutions, the market space CAGR of the new energy vehicle PCB board in 2020-2025 is 51%, which is growing rapidly, which also drives the overall automotive electronics PCB output value of 10% of the expansion, in the medium and long term, the automotive PCB market size is likely to exceed 100 billion.
02 Downstream many strong customers, PCB in the weak position of the industrial chain
China's PCB industry pattern is very poor, the top ten market share is only 50.71%, the competition can be described as very sufficient, which leads to the industry companies in the industrial chain bargaining power is weak, profitability and risk transfer ability decline.
Although there are many downstream of the PCB industry, the main customers in the three aspects of communication electronics, consumer electronics, and automotive electronics have a large-scale monopoly nature, such as Huawei, ZTE, Apple, Tesla, BOE, etc. This industry pattern is a strong giant of The moon is rare, so the power of PCB manufacturers is much lower than that of the downstream, and some companies in the industry are even more like the service industry than the manufacturing industry.
Downstream customers are more representative, such as the panel leader BOE.
The panel industry has experienced the trend of "American origin - Japanese development - South Korea surpassing - taiwan rise - mainland power" in recent years, the current South Korea withdrawal, Taiwan stagnation period, mainland production capacity has accounted for about two-thirds of the world, BOE and TCL Huaxing optoelectronics have become a global duopoly. And the industry has formed excess capital barriers, supply chain barriers, technical barriers, etc., to prevent new players from entering.
Therefore, in the case of this supply contraction, leading concentration, and stable expansion of demand, the panel industry is more inclined to growth and weaken the cycle than before, and the right to speak is gradually rising, especially in the situation of comparing the upstream PCB scuffle.
In the panel technology path, Mini LED has become the mainstream solution of the backlight market, large-size screen and high-end field due to the advantages of excellent display effect, uniform brightness, long life and low power consumption, and is expected to move forward on the mobile phone side. According to Arizton's forecast, from 2021 to 2024, the global Mini LED market size is expected to increase from $150 million to $2.32 billion, with a compound annual growth rate of 149%, which is a new growth curve that cannot be ignored in the panel industry.
At the end of 2021, in the speech of LIU Xiaodong, president of BOE, he mentioned the glass-based process, which has a very high accuracy, and its wiring accuracy is 10 times that of ordinary PCB-based products, which can achieve finer pixel spacing and greatly improve the fine level of the picture.
And the material and process characteristics of the glass substrate determine its high stability, long life, heat resistance, moisture resistance, etc., compared with the traditional PCB substrate to achieve leapfrog improvement. At present, the glass substrate has been relatively mature and small-scale mass production, and will be gradually increased in the future and applied to more use scenarios, which is also a potential risk to the PCB industry.
In addition to the downstream, we know that the upstream of the PCB is dominated by copper clad laminates, and the concentration of copper clad laminates is high, and the total market share of the top ten manufacturers in the world is about 75%, so PCBs are susceptible to upstream and downstream squeeze, and paying attention to changes in upstream raw material prices has naturally become one of the priorities.
03 Raw materials to the top and cost pass-through, PCB manufacturers profit repair
Although the status of the industrial chain is not high, driven by the demand side, the revenue growth rate of A-share PCB companies in 21 years has reached an average of 20%-30%. Judging from the orders of major PCB listed companies, the year-on-year growth rate of the industry in 22 years is difficult to maintain, and the operating income will be under pressure. But there is room for profit to be repaired, and the logic is that the cost side is better.
Copper clad laminates account for 30%-40% of PCB costs and are the most important raw materials, while the main raw materials for copper clad laminates are copper foil, epoxy resin and glass fiber cloth, and the prices of these three raw materials have risen sharply from the second quarter of 2020.
Copper foil is mainly due to the epidemic caused by the misalignment of supply and demand, strong demand and insufficient supply, the price climbed rapidly, LME copper spot settlement price reached a maximum of 10724.50 US dollars / ton; the supply side of epoxy resin because of the cold wave in the United States and Europe, chemical plant production cuts, demand side benefits from the wind power industry onshore wind turbines and offshore wind turbine subsidies have been cancelled and caused by the period of rush installation, price increase; glass fiber cloth as a high-energy consumption industry, the industry pattern is also more concentrated, production capacity expansion is slower, so in the downstream construction, wind turbines, Under the steady rise in demand from downstream such as transportation, it has entered high prices.
The high price of the three major raw materials has made the cost of copper clad laminate high for 21 years, and the PCB has also been eroded. But we know that commodities have generally reached the high level in recent years, the marginal effect of supporting the continued upward logic has been very weak, and under the influence of factors such as the easing of the epidemic and policy supervision, the prices of copper foil, epoxy resin, and glass fiber cloth are stable or loose, and the cost of copper clad laminates and PCB companies has passed the most difficult period, and it is only a matter of time before profitability picks up.
In addition, during the 21-year period of high raw material prices, the profit situation of copper clad laminate companies is far better than that of PCB companies, because of the different patterns of their respective industries, copper clad laminate companies can smoothly transfer costs to the downstream and increase the size, while pcB bargaining power is weak, the ability to pass on costs is naturally slow, and profits are squeezed.
But at the same time, we must also see that there is oppression and resistance, weak ability does not mean that it has been angry, from the third quarter of 21, PCB manufacturers have accelerated the pace of negotiating price increases with customers, and gradually sent the pressure to the downstream. Therefore, in the past two years, we are expected to see the repair of PCB corporate profits.
04 Industrial transfer and domestic substitution
Since the start of the PCB industry in the 1980s, in the first two decades, driven by home appliances, electronic information and other industries, the European, American and Japanese PCB companies that entered the market early in the morning have achieved an average annual profit growth rate of 15.9% and 7.1%, respectively.
In the first decade after entering the new century, due to the huge number of supply-side entrants, the number of enterprises increased rapidly, which intensified the degree of competition in the PCB industry, the profits of manufacturers were compressed, and the production capacity of Europe, The United States and Japan gradually shifted to Asian countries and regions with labor cost advantages and industrial chain standards such as South Korea, Taiwan, Chinese mainland, etc. During this period, the CAGR of the PCB industry was only 2.1%.
In the past decade, under the popularity of smart phones, the rise of wearable electronics, the construction of communication facilities, automotive electronics and other industries, the demand for pcB industry is still developing well and turning to high added value, the industry is further integrated, and Chinese mainland has also taken over most of the new production capacity with manufacturing dividends and engineer dividends, especially low-end production capacity.
Therefore, the PCB industry has undergone several processes of rise , vigorous development — intensified competition — and industry reshuffle, and industrial regions have also shifted from developed countries such as Europe, the United States and Japan to developing countries in Asia, and the mainland is the central region that undertakes this industrial transfer. In the past two decades, the output value of Chinese mainland PCBs has been rising, and the market share has risen from less than 10% to more than 50%, taking half of the country.
However, we should also soberly realize that most of the current PCB products in the mainland are products with low technical content, and the gap between Europe, the United States, Japan and South Korea still exists, so in the future, we need to strive for more high-end production capacity transfer and mining, and domestic PCB companies still have great potential to achieve more outstanding achievements.
On the other hand, the scale of the mainland's electronic information manufacturing industry has been ranked first in the world, in the hundred years of unprecedented changes in the coming, Sino-US friction intensified, for the security of the mainland electronic supply chain, PCB this key role in the industry must be in their own hands, in the requirements of domestic substitution also promoted the overall progress of the mainland PCB.
Moreover, in the most critical downstream automotive electronics field of PCB, the mainland new energy vehicle output is the first in the world, and it is in a leading position in terms of technology, industrial chain, supporting infrastructure, etc., which is also very conducive to local PCB suppliers to seize this opportunity, using policy advantages, geographical advantages, cost advantages, supply stability, service advantages, etc., and enter the fast lane with mainland new energy vehicles.
05 The most prominent segment: FPC
FPC (flexible circuit board) is a polyimide or polyester film and other bypass substrate made of printed circuit board, compared with the traditional PCB hard board, with high wiring density, small size, thin and light, assembly consistency, foldable bending, three-dimensional assembly and other advantages, in the product design and reliability design has obvious prominence, in line with the downstream electronics industry intelligent, portable, lightweight trend, so has become the fastest growing category in the PCB industry in recent years.
From 2009 to 2019, the compound growth rate of global FPC output value was 6%, higher than the overall industry growth rate of PCB of 4.1%, and it has now accounted for about 20% of PCB output value.
FPC is mainly used in display/touch modules, fingerprint recognition modules, camera modules, terminal applications concentrated in smart phones, automotive electronics, consumer electronics, VR/AR and other fields.
Smart phones are the biggest use of FPC, which has penetrated into antennas, buttons, batteries, LCD panels, camera modules, fingerprint modules under the screen, wireless charging modules and other links, and the number has gradually increased. Taking the FPC in the iPhone as an example, the early iPhone 4 only had 10, and by the time the iPhone XS had grown to 24.
In the field of automotive electronics, with the development of automotive electrification and intelligence, the use of FPCs in the automotive field continues to increase, and the application scope covers related scenarios such as lights, display modules, power control systems, sensors, and advanced auxiliary systems.
In fact, the most core difference between FPC and PCB application in new energy vehicles is in the power battery wiring harness, as early as 2018, NINGDE times and BYD have been batch application FPC in the pack link. Due to cost pressure and energy density requirements, FPC has the advantages of high integration, automated assembly, large-scale cost reduction, high efficiency, safety and reliability, and lightweight, so it is more important to replace the small revolution of traditional copper wire harnesses.
Usually a new energy vehicle battery module use between 6-16, each module uses 1-2 FPC, it is expected that by 2025 and 2030, the domestic new energy vehicles using FPC power battery solutions will reach 8 million-9 million and 18-20 million.
In the field of VR/AR, mainly because of the need for lightweight and heat dissipation, FPC usage has increased with the trend, referring to smart phones, it is expected that the amount of single-machine FPC in AR/VR equipment may reach more than 10, and some high-end models may exceed 20.
Mainland FPC companies have also gradually grasped the right to speak internationally, of which Pengding Holdings ranks in the first echelon, mainly supplying Apple and Huawei, and other manufacturers such as Hongxin Electronics, Jingwang Electronics, And Chongda Technology are also undertaking foreign production capacity and continuing to grow bigger and stronger.
06 Focus on enterprises
1. Pengding Holdings
The company's world's largest PCB production enterprises, for the world's few with all kinds of PCB product design, research and development, manufacturing and sales capabilities of the professional large manufacturers, the main product range covers FPC, HDI, RPCB, Module, SLP, COF, Rigid Flex and other types of products, accounting for 23% of the FPC subdivision industry, with a strong strength to provide a full range of PCB products and services for different customers.
Downstream includes communication boards, consumer electronics and computer boards, etc., which are widely used in downstream products such as mobile phones, network equipment, tablet computers, wearable devices, notebook computers, servers/storage devices and automotive electronics, of which Apple is deeply bound, accounting for 6-70% of revenue. In terms of production capacity, Pengding has multiple manufacturing bases or expansion projects such as Huai'an, Kaohsiung, Qinhuangdao and Shenzhen to provide momentum for future growth.
2. Shennan Circuit
Shennan Circuit is the world's top ten PCB manufacturers, ranked 8th in the global PCB manufacturers in 2020, with a market share of about 2.5%, with THREE businesses of PCB, PCBA and packaging substrate, forming a "3-In-One" business layout, extending from PCB business to upstream packaging substrates and downstream electronic assembly unions, increasing the profit range.
Shennan has excellent technical strength, and the highest mass production layer on the PCB hard board can reach 68 layers, more than the 56 layers of peers, and the average unit price of PCB 3912 yuan / square meter is much higher than the 1322 yuan / square meter of comparable companies. Downstream customers are mainly communications, automotive electronics, medical and other fields, especially in the field of automotive electronics, has completed the certification and introduction of a number of strategic key customers, customer development speed significantly improved.
3. Dongshan Precision
Dongshan Precision started in 1980 through the base station antenna and filter, and then business transformation, in 2016 and 2018 have entered the PCB field through the acquisition of Fflex and Multik, deep ploughing Apple, is currently the world's top three FPC manufacturers, in addition to PCB business, there are touch panels and liquid crystal display modules, LED display devices and other services.
The company has set up an automotive business coordination group, ready to focus on the automotive electronics business for a long time, and has obtained new orders from other customers at home and abroad, laid out new production capacity, and strived to have greater breakthroughs in the automotive field in the future.
4. Jingwang Electronics
High-quality PCB faucet is one of the few domestic manufacturers of product types covering rigid circuit boards, flexible circuit boards and metal-based circuit boards. In the field of FPC, the company has carried out medium- and long-term orderly expansion of production, with win-win production bases in Shenzhen, Zhuhai Fushan, Longchuan and Zhuhai, and iteratively high-end product structure. Downstream customers include Huawei, HELLA, Tianma, OPPO, vivo, Foxconn, Hikvision, Siemens, Valeo, Dept and other well-known enterprises at home and abroad.
5. Hongxin Electronics
Hongxin Electronics is specialized in FPC research and development, design, manufacturing and sales of high-tech enterprises, strategically expanded to "FPC+", established a flexible electronics research institute, the flexible materials to make key breakthroughs, its holding company Xiamen Hongxin Entrepreneurship Factory Investment Co., Ltd. is one of the most successful mobile Internet industry chain integration platforms in China. The company is continuing to break through high-end businesses such as FPC for automotive power batteries, FPC for OLED, FPC for mini LED, FPC for wearable devices, and automotive intelligent FPC, and has made the automotive strategy a key development strategy for the company.
6. Xingsen Technology
Xingsen Technology has seen very fast profit growth in recent years, the gross profit margin has also stabilized at more than 30%, the main business is PCB and semiconductors, and it is the largest printed circuit template manufacturer in China. With high R&D investment, it maintains a leading level in high-density ultra-thin packaging substrates, semiconductor test boards, 400G optical transceiver printed circuit boards and 5G antenna printed circuit boards.
[This article is based on publicly available materials, is for informational purposes only and does not constitute any investment advice.] 】