Raw material costs continued to rise, driving up the profitability of copper clad laminates
The price of electronic copper foil, the largest material, continues to rise due to the impact of copper price and copper foil processing fee. Due to the continuous rise of copper price, the rise of copper foil processing cost and the shortage of electronic copper foil production capacity, the price of copper foil is expected to continue to increase. Due to the high concentration of the copper clad laminate industry and the dispersion of the PCB industry, when the price of raw material copper rises, the copper clad laminate manufacturers upstream of the circuit board can raise the price and transfer the cost to the downstream PCB manufacturers, and the price rise of copper clad laminate exceeds the increase of upstream raw materials, so as to improve the gross profit rate.
Downstream demand is growing steadily, and there is huge room for domestic substitution
5g infrastructure, the improvement of automobile electronization level, the increase of server demand and domestic substitution demand will promote the rapid growth of industry demand. Compared with 4G base stations, the value of copper clad laminate in a single station has increased significantly. With the promotion of 5g infrastructure, the demand for relevant copper clad laminates will continue to grow. We calculate that automobile electronization will bring a demand of 2.3 billion yuan in 2022; China’s server market will also grow rapidly thanks to factors such as Eastern digital computing and Western computing, and the improvement of cloud access rate of enterprises and institutions. It is estimated that the demand for copper clad laminate brought by servers will be 3 billion yuan in 2022; The improvement of automobile electronization level is a deterministic trend. According to the development plan of new energy automobile industry (20212035), the sales volume of new energy vehicles will increase rapidly. Intellectualization and networking are the development trend of the global automobile industry. Automobile electronization will contribute the largest market growth. We calculate that automobile electronization will bring a demand of 12.5 billion yuan in 2022. The copper clad laminates exported by China are mainly FR-4 copper clad laminates and other products with low added value, while high-frequency and high-speed copper clad laminates and packaging substrates with high technical content rely heavily on imports. In 2018, more than 80% of the market share of high-frequency copper clad laminates was dominated by American and Japanese enterprises such as Rogers and taikangli. The main suppliers in the high-speed CCL market were Panasonic in Japan, Lianmao and Taiyi in Taiwan, and Isola in the United States. In 2018, the four accounted for about 65%. There is a huge space for domestic substitution, which gives high-quality local manufacturers opportunities.
Chinese manufacturers have complete product lines and have gained a certain share in the field of high-end products
The global production capacity of Chinese manufacturers accounts for about 20%. Domestic manufacturers have fully covered the mainstream products of copper clad laminates from low-end to high-end, and high-end products have also obtained a large share. Changzhou Zhongying Science & Technology Co.Ltd(300936) has the highest market share in the field of high-frequency copper clad laminates, accounting for 6.4%, Shengyi Technology Co.Ltd(600183) for 4.8%, and Shengyi Technology Co.Ltd(600183) has also obtained a large share in the field of high-speed copper clad laminates. With the progress of domestic substitution, the share of domestic manufacturers is expected to continue to increase.
Investment advice
Benefiting from the rise in product prices, steady growth in demand and domestic substitution, we suggest paying attention to relevant companies in the copper clad laminate industry and giving the electronics industry an “overweight” rating.
Risk tips
Technical progress is less than expected; Domestic substitution is less than expected; Downstream demand is lower than expected; The price rise was slower than expected.
