In the AI computing power supply chain, a clear pattern emerges upon closer inspection: the initial market enthusiasm often targets visible assets like Nvidia, servers, optical modules, and PCBs. However, the entities that sustain long-term benefits frequently reside in more upstream, specialized, and less conspicuous segments. Guangdong Dtech Technology Co.,Ltd. (Dtech Technology) is precisely such a company.
In June, Dtech Technology submitted a listing application to the Hong Kong Stock Exchange, planning a secondary listing in Hong Kong. The company's primary business involves manufacturing PCB micro-drills, milling cutters, CNC tools, and functional film materials. This may sound traditional, even niche, but it strategically positions the company upstream in the AI server PCB expansion cycle.
Identifying a Crucial Niche
AI servers require high-layer-count PCBs, switches need high-speed PCBs, and advanced packaging along with AI computing clusters drive demand for circuit boards with higher density and precision. As boards become more complex, with more holes and layers, the consumption of drill bits increases significantly. While many focus on GPUs, HBM, and optical modules in the AI compute narrative, PCBs require drilling, and drilling consumes micro-drills. This segment is small but indispensable. Dtech Technology may not be the most glamorous company in the AI industrial chain, but it is a quintessential "tool seller" in the AI PCB capacity expansion phase.
A Global Leader in Micro-Drills
How did a single drill bit lead to a global number one position? Founded in 1997 and headquartered in Dongguan, Dtech Technology has meticulously honed its expertise in precision manufacturing. By sales volume, the company's global market share was approximately 26.5%, 26.8%, and 29.2% from 2023 to 2025, securing the top global position for three consecutive years. With a monthly capacity of around 130 million units, it operates one of the few single-factories globally with capacity exceeding 100 million units per month. Its client base includes numerous leading firms from the global top 100 PCB manufacturers, with most of the top ten PCB companies being its partners, ultimately feeding into the AI server supply chain.
These figures underscore a critical industrial logic: PCB drill bits are not ordinary, low-end consumables. While a PCB drill bit appears to be a small tool, it critically impacts hole wall quality, drilling precision, production yield, and the stability of the entire PCB production line. This is especially true for high-end PCBs used in AI servers, which are thicker, have more layers, use harder materials, and require smaller apertures, demanding higher precision and longevity from the drills. The difference between standard servers and AI servers isn't just in computing power; the underlying PCB complexity is also on a different scale. The drilling volume for an AI server PCB can be several times that of a standard server, and high-hardness materials accelerate drill bit wear.
In other words, AI servers not only increase the unit price of PCBs but also boost the value and consumption frequency of drill bits. This dynamic has propelled a sharp rise in Dtech's performance. The company's revenue was approximately 1.295 billion yuan, 1.553 billion yuan, and 2.084 billion yuan from 2023 to 2025, with net profit growth in 2025 nearly doubling. In Q1 2026, both revenue and profit continued their strong growth, with gross margin improving significantly. These numbers alone indicate that the company's growth is not built on narratives but is being realized in its financial statements, driven by expanding demand from AI servers, automotive electronics, and high-end PCBs.
Transitioning from Commodity to Specialized Tooling
More importantly, Dtech's product mix is also upgrading. The proportion of high-value-added products like sub-0.2mm micro-drills and coated drill bits is increasing, pulling the gross margin upward. While the market may have previously viewed it as a traditional manufacturing consumables company, it is increasingly resembling a high-end precision tool company within the AI hardware expansion cycle. Traditional consumables are evaluated on cycles, price, and scale. Upstream AI consumables are judged on order visibility, product upgrades, customer certification, and capacity fulfillment. Dtech is currently transitioning from the former category toward the latter.
Examining the Competitive Moat
The PCB drill bit industry is not one where just anyone can enter and grab a share. The global landscape is relatively concentrated, with the top five players holding a large portion of the market share. Major competitors include Dtech Technology, Jinzhou Precision (under China Tungsten And Hightech Materials Co.,Ltd.), Japan's Union Tool, and Taiwan's Topoint. However, Dtech's true strength lies not just in its leading market share but in how it has built its manufacturing system into a formidable barrier.
The company's core moat is its in-house equipment development and full industrial chain integration. Many competitors must purchase imported equipment to produce drill bits, which entails high costs, long delivery lead times, and queuing for capacity expansion. Dtech has pursued a capital- and technology-intensive path: developing its own equipment, refining its own processes, and building its own inspection and automation systems. In the short term, this approach is slower, more expensive, and laborious; in the long term, it translates into cost advantages and expansion agility.
In-house equipment development yields three key outcomes. First, faster capacity expansion. When demand for AI server PCBs arrives, customers need delivery capability, not just concepts. Whoever can expand capacity faster can capture orders more quickly. Dtech's high rate of in-house equipment development makes its expansion cycles more controllable, giving it a faster response to orders compared to peers reliant on externally sourced machinery.
Second, lower costs. The cost of self-developed equipment is significantly lower than imported equipment. Combined with economies of scale and the substitution of domestic raw materials, Dtech exerts cost pressure on Japanese and Taiwanese competitors. In a consumables industry where price competition can emerge, cost advantage is critical.
Third, faster iteration. High-end micro-drills, coated drills, and ultra-small-diameter drills depend not only on materials but also on equipment and process control. Having equipment development in-house allows for more flexible process tuning and yield improvement. When customers demand higher precision, smaller apertures, or longer tool life, the company can respond more rapidly. In essence, to an outsider, the drill bit business looks like small tools; to an insider, it's a sophisticated manufacturing system.
Future Strategy and Associated Risks
The funds raised from Dtech's Hong Kong listing are intended for expanding high-end micro-drill production capacity, constructing bases in Thailand and Germany, and supplementing working capital. This direction is clear: continue expanding and globalizing. While Dtech's overseas revenue proportion is not yet dominant, it is growing rapidly. The Thailand base targets the shift of PCB capacity to Southeast Asia, while the Germany base aims to access the European automotive electronics and industrial PCB markets. This combination is pragmatic: Thailand addresses capacity and tariff concerns, while Germany provides access to clients and a technology window. If the overseas revenue share continues to rise, Dtech's investment narrative could evolve from "China's leading PCB drill bit manufacturer" to "the world's premier PCB drill bit brand."
However, Dtech Technology also faces several challenges. First, its business remains influenced by PCB industry cycles. While AI servers are hot, PCB manufacturing itself is cyclical. If future capital expenditure in AI hardware slows down periodically or customers adjust inventories, demand for drill bits could be affected. Being further upstream and more diversified than standard PCB makers offers some buffer but does not grant complete immunity from cycles.
Second, it remains to be seen whether the current high gross margin can be sustained. Since 2025, the company's gross margin has improved notably, driven by product mix upgrades and scale effects. However, if competitors expand capacity or customer bargaining power increases, the margin could retreat. Investors should avoid simply extrapolating the high margin linearly.
Third, the functional film materials segment is a short-term drag. While the core business is precision tools, the functional film materials unit currently shows weaker profitability, with some metrics indicating it remains under pressure. Whether this business can become a second growth pillar in the future depends on improvements in revenue scale, customer structure, and gross margin.
Fourth, expansion brings leverage pressure. During periods of high AI demand, seizing capacity requires capital expenditure. In the short term, this supports growth; in the medium term, it depends on whether operating cash flow can keep pace with profit growth. If expansion is too rapid or collections lag expectations, financial pressure could materialize.
Dtech's story is not a simplistic "buy AI blindly" narrative. Within the supply chain, Dtech is not responsible for the shine but for enabling more PCBs to be manufactured. The company doesn't stand in the spotlight but is an indispensable provider of tools and consumables for computing power expansion. The AI era requires not just chips but also the boards to mount them on; not just the boards but also the tools to fabricate them. Dtech Technology sells precisely that small drill bit. It's small enough to be easily overlooked, yet hard enough to be impossible to bypass.
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