China Merchants Securities (CMSC) has released a research report stating that the PCB sector is currently in the 2025 earnings preview period, and driven by AI demand, the sector's performance growth is notably strong. The firm summarized several key investment themes for the PCB sector this year: 1) PCB upgrade trends: The commercial application of CoWoP technology is accelerating, AI PCB products are set for a new upgrade cycle, and mSAP capacity, equipment, and technical capabilities will become the next, higher-threshold competitive arena for PCB manufacturers; investors should focus on investment opportunities across the entire mSAP industry chain. Furthermore, the industry continues to optimize interconnect solutions for the Rubin Ultra full-system architecture, with potential new developments in backplane solutions forthcoming; 2) The upgrade from CCL M8 to M9 is a definitive trend, with an increasing number of GPU, ASIC servers, and 1.6T switches expected to adopt M9 CCL; usage of Q-cloth, HVLP 3-4, and hydrocarbon resin will continue to grow rapidly; 3) Upstream material price increases remain in an upward cycle, with profitability expected to improve further; 4) Substrate demand is rising, BT substrate prices continue to increase, and ABF substrate demand is beginning to spill over to domestic manufacturers. The main views of China Merchants Securities are as follows:
Development and testing of CoWoP are accelerating, and market attention is gradually increasing. While progress on the closely watched orthogonal backplane technology remains pending clarification, another crucial technological trend—the CoWoP upgrade path—deserves attention. CoWoP is an advanced packaging process technology that integrates IC substrate and PCB into a single unit, essentially a SLP product. This integration can reduce signal loss, increase bandwidth and transmission rates, shorten signal paths, lower latency, decrease package thickness and area, and improve thermal performance. If widely adopted, the PCB value per GPU could see a substantial leap. For PCB manufacturers, the mSAP capacity, equipment, and processing capabilities required for CoWoP technology will become the next, more challenging competitive battleground, suggesting a potential consolidation in the future competitive landscape. In H2 2025, NVIDIA proposed the design concept for its next-generation CoWoP advanced packaging technology, with Shengyi Technology taking the lead in collaborating with NVIDIA on corresponding technical development. In January 2026, Wus Printed Circuit invested $300 million to develop CoWoP technology and mSAP production lines, accelerating efforts to build capacity and process technology. Companies like Zhen Ding Tech and Shennan Circuits, which have existing mSAP capacity and technical reserves, are also actively following suit. Looking ahead, the development and testing of CoWoP technology are expected to progress throughout 2026, with industry chain maturity steadily improving, presenting low short-term risks of being "disproven" or "technology substitution."
The upgrade from CCL M8 to M9 is a definitive trend; focus on the upgrade theme for CCL and upstream raw materials. The transition from M8 to M9 during 2026-2027 is a certain trend, with increasing adoption of M9 CCL in GPUs, ASIC servers, and 1.6T switches. Usage of Q-cloth, HVLP 3-4, and hydrocarbon resin will continue to grow rapidly. Recently, market concerns emerged that NVIDIA might downgrade the PCB specifications for the midplane and CPX in its Rubin CPX architecture from M9 CCL to M8.0/M8.5 CCL. However, based on the firm's industry chain tracking, NVIDIA has prepared a backup plan to ensure the smooth mass delivery of Rubin CPX in Q3 2026. The firm believes that mass processing of M9+Q-cloth materials and PCBs is a first for the industry chain, and preparing a Plan-B for smooth delivery, given unverified yield rates, is reasonable. If the PCB and CCL industry chain successfully deliver the M9+Q-cloth solution by Q2 2026, market expectations for subsequent M9 material volume expansion could be revised upwards again.
Upstream CCL remains in an upward price cycle. Japan's Resonac recently announced a 30% price increase for CCL. Prior to this, in December, leading CCL manufacturer Kingboard Laminates issued two price hike notices, raising prices for all materials by a total of 15-20%. In January 2026, raw material prices continued to fluctuate at high levels, and CCL manufacturers are currently contemplating a new round of price increases. According to the firm's tracking, the average price in the CCL industry rose by 20%-30% in 2025. Considering current supply-demand dynamics, downstream inventory levels, and raw material price trends, the price increase for CCL in 2026 is expected to potentially exceed that of 2025, leading to further improvements in the sector's overall profitability.
Substrate demand is rising, BT substrate prices continue to increase, and ABF substrate demand is beginning to spill over to domestic manufacturers. Global AI data center demand for memory remains robust and growing. At the recent CES 2026, NVIDIA addressed this trend by launching a new memory system—the Context Memory storage platform. Meanwhile, TSMC stated in its recent earnings call that its 2026 capital expenditure is projected to be $52-56 billion, significantly exceeding market expectations of $47-50 billion, with the midpoint of the guidance range representing a 32% year-on-year increase. TSMC also substantially raised its 2024-2029 AI chip CAGR forecast to 55%-59%, surpassing the upper end of market consensus. Against this backdrop of rising memory chip demand, BT substrate prices continue to climb, and industry chain capacity utilization remains at full capacity. Demand for ABF substrates, required for AI chips, is starting to spill over, with domestic substrate manufacturers successively breaking into the supply chains of leading global chipmakers. Additionally, NVIDIA CEO Jensen Huang recently visited Japan to meet with Nitto Boseki, a leading global manufacturer of high-end fiberglass cloth, seeking to secure supply of upstream Low-CTE glass cloth needed for subsequent advanced packaging substrates. Low-CTE glass cloth remains a bottleneck in the substrate industry chain, and relevant domestic material manufacturers are expected to further increase their global market share in Low-CTE glass cloth.
Risk warnings: Decline in macroeconomic prosperity, data center demand falling short of expectations, intensifying industry competition, technological innovation/iteration falling short of expectations, capacity expansion falling short of expectations, and escalating trade friction.
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