The current round of price increases for electronic fabric is expected to demonstrate significantly greater elasticity and sustainability than market predictions. Under a major cycle of active inventory replenishment, specialty fabrics are set to show substantial price flexibility. Meanwhile, traditional fabrics, constrained by low inventories and tight supply-demand conditions, are likely to see prices surpass previous peaks. A positive outlook is recommended for all electronic fabric companies.
Traditional electronic fabric dynamics differ from the previous cycle, which was driven by pandemic-induced demand for consumer electronics, leading to a price peak of around 8 yuan (excluding tax, according to SCI data). In the current cycle, rapid demand for specialty fabrics fueled by AI is occupying production capacity, limiting or even reducing the supply growth of traditional electronic fabrics. At the same time, ongoing product upgrades, increasing use of multi-layer boards, and the incorporation of traditional fabrics in AI servers suggest continued demand growth. With low industry inventories and tight supply-demand balance, traditional fabric prices are prone to rise rather than fall. Supported by sustained AI-driven demand, prices in this cycle may exceed previous highs.
Specialty electronic fabrics are anticipated to show price elasticity well beyond market expectations. As highlighted in a previous report, there is already a supply-demand gap exceeding 10% for certain specialty fabrics, creating upward price pressure. Moreover, 2026 is expected to be a year of active inventory replenishment downstream. After AI-related capital expenditures in 2025 lead to capacity expansions in 2026–2027, the focus will shift to improving capacity utilization, prompting proactive stocking of upstream materials and amplifying price volatility. Given that specialty fabrics account for less than 1% of AI server costs, there is considerable room for price increases, suggesting elasticity may significantly outpace expectations.
Leading electronic fabric producers are likely to see continued upward revisions in earnings forecasts. Since production costs remain relatively stable, price increases will largely translate into profits. Current market valuations appear to reflect 2027 sales volumes but do not fully price in potential price hikes. Further price increases could drive upward revisions in both earnings and market value expectations for industry leaders.
Key risks include significant macroeconomic fluctuations, rising costs of raw materials and energy, irrational capacity expansions, weakening overseas demand, slower-than-expected adoption of high-end products, and intensifying industry competition.
With 2026 shaping up as a strong year for electronic fabric price increases, improving fundamentals are expected to support further market value growth. A positive outlook is maintained for all electronic fabric companies.
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