PCB Manufacturer China: Price of PCB Materials Increase Twice During The Year

Following the price adjustment in January, the recent CCL industry ushered in the second wave of price hikes during the year.

A number of companies such as KingBoard, Shandong Jinbao Electronics and Zhejiang Yuanji New Materials collectively issued price increase notices. KingBoard price increase notice shows that due to the overall increase in copper price, oil price and transportation cost, KingBoard laminate is forced to increase the price of FR-4, CEM-1/22F and other CCL products by 10 yuan/sheet, PP ( 150 meters) up 200 yuan / volume, VO / HB up 5 yuan / sheet. The reasons for the rise of Shengyi Technology, Shandong Jinbao Electronics, Zhejiang Yuanji and other companies and the price increase are basically similar to those of Jianye.

Wande shows that the price of Chongqing Qingyuan CCL red material has started from 2015, and the price of CCL material has been rising. Some time ago, it has been adjusted back. Since the beginning of 2019, the CCL has been raised twice in a row.

What is a Copper Clad Laminate?

Copper Clad Laminate (CCL) is a basic material for making printed circuit boards (PCBs). The CCL industry has a history of nearly one hundred years, and the electronic information industry, especially with the PCB industry. Like polysilicon, piezoelectric crystals, and optical fiber preforms, they are the basic raw materials for the electronics industry.

The upstream of the CCL industry chain is mainly fiberglass cloth, copper foil, epoxy resin and other raw materials. The downstream industry is Printed Circuit Boards. The terminal industry is downstream equipment such as communications, computers, home appliances, automobiles and aerospace.

CCL is mainly used in communication equipment, household appliances, electronic toys, computers, game consoles, automotive electronics, wireless networks, mobile phone receiving base stations, and so on.

At present, China has become the world's largest producer of copper-clad laminates. The global share of China's CCL production is 65%, but the production capacity is mostly in the low-end areas. At present, the average unit price of CCL in China is much lower than that of other countries in the world.

According to Prismark, global CCL output increased from $9.5 billion to $10.1 billion in 2011~2016. In 2011~2016, global PCB production value decreased slightly from US$55.4 billion to US$54.2 billion, but China's PCB production value increased from 39.8% to 50.0%. Essence Securities expects that by 2021, China's PCB production value will reach 32.1 billion US dollars, with an average annual compound growth rate of 3.12%.

Traditional copper clad laminates have basically completed the industrial transfer from the West to China. We use imported products and export products to replace them.

Table "high-end" and "low-end" CCL products. According to the statistics of the General Administration of Customs, the import and export data of CCL, from 2011

Since the beginning of the year, the price gap between China's imported CCL products and export products has gradually widened, mainly due to the middle and low end of the developed countries.

The production capacity of copper plates has gradually shifted to mainland China, and foreign-funded products have gradually moved toward high-end.

Why is the CCL (Copper Claded Laminate) price increased?

The analysis believes that the price increase of CCL is mainly as follows:

First of all, benefit from the promotion of 5G construction and domestic substitution, and the copper-clad board has high bargaining power for downstream. Because the only downstream of CCL is PCB, the end product of CCL is the application of PCB in computers, communication equipment, consumer electronics, automotive electronics and other industries. The purchase of copper clad laminates and prepregs accounts for about 50% of the raw materials. The concentration of downstream PCB companies is not high. CCL companies have strong bargaining power and can pass the costs on to downstream customers. The increase in cost is less than the increase in sales price.

Secondly, affected by the price increase of copper foil and environmental protection inspectors, the price of CCL is closely following the price of copper foil products. The price of copper clad laminates is highly sensitive to the raw material supply cycle. Raw materials such as copper foil, resin and fiberglass cloth substrates belong to the chemical and smelting industries. Recently, they have been greatly affected by supply-side reform and environmental protection/limitation. In history, the price increase of glass fiber cloth and copper foil will bring about a wave of rising prices of copper clad laminates. After 2016, the environmental protection policy has become stricter, the shutdown and continuation have continued, and the supply has been further tightened.

In addition, after the second half of 2016, traditional products have entered the boom cycle in recent years. Due to insufficient supply of electrolytic copper foil, domestic CCL began to increase in price, and the average monthly growth rate of export products continued to be above 10%, but the absolute value of imported high-end products increased even more. Domestic products and high-end products depended on The gap in imported products is still widening.

Finally, copper foils continue to be scarce, and CCL manufacturers have no price reduction. Copper foil has a long expansion period due to equipment purchase, plant construction, etc., usually 1 to 1.5 years or even longer. According to industry research and expansion plans of various factories, it is estimated that there will be an increase of about 2.6~33,000 tons in the first half of 2018 to the first half of 2019, of which about 70%~80% is lithium foil. The supply-demand relationship will gradually stabilize, but the tight supply of FR-4 copper foil is still difficult to ease. In the next two years, the domestic CCL industry's demand for copper foil will grow at an annual rate of about 15%, that is, the demand for copper foil will increase by 20,000 tons per year, and the pressure for price increases remains. If considering the downstream PCB companies' stocks and other factors, the price of CCL will remain at a high level.

What are the relevant beneficiary CCL (Copper Claded Laminate) companies?

At present, China is both the largest PCB country and the largest copper-clad laminate country. The current world's first CCL market is the Hong Kong-listed KingBoard Laminate (1888.HK), and the second in the world is the A-share Shengyi Technology ( 600183.SH), high value-added special materials CCL is monopolized by foreign companies such as Rogers, TACONIC and Panasonic.

According to the market positioning, the leading products mainly include Rogers, Panasonic Electric Works and Mitsubishi Japan; the mid-end products represent enterprises with KingBoard Chemical and Shengyi Technology; the basic products are mainly represented by KingBoard Chemical and GDM(Goldenmax International) (002636. SZ).

Affected by the price increase of copper-clad board, KingBoard Chemical's cumulative increase in the past month was nearly 30%, and Shengyi Technology's cumulative increase in the most recent month was 22.12%.

In terms of performance, KingBoard Chemical's net profit attributable to ordinary shareholders in the first half of 2018 was 230 million yuan, down 11.5% year-on-year; Shengyi Technology's 2018 performance report showed that the company's net profit from non-home shareholders was 925 million yuan, down 7.64% year-on-year. Under the influence of the price increase of the Copper Claded Laminate, the performance of KingBoard Chemical and Shengyi Technology may improve in 2019.

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