A Printed Circuit Board (PCB) is a printed circuit board (PCB) fabricated by electronic printing. The printed circuit board is a printed circuit board that is designed to form a point-to-point connection and a printed component on a universal substrate. This is a component that is widely used in the electronics industry. The manufacturing quality of printed circuit boards not only directly affects the reliability of electronic products, but also affects the overall competitiveness of system products. Therefore, printed circuit boards are called "the mother of electronic system products. ".

1.PCB industry chain is short, but widely used downstream

  From the perspective of the industrial chain, the upstream is raw materials, including fiberglass cloth, copper foil, wood pulp, and synthetic resins; the midstream is the manufacturing process, in which the CCL manufacturing is the most important upstream link of the PCB; the downstream is the various electronic application terminals. , including computers, communications, consumer electronics, automotive electronics, etc

 The PCB has a wide range of downstream applications. According to the 2016 China Industry Information Network data, computers, communications and consumer electronics are the three main application areas, occupying about 70% of the PCB industry output value.

2.The domestic PCB scale has grown against the market, occupying half of the world PCB industry 

  Currently, the overall global PCB market demand is slightly weak, especially in the market segments of PCs, tablet PCs and high-end smart phones. Demand has dropped. According to Prismark's public data, in 2016, the global PCB output value reached US$54.207 billion, which was a decrease of 2.02% compared to 2015, and it has been declining for two consecutive years. In the 2016 Top 100 Global PCB Manufacturing Companies released by NT Information, global PCB sales fell by 2.0%. Some Chinese PCB companies, driven by the devaluation of currencies and the strong local demand for consumer electronics products, have achieved rapid growth. In 2016, the output value of PCBs in mainland China was US$ 27.104 billion, with an annual growth rate of 1.43%. It has achieved the world's No. 1 output value in the 11th year since 2006. The "2016 Global PCB Production Report" shows that China's PCB output accounts for 50% of the world's total.

3.Domestic PCB industry structure from highly dispersed to accelerated concentration

  Due to the wide range of downstream applications, PCB has been a highly dispersed industry in the past, with many manufacturers. From a global perspective, according to NT's statistics, in 2016, the world’s top ten PCB manufacturers’ total market share was less than 32%, and the number one corporate market share was less than 7%. From a domestic point of view, as of February 2018, there were 254 PCB manufacturing enterprises registered by CPCA of China Printed Circuit Board Industry Association. According to the statistics of CPCA, the total market share of the top ten PCB manufacturers in China in 2015 was 41.16%, which was characterized by a relatively small overall size. Most of the companies were small producers with low revenue capacity. China's PCB industry is consistent with the global market, and the market is highly fragmented and competitive.

With the acceleration of concentration in the downstream consumer electronics industry and the help from supply-side reforms, the PCB industry structure has been decentralized and concentrated. In recent years, both PCs, smart phones, automotive electronics and other industries have experienced a trend of accelerated concentration. Because the downstream customers are concentrated and large-scale, the production capacity of small manufacturers cannot meet the requirements of large customer orders, so the PCB industry is increasingly Leading companies are concentrated, which directly leads to the supply shortage of large enterprises, but also the need to continuously expand production capacity, while small businesses are desperate orders and slowly fade out of the market. In addition, due to rising raw material prices and stricter environmental protection inspectors, small manufacturers have weak downstream bargaining power and are unable to digest upstream prices, which directly accelerates the clearing of small businesses.

The boom in demand of large companies has led to the expansion of production capacity by leading companies. According to the 2016 financial report data, the top ten PCB manufacturers in mainland China according to the scale of the main business are Shennan Circuit, Shanghai Electric Power, Jingwang Electronics, Xingsen Technology, Eaton Electronics, Chongda Technology, Ultrasonic Electronics, Shenghong According to Shennan Circuit's prospectus data, seven of the top ten manufacturers have a clear plan for large-scale expansion.

4.Product structure towards high-end, localization alternative acceleration

 From the perspective of product structure, China's exports are mainly low-end PCB products, while imports are mostly high-end PCB products such as high multilayer boards, HDI boards, flexible boards, and package substrates. However, with the increasing strength of Chinese PCB companies, the product structure of the import and export of the PCB industry has gradually changed. According to the Prismark data, the output value of multi-layered boards has increased significantly since 2015, and the product structure has reached high-end. Judging from the structure of imports and exports, in recent years, under the background of slowing global economic growth, China’s PCB output value and proportion have been increasing year by year, gradually realizing a favorable balance, and accelerating domestic substitution process.

 To sum up, we believe that, driven by the localization of the PCB industry, the entire industry structure has evolved from decentralization to concentration, and the demand of leading companies has been rising. Even if we do not consider price increase factors, we expect leading companies to maintain rapid growth in the next few years.