PCB News - Analysis of recent status of PCB industry chain

Analysis of recent status of PCB industry chain

In the early stage, we conducted in-depth analysis of the PCB and copper foil industries through industry depth and weekly views, and proposed the view that "mainland PCB profit improvement benefits from two concentrations". This week we combined the Q2 and July revenue data of Taiwanese companies, Comment on the Q2 performance of the PCB industry chain copper foil, fiberglass cloth-copper-clad laminate-PCB and give a Q3 outlook.
Fiberglass cloth/copper foil: Revenue and gross profit increased, and the boom in July hit a record high, indicating that the downstream CCL destocking is over and a new cycle is coming.
The upstream raw materials of copper clad laminates mainly include copper foil, fiberglass cloth and epoxy resin, etc., which respectively account for 30%, 50% and 20% of the cost of the copper clad laminate (taking FR-4 1.5 standard copper foil as an example). In addition to the relatively stable resin prices, the prices of copper foil and fiberglass cloth have continued to rise since last year (except for the destocking stage of the 17Q2 industry chain):
(1) Fiberglass cloth: The prosperity of Q2 declined and hit a record high for the same period in July. It is expected to rise again in the second half of the year, and the stock price reacted significantly.
As the mainland fiberglass cloth manufacturers stopped kilns for maintenance at the end of 2016 and early 17th, the price of fiberglass cloth began to increase significantly from the end of Q3. 7628 rose from 3.2 yuan/m in July 2016 to 8.7 yuan in April 2017. Approaching a 10-year historical high of 10.6 yuan per meter, the profitability of related companies has also greatly improved, and the comprehensive gross profit margin of the glass fiber cloth segment has jumped from 12% in 2016 to 23.39% in Q1 in 2017.
However, due to the early price increase of downstream copper clad laminates, the supply chain inventory was high, CCL destocking stage and upstream glass yarn reluctance to sell, the price of electronic fiberglass cloth weakened, leading related manufacturers to weaken Q2 revenue, and Q2 fiberglass cloth in 2017 The total revenue of Taiwanese stocks was NT$2.138 billion, a decrease of -5.31% from the previous month, and the gross profit margin was 24.03%. Compared with the 17Q1, the increase in the previous month was limited.
However, the revenue of Taiwan stocks' fiberglass cloth in July returned to strong again, setting a record high of NT$7.7578 million over the same period, an increase of 9.09% year-on-year and an increase of 10.60% month-on-month. It is expected that with the expected impact of the electronics boom in the second half of the year and related manufacturers' further suspension of kilns, Related ethnic groups in Taiwan stocks rose sharply.

(2) Copper foil: Q2 revenue and gross profit margin declined month-on-month, and rebounded month-on-month in July. As mentioned above, in the second half of Q2, the downstream copper clad laminate supply chain was destocked. Although Taiwan Stocks Jinju’s Q2 performance and gross profit margin reached a record high in the same period, they still fell -0.72% and 0.38 percentage points from the previous month, corresponding to the domestic industry chain research data. Standard foil processing Fees dropped from a high of nearly 40,000 yuan/ton in March to 27,000 yuan/ton in early Q3.
With the end of the Q2 destocking of the industrial chain, especially the first increase in lithium battery copper foil, the Q3 standard foil has been adjusted upwards, and Rongke (4989.TWO) and Jinju Development (8360.TWO) both saw a month-on-month decline in revenue in June. Revenue in the next July will increase month-on-month. According to Jinju Development, with the advent of Q4, the demand for lithium battery copper foil will further strengthen.

Copper Clad Laminates: The month-on-month increase in July, the historical peak season of Q3 shipments, the boom is expected to further improve under the pull of the upstream.
As mentioned above, the destocking of copper clad laminates ended in Q2. From the revenue side of Taiwan stocks, we can see a month-on-month increase in July. Through historical comparison, Q3 is the pull season every year, especially considering the upstream fiberglass cloth and copper. The price of foil Q3 boosted, and the prosperity of copper clad laminates is expected to be further improved. Taking the leading Kingboard laminates as an example, in July, two consecutive increase in plate prices increased by 20 yuan per sheet.
PCB: Q2 revenue strengthens month by month, Taiwanese performance contrasts with mainland China
Taiwan's PCB industry's Q2 revenue in 2017 increased month by month. In 2017, Q2 revenue was 47.64 billion Taiwan dollars, an increase of 2.31% year-on-year and an increase of 44% year-on-year. The comprehensive gross profit margin of the Q2 sector was 12.01%, a year-on-year decrease of 0.24 percentage points. The traditional PCB boom was in Q3, so the year-on-year increase in Q2 performance was limited. In line with expectations, but breaking down the monthly data, we can see that the revenue has strengthened month by month since April. At the same time, the revenue data of Q3 and July has also shown a significant month-on-month and year-on-year increase. The previous upstream price increase is detrimental to the PCB industry argument.
On the other hand, by analyzing the performance of mainland China, it can be seen that the overall PCB growth rate of mainland China is over 70% in 17Q1.