Printed Circuit Board (PCB) is a finished product with insulated substrate and conductor as materials, designed and made into printed PCB boards, printed components or a combination of conductive graphics according to the pre-designed circuit schematic diagram plate.
In fact, PCB is one of the important components of electronic products. All household appliances, mobile phones, computers and other electronic products used in life all use PCB. In other words, as long as there are electronic components, the support and interconnection between them is necessary. Using printed circuit boards, PCBs are therefore called the “mother of electronic products.” The downstream application fields of PCB are relatively extensive. In recent years, with the development of the electronics industry, printed PCB boards has covered various fields such as communications, consumer electronics, automotive electronics, computers, medical care, aerospace defense, etc. The following describes the impact of 5G communication reforms on the PCB industry .
The downstream areas of communication PCB printed circuit boards are mainly communication base stations for wireless networks, OTN equipment and microwave transmission equipment for transmission networks, high-speed routers and high-speed switches for core networks, fiber-to-the-home equipment for fixed networks, and high-speed switches and high-performance servers for data centers/ Storage device.
According to the information obtained by our market research, the major operators’ 5G-related investment budgets have soared by 180.3 billion this year, and the total 5G investment in 2019 is approximately 33 billion. With the market’s increasing expectations for base station construction, referring to the second year of the 4G construction cycle, it is expected that operators’ base station construction is expected to exceed 800,000 this year. Printed PCB boards orders have already reached June, and some of the orders in the first quarter have been postponed to the second quarter. China Mobile’s purchase of 5G wireless network equipment in the second phase also greatly exceeded market expectations, and the boom continued.
The PCB industry has the attributes of large market capacity and many production companies, forming a complete industrial chain system of raw materials-copper clad laminate (CCL)-printed circuit board (PCB)-vertical application of electronic products.
In terms of composition, PCB printed circuit boards is mainly composed of copper clad laminate, copper foil, ink and other chemical materials. From the perspective of cost structure, copper clad laminates account for about 30%, copper foil and phosphor copper balls account for about 15%, inks account for 3%, and other chemical materials account for 12%.
Copper-clad laminate is the most important basic material for printed PCB boards. Among the types of copper-clad laminate products currently on the market with large production and sales, copper foil, fiberglass cloth, resin and other manufacturing expenses (including labor, warehousing and logistics, equipment depreciation, water, electricity, coal, etc.) , Roughly accounting for 39%, 18%, 18% and 25% of the total cost respectively. Among them, copper foil is one of the most important raw materials for copper clad laminates, which has a greater impact on the price of copper clad laminates. Copper foil is mainly divided into electrolytic copper foil and rolled copper foil. Fiberglass cloth is also one of the main raw materials for copper clad laminates. It is woven from glass fiber. According to the thickness, it can be divided into thick cloth, thin cloth, ultra-thin cloth and special specification cloth. At present, the production capacity of fiberglass cloth in mainland China and Taiwan Already accounted for about 70% of the world.
Copper clad laminate is the core of the entire PCB industry, let’s focus on it. Copper Clad Laminate (CCL) is a plate-shaped material made by impregnating a reinforcing material with organic resin, one or both sides with copper foil, and then hot pressing. It is responsible for the three major functions of conduction, insulation, and support. PCB manufacturing special laminates, PCB manufacturers use copper clad laminates as substrates for the production, design, production and sales of printed circuit boards. According to the structure and structure, copper clad laminates can be divided into rigid CCL, flexible CCL, and special material-based CCL, which can be further classified according to the different substrates used. This industry is an industry with a large demand for funds and a relatively high degree of concentration. Prismark’s research data shows that the global CCL industry has a CR10 of 75% and a CR5 of 52%, with a high degree of concentration. Major companies in the industry have strong bargaining power, while the CR10 of the downstream PCB manufacturers is only 26%. It belongs to a perfectly competitive industry. At present, the problem of overcapacity in my country’s conventional CCL still exists, but the high-end and high-performance CCL field still needs a large amount of imports, and the structural contradiction is prominent.
The downstream application fields of PCB printed circuit boards are relatively extensive, of which communications, computers, and consumer electronics applications are the main ones. The above four account for nearly 70% of the total. From the perspective of the subdivision of the track, the high-level and multi-layer market represented by communication wired, wireless equipment, and server/storage is the market with the largest space and the fastest growth. These three markets are all related to the development of the communication industry and are Driven by technological innovation and investment construction.
In the 4G era, PCBs are mainly used in base station BBUs (backplanes, single boards) and RRUs hung under antennas. Due to their small size, printed PCB boards demand is relatively small. In the 5G era, base station antennas evolve from passive to active. RRUs and antennas are merged into active antenna units (AAUs) that support large-scale antennas. AAU integrates the functions of antennas and RRUs. The application of large-scale antennas has higher requirements for antenna integration. Mobile communication base stations have developed from 2 channels in the 2G era to 4 channels and 8 channels in the 4G era, and then to Massive MIMO large-scale antenna arrays in the 5G era, FPGA chips, Optical modules, radio frequency components and power supply systems will be integrated in a PCB board that supports high-speed and high-frequency.
Compared with the 4G base station PCB, the PCB used in the 5G base station is technically more difficult. At the same time, the value of the communication PCB of the 5G single station is about 13,000 yuan, which is about 3 times higher than that of the 4G base station. On the one hand, due to the requirements of high-frequency communication, both AAU and BBU need to use a large amount of high-frequency and high-speed materials; on the other hand, the functions of 5G base stations have increased, the integration density of components on the printed PCB boards has increased significantly, and the design difficulty of the circuit board has also increased. , The use of high-frequency and high-speed materials and the increase in manufacturing difficulty will significantly increase the unit price of PCB printed circuit boards.
This can be seen from the changes in the profit margin level of the A-share PCB company. The gross profit margin and net profit margin of Shengyi Technology in the first quarter were 28.72% and 11.93%, respectively, while those in the first quarter of 2019 were 24.34% and 9.74%; The gross profit margin and net profit margin of Shanghai Electric Power in the first quarter were 26.73% and 13.53%, respectively, compared with 25.92% and 11.92% in the first quarter of 2019.
Domestic status and opportunities for local companies
Looking at the history of PCB development, since the 1950s, the global PCB industry pattern has experienced a development process from “Europe and America dominance” to “Asia dominance”, and the trend of the PCB industry to move eastward is obvious. According to Prismark’s forecast, the global PCB industry output value will continue to grow in the next few years, until 2022 the global PCB industry output value will reach nearly 76 billion US dollars. From a global perspective, China’s PCB industry has developed the fastest, with a compound growth rate of approximately 5.1% from 2014 to 2019, which is 2% higher than the global growth rate.
According to Prismark’s estimation, the PCB market has declined in all regions except China in 2019. The expected global PCB printed circuit boards output value in 2019 is approximately US$61.311 billion, a year-on-year decrease of approximately 1.7%. Most PCB market segments have also declined in 2019, but the demand for infrastructure applications such as 5G networks and data centers has continued the growth trend in 2018. China is in a leading position in this round of 5G revolution, and local PCBs Manufacturers have benefited a lot. With the shifting trend of the global PCB industry, China is expected to win the leading position in the PCB industry in the global competition.
But a reality that has to be faced is that although China’s PCB industry is developing rapidly, the contribution of the initial output value mainly comes from foreign capital’s production capacity in China, and the overall competitiveness of domestic-funded enterprises is generally weak. According to CAPA statistics, the proportion of foreign-invested manufacturers in China has reached 58%. Although the number of domestic property owners has increased, their scale is relatively small.
In the 4G era, suppliers of high-frequency and high-speed copper clad laminates mainly come from American and Japanese companies, and there are no domestic companies. Shengyi Technology has introduced technologies from Japan’s ZTE Chemicals and South Korea’s LG, and has completed digestion and absorption. It has become the only domestic manufacturer with high-frequency and high-speed CCL mass production capabilities, which has improved the company’s competitiveness in the same industry abroad and completed technology localization. Shengyi Technology’s high value-added products based on this technology have passed the certification of 5 terminal equipment manufacturers and 4 PCB manufacturers, which has increased the company’s copper clad laminate business gross profit margin. The quarterly report shows that in the first quarter, Shengyi Technology achieved operating income of 3.072 billion yuan, a year-on-year increase of 12.30%; net profit attributable to the parent company was 339 million yuan, a year-on-year increase of 36.09%.
The global PCB industry is moving eastward, and China’s total output value accounts for half of the PCB industry. In the direction of industry development, although foreign-funded enterprises still dominate high-end products, with the rise of downstream local brands such as Huawei, ZTE, Haikang and other companies, the localization of domestic-funded enterprises has become the theme of this round of industry development. The growth mainly depends on the construction of communication infrastructure driven by 5G, and this process will continue until 2021. With the continuous expansion of the PCB industry scale, more and more companies are trying to raise funds to expand production through market means, and form a scale advantage. Some backward small and medium-sized enterprises will gradually withdraw from the market. At the same time, products continue to increase in density and With the development of precision and high performance, the market will further concentrate on leading companies with R&D capabilities.