Upstream of PCB, prices of two raw materials continue to rise

     The cost of raw materials continues to rise, driving the profitability of copper clad laminates to rise. The price of electronic copper foil, the largest material, is affected by copper prices and copper foil processing fees, and prices continue to rise. As copper prices continue to rise, copper foil processing costs rise, and there is a shortage of electronic copper foil production capacity, copper foil prices are expected to continue to grow. Due to the high concentration of the CCL industry and the relatively scattered PCB industry, when the price of raw material copper rises, the CCL manufacturers upstream of the circuit board can increase the price and transfer the cost to the downstream PCB manufacturers, and the price increase of the CCL exceeds that of the upstream raw materials. thereby increasing gross profit margins.

5G infrastructure, improved automotive electronics, increased server demand, and increased demand for domestic alternatives will drive rapid growth in industry demand. Compared with 4G base stations, the value of single-station copper clad laminates for 5G base stations has increased significantly. With the advancement of 5G infrastructure, the demand for related copper clad laminates will continue to grow. We estimate that automotive electronics will bring demand of 2.3 billion yuan in 2022; Driven by factors such as east and west computing, and the increase in the cloud rate of enterprises and institutions, the server market will also grow rapidly. It is estimated that the demand for copper clad laminates brought by servers will be 3 billion yuan in 2022; the improvement of the level of automotive electronics is a deterministic trend. According to "New Energy Vehicle Industry Development Plan (2021-2035)", sales of new energy vehicles will grow rapidly, intelligence and networking are the development trends of the global automotive industry, and automotive electronics will contribute the largest market increment. We estimate that In 2022, automotive electronics will bring a demand of 12.5 billion yuan.

Copper prices hit record highs. Copper prices hit an all-time high a week ago, with traders looking to stock up on the metal amid historically low inventories and concerns about escalating supply chain disruptions from the Russia-Ukraine conflict. Copper prices are now down 8% from the metal's all-time highs, trading sideways at $4.67 a pound ($10,300 a tonne) on March 27 on the New York Mercantile Exchange. A new report from Capital Economics sees a weakening trend ahead amid weaker demand, particularly in China, which accounts for more than half of global copper consumption.

 Given copper's widespread use in industry, construction, and transportation, the metal's price correlates with overall economic growth, manufacturing activity, and the world's largest economy based on purchase prices when supply and demand balance.