PCB和CCL在數(shù)據(jù)時(shí)代的重要性與日俱增

1、July 21, 2020 09:01 PM GMTChinas LocalizationRisingImportanceofPCBand CCLintheDataEraPrinted circuit boards and copper clad laminates, a key raw material, are at the center of all electronic devices, with China playing an increasingly important role in their production. We believe Shennan and Shengy

2、i are best positioned to benefit from Chinas localization, and initiate at OW.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morg

3、an Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates

4、 are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.ContributorsMORGAN STANLEY TAIWAN LIMITED+Howard KaoEquity A

5、nalyst+886 2 2730-2989 HYPERLINK mailto:Howard.Kao Howard.KaoMORGAN STANLEY TAIWAN LIMITED+Sharon ShihEquity Analyst+886 2 2730-2865 HYPERLINK mailto:Sharon.Shih Sharon.ShihChinas LocalizationRisingImportanceofPCBand CCLintheDataEraPrinted circuit boards and copper clad laminates, a key raw material

6、, are at the center of all electronic devices, with China playing an increasingly important role in their production.We believe Shennan and Shengyi are best positioned to benefit from Chinas localization, and initiate at OW.We believe mainland Chinese rigid printed circuit board (PCB), flexible PCB,

7、 integrated circuit (IC) substrate, and even upstream copper clad laminate (CCL) makers will continue to gain share in the coming years. The aggregate value share of Chinese PCB companies stands at only 20% currently, but we see this rising to 30% by 2025. We see three potential trends that will acc

8、elerate their value share: (1) more Chinese brands designing their own PCB circuitry (e.g., Huawei, Lenovo); (2) rising share of Chinese-branded products (e.g., Huawei/ZTE in 5G base stations, Inspur/Lenovo in data center/PC hardware), and (3) Chinese assem- blers gaining share (e.g., Samsung outsou

9、rcing low-end smartphone assembly to Chinese ODMs).Chinas rigid PCB market will be driven by an increased PCB TAM for 5G base stations and rising data center infrastructure demand: We estimate aggregate Chinese rigid PCB companies will increase at a 12.7% CAGR, 2019-25, bringing their global market

10、share to 37% by 2025, up from just 23% in 2019 mainly driven by rising PCB volume and content for 5G base stations, whose PCB TAM is 4.7x that of 4G, as well as data center infrastructure.Chinas IC substrate market will see the largest growth in coming years: We think this will be driven by a combin

11、ation of a low base (China currently accounts for only 2% of the IC substrate share globally), as well as Chinas accelerating efforts to drive semicon- ductor self-sufficiency. We forecast Chinese IC substrate companies to increase at a 19.9% sales CAGR, 2019-25, doubling their global market share t

12、o 4% by 2025.Chinas CCL market will also benefit from increasing self-suf- ficiency, especially for high-frequency and high-speed lami- Industry ViewGreater China Technology Hardware - In-LineExhibit 1:We initiate coverage of Shennan Circuits and Shengyi Technology at OverweightTickerCompanyRatingPr

13、iceTargetLastCloseUpside002916.SZShennan CircuitsOW215.00162.6732%600183.SSShengyi TechnologyOW39.0029.0034%Source: Morgan Stanley Research estimates. Note: Last close as of July 17, 2020.nates: These two segments are currently seeing significant growth, driven by 5G and data center demand as rising

14、 requirements for higher transmission speeds and data integrity are driving high-fre- quency and high-speed laminates growth. This is an area where China CCL companies have limited share today. In aggregate, we forecast Chinese CCL companies sales to increase at a 6.7% CAGR, 2019-25, driving their a

15、ggregate global share up to 24% by 2025, from20.5% in 2019.We expect larger PCB companies to benefit the most: Consolidation within the China PCB space began in the past five years, and we think this will continue, which suggests that this trend, coupled with Chinas PCB localization will benefit the

16、 larger PCB and CCL makers such as Shennan Circuits (002916.SZ, OW, PT: Rmb215) and Shengyi Technology (600183.SS, OW, PT: Rmb39). We think the biggest risk is escalating US-China trade tensions, which could result in further technology restrictions.ContentsKey ExhibitsExecutive Summary12Sub-segment

17、: Rigid printed circuit boards (PCB)Sub-segment: Flexible PCBSub-segment: Integrated circuit (IC) substrates23 Sub-segment: Copper clad laminates (CCL)Shennan Circuits (002916.SZ): Best proxy to play Chinas PCB and IC substrate localization trend; initiate at OWRisk Reward Shennan Circuits Co Ltd (0

18、02916.SZ)Shennan Circuits: Financial SummaryShennan Circuits: Executive SummaryShennan Circuits: Investment Positives and ConcernsShennan Circuits: Financial OutlookShennan Circuits: Where are we versus consensus?Shennan Circuits: Price Target Discussion and Valuation Methodology38 Shennan Circuits:

19、 Company ProfileShengyi Technology (600183.SS): Best proxy to play Chinas CCL and PCB localization; initiate at OWRisk Reward Shengyi Technology Co Ltd. (600183.SS)Shengyi Technology: Financial SummaryShengyi Technology: Executive SummaryShengyi Technology: Investment Positives and ConcernsShengyi T

20、echnology: Financial OutlookShengyi Technology: Where are we versus consensus?Shengyi Technology: Price Target Discussion and Valuation Methodology53 Shengyi Technology: Company Profile59 AppendixKey ExhibitsExhibit 2:We expect Chinas PCB and CCL localization will result in share gains in the coming

21、 years (2019 vs 2025e). 37.3%12.7% CAGR23.4%7.2% CAGR6.7% CAGR23.3%19.9% CAGR23.9%18.8%20.5%2.1%4.2%US$ mn20,00015,00010,0005,000Exhibit 3:.driven by a rising 5G PCB TAM (4.7x that of 4G).US$5G4G5G v 4G BTSAAU1,1353003.8xBBU4182002.1xPCB content per BTS1,5535003.1x5G BTS density vs 4G1.5xTotal PCB T

22、AM4.7xSource: Morgan Stanley Research estimates.0Rigid PCBFlexible PCBIC substrateCCL2019 2025eSource: Company data, Morgan Stanley Research. E = Morgan Stanley Research estimates. Note: Percentage indicates Chinas market share.Exhibit 4:.Chinas higher demand for server and storage at an 11.7% CAGR,

23、 2019-24, vs other regions globally.US$ bn4.3% CAGR11.7% CAGR-0.3% CAGR2.8% CAGR12010080604020Exhibit 5:.and a rise in sales of China-designed chips, which we expect will reach US$48bn (9% global market share)0North AmericaChinaEMEAROW 20192024Source: IDC, Morgan Stanley Research. E = IDC estimatesE

24、xhibit 6:Shennan Circuits is best positioned to benefit from PCB and IC sub- strate localizationMkt PreSource: Gartner, SIA, Morgan Stanley Research. E = Morgan Stanley Research estimates.Exhibit 7:Shengyi Technology is best positioned to benefit from CCL and PCB localizationMkt PreRMB bn201540%30%N

25、T$ bn25201516%14%12%1020%1010%510%00%502017201820192020E2021E8%6%2022E2017201820192020E2021E2022ESalesNet IncomeROAE (RHS)SalesNet IncomeROAE (RHS)Page 1Source: Company data, Morgan Stanley Research. E = Morgan Stanley Research estimates.Page 1Source: Company data, Morgan Stanley Research. E = Morga

26、n Stanley Research estimates.Executive SummarySince US-China trade tensions began to heighten from 2018, China started making efforts to localize various components and drive up its self-sufficiency ratio. While most of these efforts were focused on upstream semiconductors, in this report we provide

27、 an angle on how downstream technology hardware components may also benefit from Chinas drive to localize. We focus on the printed circuit board (PCB) segment, including a key upstream raw material, copper clad laminate (CCL).Why do we think Chinas self-sufficiency ratio will increase for the PCB se

28、gment?Chinas PCB production has risen in the past two decades, making it the largest PCB-producing country in the world. In 2000, global PCB production was valued at US$41.6bn, with China accounting for only 8% of global PCB production and contributing US$3.4bn in terms of total PCB production value

29、 output. By 2019, global PCBs value had increased 47% to US$61.3bn. Over the same period, Chinas PCB pro- duction value grew by 878% to US$32.9bn ( Exhibit 8 ), signifi- cantly outpacing global PCB market growth and accounting for 54% of the worlds PCB production value today ( Exhibit 9 ). This is b

30、ecause (1) manufacturing has shifted to Asia Pacific, specifically China, and (2) PCB production tends to be highly linked with end- system assembly.If China already accounts for 54% of the worlds PCB production in terms of value, why write this report now? To better under- stand what drove Chinas P

31、CB production to increase almost nine- fold, lets take a step back to understand which PCB fabricator a company decides to outsource the actual PCB fabrication to.Typically, the PCB circuit and routing is designed by either the brand (e.g., Apple, Huawei) or the end-system assembler (ODMs, e.g., Qua

32、nta, Wistron, Inventec, Compal, Pegatron, Wiwynn). For the former (such as any Apple product today), the brands themselves design the PCB circuitry and choose which PCB company to out- source the PCB fabrication to. For the latter, which is the case for most desktops, notebooks, and data center hard

33、ware, the PCB circuit and routing is designed by the ODMs. The brands that choose to work with the ODMs will ultimately sign-off on the PCB circuit and routing designs, but will let the ODMs decide which company to outsource the PCB fabrication to. Most of these outsourcing orders usually end up at

34、the Taiwanese PCB fabricators, e.g., Tripod, Gold Circuit, Compeq, Flexium, Zhen Ding, etc.This is why Chinas PCB production exhibited outsized growth vs the rest of the world over the past two decades. A lot of the end-system assembly and production was outsourced to and driven by Taiwanese compani

35、es such as Quanta, Wistron, Inventec, Compal, and PegatronExhibit 8:Global PCB production value by region (2000 vs 2019)US$ bn353025Exhibit 9:The value of PCBs produced in China reached 54% of the world in 2019 (up from 8% in 2000)8%54%100%80%2060%151050AmericasEuropeJapanRoW40%China20%Source: Prism

36、ark, Morgan Stanley Research.200020190%20002019ChinaRoWSource: Prismark, Morgan Stanley Research.that have expanded production capacity in China to leverage govern- ment incentives. They outsourced the majority of their PCB produc- tion to Taiwanese PCB companies, which drove these Taiwanese PCB com

37、panies to also expand production capacity in China. The forma- tion of these manufacturing clusters also helps accelerate the time- to-market production schedule, enhancing efficiency for their customers. Thus, the majority of the outsized PCB value growth in China over the past two decades was actu

38、ally driven by Taiwanese PCB companies that have set up production facilities in China not only to be closer to the end-system makers, but also to leverage local resources (i.e., land, subsidies, labor, etc). This is why the majority of Chinas PCB production value today is not from the mainland Chin

39、eseExhibit 10:The majority of Chinas PCB production value is contributed by non- mainland Chinese PCB companies26%29%20%14%16%17%100%80%60%40%20%0%PCB companies ( Exhibit 10 ).Because there are emerging signs of true China localization in the PCB segment: In recent years, more brands have started to

40、 design their own PCB circuitry. In the past five to ten years, Apple has been the dominant global brand that is well known to design its own PCB circuitry. Chinese brands such as Huawei and Lenovo have also started doing the same, which we think will benefit mainland Chinas PCB supply chain. In the

41、 coming years, we see three trends that will drive true China localization in the PCB segment: (1) more Chinese brands start to design their own PCB circuitry; (2) rising share of Chinese-branded products; and (3) Chinese assemblers gaining share.Chinas PCB market is also consolidating, which we thi

42、nk will benefit the larger Chinese PCB makers: We are also seeing consoli- dation in Chinas PCB market. Data over the past five years show that the top 10 mainland China PCB companies expanded at a 16% rev- enue CAGR, outpacing the total China PCB market at a 5% CAGR and the entire PCB industry at a

43、 3% CAGR ( Exhibit 12 ). In terms of market share, the top 10 mainland China PCB companies in aggregate accounted for 11% of the total China PCB market share in 2014, which climbed to 19% exiting 2019 ( Exhibit 11 ). This suggests that the market is consolidating, with the larger PCB makers seeing g

44、reater benefits from this consolidation. We believe this trend will continue in the coming years, as the larger PCB makers continue to benefit from economies of scale.201420152016201720182019Chinese PCB companiesSource: Company data, Morgan Stanley Research.Exhibit 11:Chinas PCB market is consolidat

45、ing - Aggregate revenue share of the top 10 mainland Chinese PCB companies is increasing11%14%13%16%15%19%100%80%60%40%20%0%201420152016201720182019Top 10 Mainland China PCB companies as % of total China PCBSource: Company data, Morgan Stanley Research. Note: Top 10 include Shennan Circuits, Kinwong

46、, Victory Giant, Shenzhen Fastprint, Suntak, Founder PCB, Ellington PCB, Shengyi Electronics, Xiamen Hongxin, and Bomin Electronics.Exhibit 12:Top 10 mainland Chinese PCB companies have been outgrowing the entire China PCB market, implying ongoing consolidation20016% CAGR5% CAGR3% CAGR18016014012010

47、0806040200China Top 10 PCBTotal China PCBGlobal PCB 20152016201720182019Source: Company data, Prismark, Morgan Stanley Research.Note: Top 10 include Shennan Circuits, Kinwong, Victory Giant, Shenzhen Fastprint, Suntak, Founder PCB, Ellington PCB, Shengyi Electronics, Xiamen Hongxin, and Bomin Electr

48、onics.The impact of localization by sub-segmentThe China localization trend is playing out across all sub-segments within the PCB space, such as rigid PCBs, flexible PCBs, IC substrates, and even in the upstream key raw material, copper clad laminate (CCL). Exhibit 19 shows a snapshot of the value s

49、hare of Chinese companies for each PCB sub-segment.For PCBs (rigid PCB, flexible PCB, IC substrates), we estimate the PCB production value of mainland Chinese PCB companies will reachUS$23.5bn by 2025, implying Chinese PCB companies in aggregate will reach 29.7% global PCB market share, up from 19.6

50、% in 2019 ( Exhibit 14 ). By growth rate, we expect the IC substrates sub-seg- ment to expand the fastest at a 19.9% CAGR, 2019-25, to a market sizeof US$500mn, from a lower comparison base vs rigid PCBs and flex- ible PCBs. This implies that Chinese IC substrate companies will account for a 4.2% gl

51、obal market share by 2025 ( Exhibit 17 ). This will be followed by rigid PCBs at a 12.7% CAGR, 2019-25, toUS$19.6bn, driven by rising demand from telecommunications and data centers, implying a 37.3% global market share for Chinese rigid PCB makers ( Exhibit 15 ). We estimate flexible PCBs to expand

52、 at a 7.2% CAGR, 2019-25, to a market size of US$3.5bn, implying a 23.3% global market share for Chinese flexible PCB makers ( Exhibit 16 ).We estimate mainland Chinese CCL companies will expand at a 6.7% CAGR, 2019-25, to a market size of US$3.7bn, up from US$2.5bn in 2019. This implies that the ag

53、gregate market share of Chinese CCL companies will reach 23.9% by 2025, up from just 20.5% in 2019 ( Exhibit 18 ).Exhibit 13:China 2019 market size/share vs 2025 market size/share by PCB sub-segmentChina market size China market share(US$ mn)(%)Sub-sectors20192025E20192025EKey Chinese playersKey Glo

54、bal peersRigid PCB9,57619,57523.4%37.3%Dongshan Precision, Shennan Circuit, Kinwong, Victor Giant, Shenzhen Fastprint, Suntak, Founder PCB, Shengyi Electronics, Ellington PCBAT&S, Tripod, Zhen Ding/Avary, Compeq, TTM, SEMCO, LG Innotek, KCE, Unimicron, Gold Circuit, Chin-Poon, TPTFlexible PCB2,2883,

55、46718.8%23.3%Dongshan Precision, Xiamen Hongxin, KinwongZhen Ding/Avary, Flexium, Career Tech, NOK, Fujikura, Sumitomo Electric,InterflexIC substrates1685002.1%4.2%Shennan Circuits, ACCESSIbiden, Shinko, Unimicron, Nanya PCB, Kinsus, AT&S, SEMCOCCL2,5283,72720.5%23.9%Shengyi Technology, GDM, Shandon

56、g Jinbao, Grace, Zhejiang Wazam NewMaterial, Go World CCL, Chaohua Tech, ZYSTKingboard, Rogers, Taconic, Panasonic, Doosan, Hitachi Chemical,Mitsubishi Gas Chemical, Nanya Plastics, ITEQ, TUC, EMCSource: Company data, Morgan Stanley Research. E = Morgan Stanley Research estimates.Exhibit 14:Aggregat

57、e mainland Chinese PCB companies revenue trend by sub-segmentUS$bn2530%2025%1520%1015%510%05%201420152016201720182019 2020E 2021E 2022E 2023E 2024E 2025ERigid PCBFlexible PCBIC substrateChina market shareSource: Company data, Morgan Stanley Research. E = Morgan Stanley Research estimates.Exhibit 15:

58、We estimate sales of China rigid PCB companies will grow toUS$19.6bn by 2025, accounting for 37% of the global rigid PCB market shareExhibit 16:We estimate sales of China flexible PCB companies will grow toUS$3.5bn by 2025, accounting for 23% of the global flexible PCB market shareUS$ mn20,000China

59、Rigid PCBUS$ mnChina Flexible PCB4,00025.0%3,00020.0%2,00015.0%1,00010.0%05.0%2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025EFlexible PCBChina market share40.0%15,00030.0%10,00020.0%5,00010.0%02014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E0.0%Rigid PCBChina marke

60、t shareSource: Company data, Morgan Stanley Research. E = Morgan Stanley Research estimates.Exhibit 17:We estimate sales of China IC substrate companies to grow willUS$500mn by 2025, accounting for 4% of the global IC substrateSource: Company data, Morgan Stanley Research. E = Morgan Stanley Researc