中泰證券：AI 需求強勁 預計數通領域 PCB 需求將持續景氣

According to the financial news app Zhitong Finance, Zhongtai Securities released a research report stating that based on Prismark data, the server/data storage sector is expected to account for approximately 11.8% in 2023, with a compound annual growth rate of 6.5% from 2022 to 2027. It is also the downstream sector with the highest growth rate for PCBs. The AI-driven computing power boom is a major cycle, with data communication PCBs benefiting the most, and future growth is expected to remain high. Due to strong demand for AI, it is expected that PCB demand in the data communication sector will continue to be robust. PCB manufacturers focusing on the data communication sector with technological accumulation and active exploration of key domestic and foreign clients are expected to sustain high growth in their performance.

Zhongtai Securities' main points are as follows:

1. AI Drives a Major Computing Power Cycle

The computing power explosion is driving rapid growth in the data communication sector. With the emergence of ChatGPT and endless layers of large models in various AI fields, AI iterations are accelerating competition. Subsequently, applications such as autonomous driving and AIoT will continue to drive AI development, which in turn will accelerate the demand for data computation.

Data center capital expenditures are on the rise. To keep up with the trend of AI development, global data center expenditures for computing and storage are continuously increasing. According to IDC data, it is projected that by 2024, total cloud infrastructure spending will reach $138.3 billion, a year-on-year increase of 26.1%, and total data center computing and storage spending will reach $203.1 billion, a year-on-year increase of 19.9%. AI-related infrastructure remains highly prosperous. In addition to AI training servers, AI infrastructure also includes other equipment such as switches for networking. The high-speed communication sector is expected to remain in a state of high prosperity, and PCBs, as the basic hardware of the high-speed communication sector, will continue to upgrade as product specifications improve.

Based on Prismark data, the server/data storage sector is expected to account for approximately 11.8% in 2023, with a compound annual growth rate of 6.5% from 2022 to 2027. It is also the downstream sector with the highest growth rate for PCBs. The AI-driven computing power boom is a major cycle, with data communication PCBs benefiting the most, and future growth is expected to remain high.

2. General Server Upgrades + Increased AI Server Volumes Drive PCB Volume and Price Increases

Servers, as the soul of network nodes, have high requirements for PCBs. Servers, as network nodes, store and process over 80% of data and information on the network, hence they are also known as the soul of the network. Terminal devices need to access information, communicate with the outside world, and entertain through servers. Servers require higher performance, mainly in terms of computing power, data processing capabilities, stability, reliability, security, scalability, and manageability, and similarly, servers have higher requirements for PCBs.

Global server shipments have been growing steadily over the past 20 years, and a new round of replacement cycles is expected to be driven by the high capital expenditures in data centers: In recent years, the server market has experienced steady growth. By 2022, due to restrictions on offline scenarios caused by the pandemic, the demand for "online" and "remote" services has led to a continuous increase in server shipments, reaching a historical high. However, server shipments are expected to decline in 2023. Looking ahead, with the demand for updates brought by new server platforms and increased capital expenditures in data centers, the server market is expected to experience a recovery in growth The proportion of ODM server factories is showing a clear upward trend. Currently, ODM manufacturers' shipments in the server market have increased from 13.26% in 2013 to 35.64% in 2023. The advantages of the ODM model mainly include: 1) Better performance: Standard servers often cannot meet the application requirements of all scenarios, while customized servers are developed, configured, and optimized according to the different scenarios of enterprises; 2) More stable and reliable: Customized servers are specifically designed for specific applications, and during the development process, workloads for special scenario applications are optimized, making the load more balanced compared to traditional servers, thus ensuring greater stability and reliability; 3) Lower overall ownership costs: Although the procurement cost of customized servers is higher, the matching of server computing performance with business through customization results in higher computing efficiency, meaning that fewer servers can support the same business.

Server platforms continue to upgrade, increasing the requirements for PCB. Generally, servers on chip platforms in various eras have upgraded all aspects of PCB materials and layers. Taking Intel's Eagle Stream platform as an example, its server PCB layers, materials, and design processes have all been upgraded, significantly increasing PCB prices. The number of layers has been upgraded from 12-18 layers in the previous generation platform to 14-20 layers. According to Prismark data, in 2021, the price of 8-16 layer boards was $456 per square meter, while boards with 18 layers or more were priced at $1538 per square meter, showing a significant increase in PCB value.

Large model data computations such as ChatGPT are growing rapidly, driving the rapid increase in AI server deployment. The increased computational demand brought by large models like ChatGPT has led to a rapid growth in the demand for AI servers. According to Trend Force data, it is expected that the shipment of AI servers will reach nearly 1.2 million units in 2023, a year-on-year increase of nearly 38.4%. It is estimated that by 2026, the number of AI servers will exceed 2.3 million units.

AI servers have higher requirements for PCB and CCL due to their higher computational speed requirements. Taking NVIDIA's H100 server as an example, the PCB layers used in its GPU module reach as high as 26 layers, with the OAM being a 5-layer HDI board, and all CCL materials used are Ultra Low Loss. The PCB value of the GPU module exceeds $2500, the CPU module value exceeds $600, and additional components such as power supplies and hard drives are expected to exceed $30, making the total PCB value approximately $3221.

In terms of market space, it is expected that with the continuous increase in the penetration rate of PCIe 5.0 servers, the specifications and value of PCBs will further increase. It is estimated that the general server PCB market space will reach $8.186 billion by 2026.

AI servers, due to their higher overall PCB value and the expected rapid growth in line with the overall AI trend, are expected to drive rapid growth in the AI server PCB market and are expected to become one of the fastest-growing sectors in the PCB sector in the future 3. Switches and Optical Modules Synchronized Upgrade, Promising Future Space

Switches are network devices that provide dedicated electrical signal paths for access network nodes. From the perspective of the industry chain, the upstream of the switch industry chain consists of six types of resource providers, namely PCB/electronic components, operating systems, switching chips, CPUs, optoelectronic chips, and optical modules, with highly concentrated upstream suppliers; the middle of the industry chain is switch manufacturers; downstream customers of the industry chain include cloud computing companies, telecom operators, other enterprises, and home users.

With the improvement of the 400G penetration rate and the end of destocking, the overall market space of the switch market is expected to see a restorative growth in 2022 and 2023, with the market size reaching $52.8 billion in 2023.

In terms of competitive landscape, Cisco is the core supplier of switches, with a market share exceeding 40% in the past five years, while Arista and Huawei are in the second tier, each with a market share of around 10%.

As servers continue to upgrade, the overall trend of switch upgrades is evident. According to Dell'Oro data, 800G switches will start to be mass-produced in 2024, and high-speed switches represented by 800G are expected to become the mainstream of the overall market in the future.

Due to the higher rate requirements of 800G switches, the requirements for PCBs are expected to be further enhanced, leading to a significant increase in the overall value of PCBs. It is expected that with the further increase in the penetration rate of 800G switches in the future, the switch PCB market will experience rapid growth.

The upgrade of optical modules significantly increases the requirements for PCB specifications: According to industry chain research, due to the complexity of the lines, 400G optical module PCBs mostly adopt HDI solutions, while 800G optical modules, due to higher transmission rate requirements, have different customer requirements for optical module PCB specifications, such as HDI or SLP solutions, and 1.6T optical modules generally require SLP solutions. The upgrade of optical modules will drive a significant increase in PCB price/profit margin levels, and the future optical module PCB market is expected to grow rapidly.

According to Lightcounting's forecast, the global market size of optical modules is expected to maintain a CAGR of 11% from 2022 to 2027, with the potential to exceed $20 billion in 2027. With the growth of traffic broadband, 100G and 400G optical modules have become mainstream in 2022, and it is expected that 800G optical modules will become the main shipment growth engine in 2024.

Risk Warning:

Risks of industry demand falling short of expectations; intensified industry competition; fluctuations in raw material prices; risks of deviation in industry scale estimation; risks of outdated research report information: Research report information is public information and research data, which may have a certain impact due to outdated information updates