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Copper price reduction on the PCB industry

Macroeconomic recession is expected to overlap the supply and demand shift, copper prices in June have a high level of decline. As the “mother of electronic products,” PCB suffered from rising pressure on raw materials last year , this year, burden of the industry are expected to be reduced.

On the other hand, despite the downturn in the development of consumer electronics, but the pace of expansion of the PCB industry does not slow down, many companies are in the transition to higher-end varieties.

The drop in copper prices reduces the pressure on PCB manufacturers

Data shows that China’s Shanghai copper prices have continued to fall since mid-June, a cumulative decline of more than 10%, as of June 30 data reached 63,200 RMB / ton, approaching the starting point position in February last year; London Metal Futures Exchange (LME) data shows that the LME copper latest offer of $ 8274 / ton, hitting a near 16-month low.

The cost of PCB manufacturers is more sensitive to upstream raw material prices, which usually account for 50% to 75%, among them, copper clad PCB and other copper products are the core raw materials. Copper prices have fallen sharply, PCB companies whose profitability was suppressed last year will benefit from this.

“As the United States entered the interest rate hike cycle, global liquidity weakened, commodity prices bearish forces are relatively strong, it is expected to the end of this year, copper prices are less likely to rebound significantly.

According to the calculations of a securities practitioner, copper per 10% decline, will raise the average gross margin of PCB companies 0.55%. Stepping into June, PCB listed companies have said that the main raw material prices have fallen back.

Some companies said that the overall price of major raw materials currently remains stable, compared to the average price of 2021 has fallen back. They will continue to pay attention to the international market price changes in copper and other commodities, and maintain active communication with suppliers and customers.

Some other companies also said that with the gradual easing of the supply tension of upstream copper clad board manufacturers, the company’s copper clad board purchase price continued to decline since February this year,which gradually ease the pressure on the company’s costs.

At the same time, in order to absorb and transfer the pressure brought by the rising cost of upstream raw materials, the company will continue to improve per capita output value and per capita efficiency through a number of measures to reduce the unit cost of products – such as price increases for some products, unit section cost control, and increasing the area of assembled boards to improve material utilization.

It is expected that in the future, with the release of upstream raw material manufacturers production capacity, the company will gradually ease the pressure of rising raw materials. The lower copper price greatly relieves the production and supply pressure for suppliers in the upstream of the industry chain, while there are some impacts for suppliers and consumers in the downstream.

Consumer electronics demand decline brings a chain reaction

copper price and electronicsChina PCB upstream consumables leading suppliers said that crude oil, copper and other commodity prices have a relatively large impact on the cost of upstream materials in the PCB industry, but commodity price changes to the downstream conduction are usually required 2 to 3 months.

Under the influence of the COVID, the raw material price reductions extend the conduction cycle. Compared to the fall in copper, laminates and other raw materials prices, the biggest challenges the PCB industry faces is that the epidemic disrupting the supply chain, as well as the ripple effect of lower demand for consumer electronics.

PCB upstream consumables manufacturers said that many PCB customers begin to cancel orders in May and June,and some even canceled 1/2 orders.”Although the company has resumed work and production, but now far from a return to normal levels.” Certain cities in China is good evidence that the impact of the epidemic period on the entire electronics industry, especially the tension in logistics, which results in a significant increase in freight costs and extended supply cycles.

In addition, the COVID led to lower demand for consumer electronics, reduced orders and lower prices, which put pressure on the Company’s production and operations.

A company executive said the second half of 2020, the impact of the epidemic brought the “home economy” (Note: home economy is a new word with the rise of the network, the main meaning is to work at home, part-time work at home, work at home or work at home in business) demand.

“Home economy” Consumer orders turned weak in the third quarter of last year after nearly 10 months of sustained strength. At the same time, At the same time, raw material prices fluctuated, which brought about adjustments in laminate prices and increased expectations of downstream customers for price reductions.

From the point of view of capacity planning, this year, the new production capacity of copper clad board will be concentrated in the second half of the year, is expected to increase about 10% capacity throughout the year. At the same time through the adjustment of product structure in recent years, the proportion of traditional products fell to less than 5%, while the proportion of medium and high TG, halogen-free, high thermal conductivity, high frequency and high speed, packaging and other high-end products gradually increased.

2019 and 2021 are important years in the PCB industry, of which, 2019 into the climax of the construction of 5G communication base stations, and product gross margins becomes high. 2021 the first half of product demand is high, but the second half tends to be weak.

With the cell phone change cycle lengthened, the electronics does not boom, which affecting the demand for orders. In contrast, the automotive electronics market prospect is bright. The automotive application market is currently the company’s largest sales business segment.

Companies expand the new energy vehicle market actively, and have achieved on Tesla, BMW, Volkswagen, Porsche, Xiaopeng and other brands of new energy vehicles supply. About capacity, some companies have planned new PCB projects in 2020 that expected to start gradually put into production in 2022. Expansion into high-end PCB products

Expansion into high-end PCB products

According to forecasts, the global PCB industry output value will reach $75.846 billion in 2024, with a compound growth rate of 4.3% from 2019 to 2024.In addition to Hong Kong, Macau and Taiwan , China’s output value is expected to reach $41.77 billion,and compound growth rate will exceed the global average in 2024. More specifically, IC packaging substrates will be the fastest growing PCB segment.

In the background, PCB industry listed companies have turned to the automotive electronics, data communications , and the IC carrier board and other high-end areas. Electronics analysts pointed out that, from the type of view, the IC carrier board category will be better, the localization rate of 4% last year is expected to reach 5% to 6%. ABF carrier board is mainly used in GPU, CPU car, and BT carrier board is mainly used for IF RF, memory chip type.

In China, some companies packaging substrate project is mainly oriented to FC-BGA packaging substrate, RF packaging substrate and FC-CSP packaging substrate products. At present, their RF, FC-CSP packaging substrate products have been relatively mature and have achieved mass production; FC-BGA packaging substrate products are more technically difficult.

The progress of the relevant research and development is in line with development expectations, and some companies have even built IC packaging substrate capacity production line and started trial production, and plan to enter the trial production stage around the end of 2023.

As a key raw material, copper foil is an important material for copper-clad panels and PCB, lithium-ion battery manufacturing. With the full explosion of demand for downstream new energy and other market applications last year, upstream copper foil companies have also stepped on the road of production expansion.

According to data, in 2021 China electrolytic copper foil to achieve new annual production capacity of about 116,000 tons, the total annual production capacity of 721,200 tons. Among them, there is an additional 87,000 tons of copper foil capacity for lithium batteries; 29,000 tons of new copper foil capacity for electronic circuits, and the industry is in a highly booming state.

In addition, driven by the construction of new infrastructure, 5G base stations, automobiles, home appliances, etc., the demand for copper-clad panels is high and was intensively put into production last year.

According to statistics, last year, China’s copper clad board enterprises to set up 15 projects, cast expansion projects 26, put into operation 8 projects. 15 projects (signed) of copper clad board projects, are expected to add copper clad board production capacity of about 164.84 million square meters / year; if the project plan can start on time, the new capacity will be released in 2022-2024 year by year.

Although the price of copper foil and other prices have retreated, but listed companies are still determined to promote the expansion of production and high-end projects. Some companies have spent huge amounts of money to start construction of high-density electronic copper foil and high-frequency copper-clad board projects with huge annual output and are nearing completion.

Besides, many companies have successfully expanded their production capacity. Although some are affected by the COVID, the equipment delivery period is lengthening, even taking up to four years, the supply and demand in the copper foil industry remains tight overall with the rapid development of new energy, photovoltaics, energy storage and other fields.

Conclusion

It is obvious that the overall momentum of the industry is non-stop upward against the backdrop of today’s rising copper prices. The companies should seize the opportunity to develop to high-end products and expand their production capacity, but also pay attention to the potential dangers brought by factors such as the epidemic and adjust their development strategies and directions according to the trend.

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