Will the PCB Industry Face a "Material Shortage Year" in 2026? With Updates on Copper Foil, Drill Bits, Glass Fabric, and M9

October 30, 2025

The PCB industry might encounter a "Material Shortage Year" in 2026, with the core logic being "Materials Enable Computing Power." Tight supply and demand of upstream materials are driving price increases, midstream high-end capacity is constrained with overseas capacity prioritized, and downstream customers are actively securing orders, leading to a reshaping of the industry supply chain.

1.Copper Foil: Monthly demand for HVLP4 copper foil has been revised upwards to over 3,000 tons, while supply expansion is slow. Since October 2025, manufacturers like Mitsui and Furukawa have initiated price hikes (around 2 USD/kg or 5%-10%). Increases in processing fees are inevitable. The supply-demand gap is projected to reach 25% in 2026 and 42% in 2027, indicating a continuously widening shortage.

2.Drill Bits: Capacity/output value at major high-end PCB manufacturers is surging, but drill bit producers are expanding cautiously. The supply-demand imbalance is expected to persist until 2027. High-margin products will drive profit growth for related companies in 2026.

3.Glass Fabric: Taiwanese glass fabric suppliers are prioritizing Chinese customers. Second-generation fabric is becoming mainstream, driven by demand from new-generation ASIC servers and 800G/1.6T switches. In 2026, monthly demand for Low Dk glass fabric is estimated at 18.5 million meters, against a supply of only 10 million meters, creating a significant gap. Yield issues are exacerbating delivery lead times, presenting opportunities for price increases. Quartz fabric still requires time for wider adoption.

4.Key Material Upgrade: Transitioning to the 224Gbps transmission architecture (1.6T) requires CCL to upgrade from M8 to M8.5~M9. M9 primarily uses quartz fabric, adopted in parts of Nvidia's Rubin boards. Major suppliers include TUC, Shengyi Technology, and Doosan. Quartz fabric offers superior performance but is difficult to process and expensive (about 40 times the cost of E-glass).

How to View the Current Drill Bit Supply-Demand Gap?

Catalysts: Nvidia's Rubin shipment guidance exceeded expectations; Shenghong raised its value content guidance. At the GTC conference, Nvidia provided shipment guidance of 20 million for Blackwell/Rubin, surpassing the market expectation of 15 million. Starting next year, Nvidia, TPU, and TRN3 are expected to see confirmed volume increases, coupled with value growth from technological upgrades. Shenghong mentioned in an earnings call that the PCB's value content could reach about 5%, potentially rising to 10% in the long term, exceeding market expectations and further expanding the PCB market's potential. The drilling process exhibits the highest elasticity, with the drill bit shortage intensifying and the trend towards high-end drilling machine iteration accelerating.

How Large is the PCB Drill Bit Supply-Demand Gap?

We estimate the total supply of AI drill bits this year is approximately 650 million units. Next year, demand is projected to surge to over 4 billion units, resulting in a supply-demand gap of about 2.2 billion units. By 2027, the market size could exceed 30 billion yuan, with a gap of around 6 billion units. Even assuming all drill bit manufacturers' capacity is allocated to AI drill bits, a shortage would still exist. Starting next year, drill bits will become the most critical bottleneck in PCB capacity expansion. Key focus areas: progress of price increases, expansion progress, and price hikes from upstream raw material suppliers. We continue to focus on Dingtai Tech and China Tungsten, and monitor potential secondary suppliers like Ouke Yutong and Huarui Precision.

AI New Materials Update: Adoption of M9 is a Matter of Time

1.Why is there significant skepticism about M9?

Despite various sources indicating M9 usage in CPX and midplanes, the market continues to seek verification. Without official confirmation, the market remains cautious. Our view is that the upgrade is a major trend, and M9 adoption is inevitable. The key questions are where it will be used, when, and this is difficult to disprove in the short term.

2.Why is the news flow regarding Quartz fabric so complex?

CCL is a combination of "fabric, resin, filler, copper foil." Achieving the dielectric constant and loss tangent for M9 grade involves different combinations of these four materials; there's no single standard formula. Therefore, CCL and PCB downstream players cannot provide definitive answers to the market. Quartz fabric won't ramp up simply and quickly – easy volume expansion would mean price drops. The current phase is advantageous – demand exists, inventory is being built, and prices are high.

3.Regarding usage volume?

Assuming M9 is used in Rubin ① CPX, ② Midplane, ③ 1.6T switches, ④ Rubin Ultra orthogonal midplane sampling, we conservatively estimate the annual demand for Quartz fabric in 2026 to be over 10 million meters.

Assuming Taishan Fiberglass (Zhongcai) holds a 35% market share, the estimated profit contribution is 350-400 million RMB.

(1) Midplane: Begins application with Rubin. Each GPU corresponds to $160. For 40,000 racks, 144 chips per rack, this represents a pure incremental market space of $900 million - $1 billion. Assuming Quartz fabric constitutes 15% of the cost, this translates to a $100 million space. At 200-250 RMB/meter, the annual Quartz fabric space is 4-5 million meters, or 300,000 - 400,000 meters per month.

(2) CPX: Refers to the network card on CPX, estimated volume is likely 60-70% of the midplane volume.

(3) 1.6T switches: Estimated at 200,000 meters/month.

(4) Orthogonal midplane sampling: Partial demand.

(5) Total estimated demand is around 1 million meters/month, annualized to over 10 million meters.

AI Copper Foil HVLP4 – Nearing the Standard Answer

Progress is steady. Tongguan's HVLP4 has passed verification and is shipping in small batches to downstream Taiwanese companies. M9 is dominated absolutely by a specific Taiwanese manufacturer.

Both M8 and M9 use HVLP4. Copper foil continues to be in tight supply, representing the strongest certainty, with an optimal supply structure and low domestic substitution rate. Currently, mature HVLP4 suppliers are only Mitsui and Furukawa. Domestic Tongguan and Taiwan's Chinatungsten are at a similar stage of progress.

Second-Generation Fabric is not out of the game; demand remains strong, and the gap is clear. Next year, second-generation fabric will find many applications (likely in GB300, Rubin computer + switch tray, Google). Supply still relies mainly on overseas sources. If the ramp-up of domestic second-generation fabric isn't rapid, the supply gap will be significant.

Continued focus on substrate upstream materials.Since April, Japanese substrate manufacturer [Ibiden] has seen stock price increases of 300-400%, reflecting strong downstream demand (BT substrates for memory, ABF substrates for AI servers) and price increases driven by raw materials like Low-CTE electronic fabric and carrier copper foil.

Fundamental Leaders: [Tongguan Copper Foil], [Zhongcai Tech], [Han's Laser], [Dingtai Tech], [Xinci Micro], [Feilihua].

CCL Upstream Copper Foil Update:

1.Capacity & Demand: The supply-demand gap may continue to widen. After Mitsui's capacity conversion next year, high-end copper foil capacity is estimated at 8,000+ tons, with total industry high-end capacity around 10,000-20,000 tons. Focusing solely on HVLP4, the gap is already substantial:

(1)Assuming 80-90% yield: Rubin demand ~300-700 tons/month, Amazon AWS 800-850 tons/month, Meta MTIA 200 tons/month, AMD MI450 100-200 tons/month, 800G switches 400 tons/month. Total: 1,800-2,350 tons/month.

(2)Nvidia's actual yield is 50-60%, revising Rubin's HVLP4 demand to 400-1,300 tons/month. Total demand revised to 1,900-3,000 tons/month.

2.Processing Fee Increase Recap:

(1)Chinatungsten raised RTF prices by 5-10% in August. Furukawa raised all series by 5-10% in September. Mitsui raised all series by 10% in October. There's a trend for further increases in Q4. Luxembourg also recently started raising prices by ~10%.

(2)Industry HVLP3 processing fees have increased to 200,000-250,000 RMB/ton (previously 150,000). HVLP4 processing fees have increased to 250,000-300,000 RMB/ton (previously 210,000-220,000).

3.Next-Gen M9 Solution: M8 will be the mainstay next year, with expectations for M9 volume growth. M9 has high Quartz fabric and HVLP4 content. Therefore, considering demand-side impacts in the coming years, we expect HVLP3+4 to be the largest incremental factor next year, while Quartz fabric's earnings contribution is more certain for 2027.

Core Focus: Defu Technology (technical expertise, product diversity, strategic positioning), Feilihua (order certainty), Huazheng New Material (major breakthrough in industry landscape).

Fubon Securities' October report "2026 PCB Industry Outlook: Materials Enable Computing Power" pointed out: The AI and high-computing era is driving a comprehensive increase in the value content of the PCB industry. 2026 will be a critical year for accelerated industry growth and structural upgrade.

I. Industry Trends: Shifting from "Volume Competition" to "Material Competition"

1.AI Computing Power Drives Structural Upgrades

High-speed transmission demands are boosting needs for high-layer count boards, IC substrates, HDI, and rigid-flex boards.
PCBs are no longer just basic electronic connectors but "physical enablers of computing power."

2.Significant Technological Divergence

Servers and AI accelerator cards bring requirements for high-speed, high-frequency, and high thermal dissipation design.
Increased material value content becomes the main theme: comprehensive upgrade of the [Glass Fabric, Copper Foil, Resin] system.

II. Key Growth Drivers for the Industry in 2026

1.AI Servers, Switches, and Optical Modules Drive High-End PCB Demand

Benefiting companies: Shenghong Technology, Shennan Circuits, Jingwang Electronics, Wus Printed Circuit, etc.
AI server motherboard layers are expected to increase from 24 layers to over 30 layers.

2.Automotive Electronics and Advanced Packaging Sustain Growth

Electric vehicles and ADAS systems are driving ~15% annual growth in automotive PCB demand.
Strong demand for substrates used in advanced packaging; FC-BGA, SiP substrates continue volume expansion.

3.Regional Transfer and Capacity Expansion

Mainland China remains the core production base; Southeast Asia becomes the second growth curve.
Companies like Shenghong, Jingwang, and Ask Technology are accelerating factory setups in Thailand and Vietnam.

III. Rebalancing Cost and Valuation

Pressure from material price increases can be passed downstream through technological upgrades and product mix optimization.
Valuation logic shifts towards "Materials Enable Computing Power": The market will reprice companies with high-performance materials and high-end capacity.

IV. Investment Conclusion

The PCB industry will officially enter a new cycle of "High Computing Power + High Added Value" in 2026.