AI industry chain PCB upstream six shortage of materials and electronic grade hydrofluoric acid demand analysis

You think NVIDIA is currently worried about not being able to produce chips? You're completely wrong! What NVIDIA is currently facing the biggest headache is that the GPUs have been produced, but they simply can't fit into the servers. Because the GPUs are lacking a board, the PCB value in the latest NVIDIA Veraubing200 cabinet has skyrocketed by 233%, from $35,000 to $116,700. It's 10 times that of an ordinary server. Even more astonishingly, the copper laminate leader Kingboard has raised its prices for laminated boards for the fourth time this year, with a cumulative increase of over 40%. The PP semi-cured sheet has directly increased by 20%. Why is it skyrocketing like this? Because the upstream six core materials for PCBs simply can't keep up with the demand, and the biggest shortage directly reaches over 60%. Even with money, it's impossible to get the goods. At the same time, the demand for high-end hydrofluoric acid in the AI sector is indeed "structurally" in short supply, and this tight balance is unlikely to be alleviated in the short term. The core reason lies in the mismatch between supply and demand and the explosive demand. AI chips not only have a rapid increase in quantity, but the complexity of the manufacturing process per chip (such as thousands of steps in advanced processes) and the HBM stacking technology also make the consumption of hydrofluoric acid in the etching and cleaning processes increase exponentially. This is a rigid incremental demand. However, the technical barriers for high-end electronic-grade hydrofluoric acid required by the AI industry are extremely high, with extremely high purity requirements. High-end hydrofluoric acid suppliers expand production slowly and have extremely long certification cycles. The global high-end market has long been dominated by Japanese companies, but the main Japanese plants are old and have weak expansion intentions, and supply growth is limited.

1. Next, let's analyze the 6 core materials of PCB upstream:

1.1 ABF substrate: 60% shortage, the most lacking one without any exception.

This is the translator between the chip and the PCB, the core foundation of advanced packaging technology. Now, AI chips need to have a line width and line spacing of 10 microns, 10 times thinner than a hair, and the yield improvement needs to be calculated by the year. The factory construction takes 2 years, and it takes another year for the yield to climb up. The long construction period makes the production capacity fundamentally unable to keep up with the explosive growth of market demand. Currently, the core production capacity of Taiwan factories such as Taiwan factory Xinxing and Nanya has been booked by giants like NVIDIA and AMD, with long-term orders locked until the end of 2026. New production capacity will not be implemented until 2027. Both Shenzhen Nan Circuit and Xinsen Technology are absolute leading enterprises in China. The Guangzhou FC and BGA projects of Xinsen Technology are already in progress, and this is the biggest highlight in the future.

1.2 Low CTE ultra-thin electronic fabric: Gap 45%-65%.

This is the main fiber of the copper-clad laminate. It is the key material that determines the dimensional stability of the PCB board and directly affects the reliability of chip packaging. Ordinary electronic fabrics are in excess production, but ultra-thin fabrics below 30 microns required for AI servers and high-end PCBs are the most critical bottleneck in the current industrial chain. 85% of the global production capacity is monopolized by Japan's Hitachi Chemical alone, and it has no expansion plans. The higher the barrier of the ultra-thin fabric weaving process, the smaller the production elasticity, and it is difficult to alleviate the shortage in the short term. China Honghe Technology is the only company capable of producing second-generation ultra-thin fabrics. China Materials Technology and China Jushi are also actively developing, and China Taitan Shares break through the bottleneck of high-end looms.

1.3 Carbon-hydrogen Resin: Deficiency 40%-55%.

This is the low-loss material for high-frequency boards. 5G/6G base stations and AI servers are all competing for it, resulting in extreme shortage at the demand end. One gram of resin is used to make one board. Its molecular structure determines the dielectric loss. Currently, there are no low-cost and high-performance alternative materials available. Dongcai Technology from China has already supplied M9 and carbon-hydrogen resin in bulk to NVIDIA. It is the only company in China that has achieved this level. Now the M10 grade is also being verified with international customers. The new production capacity will be put into operation by the end of June, directly solving the production capacity bottleneck. Also, China's Shengquan Group and Huazheng Xincai are also involved in the layout.

1.4 PCB drill pins: Gap 30%+; from durable products to fast consumer goods.

These are the pioneers in the micro-hole world, with precision down to 0.1mm or less. They can produce thousands of holes per second. The wear is measured in nanometers, and they become obsolete within a few hours. They have transformed from durable components to fast consumer goods. The global leader in drill pins is China Dtech (DTECH), with a global market share of 28.9%, ranking first globally. Currently, they are operating at full capacity and selling out at full rate. The monthly production increase of 10 million pins still cannot meet the demand. There is also China Zhongtong High-Tungsten, which is a core tungsten steel substrate enterprise for drill pins and also directly benefits from this.

1.5 High-speed copper foil: Gap 15%-25%, approaching the atomic-level limit.

This is the highway surface for signals. The roughness is reduced by 1 micron, and the signal loss is directly reduced by one order of magnitude. Currently, the high-end copper foils used by AI require the roughness to be controlled within 1 micron. The production accuracy has reached the threshold of atomic-level manufacturing, and the process barriers are extremely high. Now, the gap of high-end copper foils above HVLP4 reaches 28%. The core production lines worldwide are operating at full capacity, and the supply pressure is difficult to alleviate in the short term. China's Tongguan Copper Foil, Nuode Group and Nan Ya New Materials are the main suppliers.

1.6 High-end Chemical Silicon Powder: In high demand, it is the cornerstone of copper clad laminates.

This is the heat expansion agent and blending agent for copper clad laminates. It can effectively adjust the thermal expansion coefficient, ensuring the dimensional and performance stability of high-frequency and high-speed copper clad laminates in extreme high-temperature environments. Ordinary flame-based silicon powder has sufficient production capacity, but what is lacking in the market is high-end liquid-phase chemical silicon powder. It has high technical barriers, a long production cycle, and extremely high environmental requirements. It demands triple compliance with purity, sphericity, and particle size distribution. Even one impurity will cause the entire batch of boards to be discarded. China Lianrui (NOVORAY) Materials is one of the few core enterprises capable of producing liquid-phase chemical high-end silicon powder and has already started supplying goods. The Yishitong Low-α high-purity silicon powder of China Nanya New Materials has entered the supply chain of leading CCL companies in Japan and South Korea.

2. The demand for high-end electronic-grade hydrofluoric acid is extremely tight.

Electronic-grade hydrofluoric acid is an indispensable cleaning and etching solution in chip manufacturing and is used in large quantities. Its demand was triggered by the expansion of the entire AI industry chain. The expansion of AI chip production capacity, the increase in AI servers, the explosive demand for advanced manufacturing processes such as GPUs and HBM, directly led to an increase in the usage of upstream wet electronic chemicals, including hydrofluoric acid. The expectation of both rising quantity and price is clear. Due to the "hard constraints" on supply, hydrofluoric acid for high-end products (G5 grade) has already experienced a shortage of supply and a clear upward trend in prices.

Summary:

The opportunities of AI are not limited to the highly-publicized chip sector. Against the backdrop of rapid expansion in computing power, the six key raw materials at the upstream of PCB have firmly taken the lead in the industry trend thanks to strict technical barriers and a slow expansion cycle of production capacity.

What AI PCB lacks is the material for the "board". The tight shortage at the upstream of PCB is merely a "signal" of the AI boom.  However, high-end electronic-grade hydrofluoric acid is a must-have for chip manufacturing and has a clear benefit logic. It is entering a prosperous cycle driven by the demand for computing power, supply rigidity, and price increases. Both are jointly benefiting from the AI wave, and their demand is the result of parallel development.