Sinolink Securities Co., Ltd. has released a research report indicating that in the first half of this year, the fundamental performance of upstream materials in the PCB supply chain significantly outpaced that of downstream PCB manufacturers. However, the second half is poised to bring dual marginal changes for the PCB segment—new product shipments and profit repair—making the acceleration of fundamental momentum highly certain. The current sector allocation value is considered attractive and warrants investor attention.

Upstream materials accelerated first in the first half. The earnings acceleration for upstream materials began as early as Q1 2026, with quarter-over-quarter growth changes in revenue, net profit attributable to shareholders, and non-GAAP net profit in Q1 2026/Q4 2025 being notably stronger. By comparison, the acceleration in the CCL segment only peaked in Q2 2026, while the PCB segment had yet to show signs of acceleration in the first half. Data shows that the CCL segment's quarter-over-quarter growth changes for revenue, net profit, and non-GAAP net profit were -3pct, -428pct, and -433pct in Q1 2026/Q4 2025, but jumped to 37pct, 188pct, and 157pct in Q2 2026/Q1 2026, marking its acceleration point in Q1. For the PCB segment, Q1 2026/Q4 2025 quarter-over-quarter changes were -10pct, 163pct, and 57pct, while Q2 2026/Q1 2026 saw 31pct, 4pct, and 18pct—remaining broadly stable overall.

Two factors explain this divergence. First, high-end AI new products did not see large-scale shipments in the first half. Products such as NVIDIA's Rubin, Amazon's next-generation Trainium3, and Google's TPU V8 series are scheduled for shipment in the second half of 2026, leaving the first half as a shipment vacuum—a factor that impacts A-share PCB companies more than midstream or upstream players. Second, both visible and hidden AI inventory building crowded out mid- and low-end products. Although AI new products saw weak shipment momentum in the first half, customers issued small-scale inventory notices in late March and full-scale supply chain preparation notices in May. Given that most industry players are bullish on AI's forward-looking positioning, the drive to shift capacity toward AI product R&D and testing was substantial, ultimately causing severe capacity shortages for mid- and low-end PCB upstream materials and triggering frequent price hikes.

The second half is expected to bring dual benefits of new product shipments and profit repair for PCB. Sinolink Securities Co., Ltd. believes that starting from Q3, the earnings growth trajectory for PCB is likely to accelerate, positioning PCB as one of the most standout sectors. The core reasons are twofold. First, high-end AI new products have begun shipping. According to supply chain tracking, some high-end AI products already shipped in late July, with the latest part numbers entering mass production by mid-August. Production is expected to remain at full capacity through year-end, and PCB—being the segment with the largest AI exposure—will benefit significantly. Second, PCB pricing is beginning to transmit. In the first half, when price increases from midstream and upstream reached PCB makers, they were not fully passed on to customers. However, Sinolink Securities Co., Ltd. observes this situation is actively improving, and from a supply chain perspective, PCB profit levels are expected to rise further in the second half, steepening the segment's acceleration curve. Data supports this view: Taiwan-listed PCB makers' monthly revenue growth has shown notable year-over-year and sequential changes. In July 2026, monthly revenue growth reached 39% year-over-year—the highest growth rate so far this year—with sequential growth of 13%, signaling that the inflection point has emerged.

Technological innovation continues to underpin the PCB industry's growth. As long as technological advancement persists, even AI-related volatility will not undermine the industry's value growth and earnings sustainability, making the continuity of technology iteration a critical anchor for valuation. Visible AI PCB technology iterations remain ongoing. First, PCB orthogonal backplanes. In NVIDIA's current Rack architecture, the interconnection between Compute Trays and NVLink Switch Trays relies on copper cables, which face significant heat dissipation and assembly challenges. The industry is exploring new solutions for better mass-production outcomes. Sinolink Securities Co., Ltd. notes that the PCB orthogonal backplane technology previously used in communications could be a key direction to address this issue. If adopted, PCB value content would see further upgrades, providing medium- to long-term growth support for the sector. Second, CoWoP design shifts substrate value to PCB. The CoWoP design eliminates the packaging substrate process and connects directly to PCB, increasing PCB complexity. While it remains uncertain when such products will become mainstream, Sinolink Securities Co., Ltd. believes this approach demonstrates that overseas terminal manufacturers still place significant emphasis on PCB technology in future designs, serving as long-term support for PCB technology evolution.