Electronic Fabric: Key to AI Electronic Fabric Is Positioning and Volume Growth; Valuation Back in Strike Zone

English summary

Electronic fabric remains the most certain link in the PCB chain. On one hand, it accounts for a tiny share of terminal BOM, so it captures greater incremental elasticity; as long as top CSPs do not give up, materials benefit from volume growth and upgrades. On the other hand, domestic players are deeply embedded in global supply chains, with high earnings deliverability. In Q3, demand from NV, Google, AMD, etc. for rack cabinets is concentrated, accelerating AI fabric volume ramps; core companies have recently raised their volume guidance for the end of this year to next year. Each company differs; we place more weight on core customer positioning and shipment ramp. International Composites second-generation fabric has the largest volume in the SY chain; Sinoma Science supplies TG and SY, giving both leading positioning and ramp advantages. Low CTE electronic fabric has a steep demand curve with relatively dispersed customers; customers are proactively locking volume, with Honghe Technology having the largest volume and high gross margins. For ordinary electronic fabric, both yarn and fabric segments face tight supply-demand and continuing price increases, and Jushi is also actively positioning in AI electronic fabric.