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A PCB listed company announced that it signed a "Strategic Cooperation Agreement" with an upstream electrolytic copper foil supplier, agreeing to establish a long-term strategic cooperative relationship and become important partners of each other.

Comment:

Electrolytic copper foil is an indispensable raw material for PCB production, accounting for about 11% of the cost.

Electrolytic copper foil is divided into lithium battery copper foil (7-20μm), standard copper foil (12-70μm), ultra-thick copper foil (105-420μm), among them, lithium battery copper foil is one of the basic materials of electric new energy industry. It is used in the field of lithium-ion batteries, such as shielding plates and power multilayer boards for power industry systems, high-power lithium batteries for power, flexible circuit boards for automotive electronic control systems, lithium batteries for mobile phones, and lithium batteries for new energy vehicles. Standard copper foil and ultra-thick copper foil are applied to printed circuit boards (PCBs) of different powers according to their own thickness and technology. In PCBs, electrolytic copper foil acts as a wire for interconnection between electronic components to conduct electricity and dissipate heat. And other important functions, indispensable.

The raw materials for PCB production are copper clad laminates, prepregs, copper balls, copper foil, etc. According to the proportion of copper foil and copper clad laminate raw material purchases in operating costs disclosed in the financial reports of PCB listed companies, copper foil accounts for about 11% of PCB operating costs. %.

Driven by the new energy and lithium battery market, copper foil is in short supply and continues to rise in price, and our judgment has been verified.

The production capacity of electrolytic copper foil in the world and mainland China has not expanded in the past two years. Since the second half of 2015, the development of new energy vehicles has broken the old ecology of the copper foil industry. Lithium battery copper foil is in short supply. Major copper foil manufacturers plan to switch to lithium battery copper foil. Foil, part of the production capacity of standard copper foil is diverted, resulting in a shortage of standard copper foil used in the production of PCB and copper clad laminates, and the price continues to rise. The effect of copper foil price increase has been transmitted to copper clad laminate and PCB in turn, and the cost transfer is smooth, which verifies our previous judgment on the improvement of PCB industry supply and demand relationship caused by copper foil price increase and downstream market demand recovery. We believe that the competitive landscape of the PCB industry is relatively scattered. In the process, PCB companies with insufficient bargaining power and weak resource acquisition capabilities will face bankruptcy, and the concentration of the PCB industry will continue to increase.

High-quality PCB companies sign long-term cooperation agreements with upstream copper foil factories to lock in the supply of raw materials and highlight resource advantages.

In the 21st century, with the accelerated transfer of the global electronics manufacturing industry chain to the Asia-Pacific region, the center of gravity of the PCB industry continues to move eastward. China has become the region with the largest PCB output value in the world, but almost all of the top 20 manufacturers in the world are from Japan, Taiwan, South Korea, The four countries of the United States. In the context of scarce copper foil resources and rising prices, the ability to obtain resources is a direct reflection of the company's competitive strength. On October 10, 2016, an A-share listed PCB company announced that it had signed a long-term cooperation strategic agreement with its upstream copper foil supplier. If the agreement can be finally implemented, it will be conducive to the stability of the company's raw material electrolytic copper foil procurement. This is the first case in the history of the PCB industry, proving the competitive strength and sustainable, high-growth development prospects of China's high-quality PCB companies. In the future, they can participate in the fierce competition in the PCB industry with more resources and lower costs and stand out, replacing Taiwan Major manufacturers in Korea, Japan, Europe and the United States have become global leaders.

We expect that the copper foil price increase cycle will continue until 2018, and new growth drivers such as automotive electronics, new energy vehicles, and communication base stations will appear in the PCB downstream demand market. Stimulated by environmental protection factors, all links in the PCB industry chain have taken the lead in realizing supply-side reforms. Mainland enterprises are expected to gradually replace Taiwan, Japan and South Korea to become global leaders. They are firmly optimistic about [copper foil] [copper clad laminate] [PCB] sector investment opportunities.