There are many kinds of raw materials required for PCB production, mainly including copper clad plate (CCL), semi solidified sheet (PP), copper foil, copper ball, gold salt, ink, dry film and other materials. Generally speaking, in PCB cost composition, copper clad plate accounts for about 37%, semi cured sheet 13%, gold salt 8%, copper foil and copper ball 5%, and labor cost accounts for about 11%. The proportion of raw materials for different types of products is slightly adjusted.

Copper clad laminate (CCL) is a kind of substrate with different specifications and thicknesses made by bonding the upper and lower surfaces of the semi cured sheet (PP) with copper foil under the condition of high temperature and high pressure. The semi cured sheet is a kind of sheet bonding material mainly composed of glass fiber cloth, resin and additives.

According to the thickness of copper clad laminate, the cost composition of glass fiber cloth accounts for 25%~40% of the cost, resin accounts for 25%~30%, and copper foil accounts for 30%~50%. Due to the high concentration of the CCL industry, strong bargaining power, and smooth price transmission to the PCB industry, the overall cost of PCB enterprises is more sensitive to the prices of the upstream main raw materials, such as electrolytic copper foil, glass fiber cloth, synthetic resin, etc., and the price rise effect will bring great pressure on the profitability of PCB enterprises.

This round of copper foil enterprises, affected by the rising demand for lithium battery copper foil from new energy vehicles, actively switched to lithium battery copper foil production, and the standard copper foil used for PCB production decreased, resulting in a rapid rise in the price of copper foil since the beginning of 2016. There are differences in production equipment and process between standard copper foil and lithium copper foil. Lithium copper foil has fewer processing procedures, simple process treatment, and higher gross profit than standard copper foil for PCB.

With the promotion of China's new energy vehicle incentive policy, the production of new energy vehicles has expanded, and the demand for copper foil used as the cathode carrier of lithium ion batteries has also increased dramatically. Domestic and foreign manufacturers have high enthusiasm to switch to production. According to the estimation of CCL Industry Association, in 2015, 62000 tons of lithium copper foil were produced in Taiwan, Japan and South Korea, accounting for 30.62% of the total output of electrolytic copper foil. In 2016, 16700 tons of lithium copper foil (including conversion) were added in China, reducing the proportion of standard copper foil in the total annual capacity of domestic electrolytic copper foil from 82.3% in 2015 to 79.8% in 2016.

The price of copper foil mainly consists of copper price and processing fee. From the perspective of the trend of international copper price, the copper price has been rising since the beginning of 2016. In the second half of 2017, it once hit a historical high. On July 5, 2017, Shandong Jinbao announced an increase of 1000 yuan per ton of copper price; On July 11, 2017, Wilbur Electronics also announced an increase of 2000 yuan/ton for copper foil. In the same period, about 157000 tons of copper foil withdrew from the supply chain of FR-4, which accounted for about 31% of the total standard copper foil, leading to a serious contraction of copper foil supply for PCB production and a sharp rise in copper foil processing costs. Since the beginning of 2018, the copper price has slightly retreated at a high level, but the copper foil processing fee has not been adjusted.

The new capacity of copper foil will be released in succession as soon as the second half of 2018, partially relieving the supply and demand pressure of upstream and downstream. The difficulty in expanding the production of copper foil lies in the titanium cathode roll production equipment imported from Japan. Japanese manufacturers usually do not expand the production of cathode roll because of the increased demand for copper foil. The tight supply of equipment has led to an increase in the production expansion period of copper foil from 1 to 1.5 years to 1.5 to 2 years. According to the statistics of domestic CCL industry association, 69000 tons of new electrolytic copper foil capacity was released in 2017, of which 81.2% was lithium battery copper foil capacity; In 2018, seven domestic copper foil enterprises added 68500 tons of capacity, 89.1% of which was lithium battery copper foil capacity. Therefore, the lithium battery copper foil market is likely to be oversupplied by the end of 2018.

The price increase of copper foil is the main driving force for the price increase of CCL. It is indirectly transmitted to PCB enterprises through CCL. Through sensitivity analysis, every 10% price increase of copper foil will lead to an increase of 1.6%~2.35% in PCB costs. Copper foil is a capital intensive industry, dominated by large-scale production, with relatively high market concentration and strong bargaining power for downstream. The rise in copper foil prices will put great pressure on downstream costs.

In the capital intensive glass yarn industry, the market is highly concentrated and manufacturers have strong bargaining power. Glass fiber yarn is calcined into liquid state from silica sand and other raw materials in the kiln, pulled into very fine glass fiber through a very small alloy nozzle, and then hundreds of glass fibers are twisted into glass fiber yarn. Kiln construction investment is huge. It is a capital intensive industry. A 30000 ton kiln needs 400 million yuan. It takes 18 months to build a new kiln. It is difficult to grasp the business cycle. Once the ignition is started, it must be produced 24 hours a day. After about five years, it must be stopped for half a year for maintenance. The cost of entry and exit is huge. The glass fiber cloth industry is highly concentrated, with 70% of the global production capacity concentrated in 5 enterprises including Jushi, OCV, NEG, Chongqing International and Taishan Glass Fiber. In China, China Jushi, Taishan Fiberglass, Chongqing International, Shandong Fiberglass, Sichuan Microglass and Changhai have concentrated 80% of the national production capacity.

The price of electronic fiberglass cloth has risen nearly three times since the third quarter of 2016. Taking 7628 cloth for thick plate as an example, the average price in July 2016 was only 3.2 yuan/m, rising to 8.7 yuan/m in April 2017, approaching a historical high of 10.6 yuan/m in the past 10 years. The following table shows the price increases announced by several major suppliers in 2017.

The reasons for the price increase of glass fiber can be summarized as follows:

Capacity contraction at the supply side dominated by glass fiber manufacturers: The glass fiber industry has a high concentration and obvious periodicity. In the case of continuous downturn in the early market of glass fiber electronic yarn/electronic cloth, many enterprises with tank kilns gave priority to the development of glass fiber roving products, and the number of new glass fiber electronic spinning tank kilns decreased. Among domestic enterprises, only Taishan glass fiber newly built 50000 tons of glass fiber spinning tank kilns, which were ignited in November 2015. In 2016, the glass fiber spinning tank kilns of Taishan Glass Fiber and Chongqing International Shanghai Base were successively shut down, reducing a total of 38000 tons of electronic glass fiber spinning.

There is a glass fiber spinning tank kiln in Chongqing International Headquarters which has been shut down for cold repairThe production capacity of electronic glass fiber yarn in the industry dropped slightly. In the case of limited production capacity of electronic glass fiber yarn, the supply and demand tend to be tight in the short term.

Increased environmental pressureThe shrinking of imitation cloth production has changed the supply-demand relationship of electronic glass fiber gauze.

New industrial policyUnder the guidance, the production capacity of electronic cloth tends to be concentrated in glass fiber tank kilns, which increases the storage pressure of professional electronic cloth manufacturers.

Since the beginning of 2018, the price of some fiberglass fabrics has begun to loosen. We know from the market that the 7638 cloth and 2116 cloth used for thick plate decreased significantly, with an average decrease of 5%~18%; The price of fiberglass cloth number for thin plate is still high. The tank kilns under cold repair in the early stage have been ignited successively in 18Q2, and the production capacity has been gradually released. This year, the major factor affecting the supply side will be environmental protection and production restriction, and the middle and low-end enterprises that are not compliant will be further cleared.

Because of its good mechanical, electrical and bonding properties, synthetic resin has become one of the important raw materials for CCL. Different kinds of PCBs have different requirements for resin: in general, phenolic resin and epoxy resin are mainly used for single/double sided boards, multilayer boards and HDI, polytetrafluoroethylene is mainly used for high-speed/high-frequency board making, and environment-friendly non bromine resin is used for halogen-free copper clad laminate in recent years. At present, suppliers from mainland and Taiwan mainly provide phenolic resin and epoxy resin.

In addition to the downstream demand, there are two other reasons for the rise in the price of epoxy resin: raw materials and environmental protection. In terms of raw materials, the upstream industry of epoxy resin (mainly oxychloropropane and bisphenol A) is closely related to the global crude oil price trend. This year, the crude oil price continues to rise, and the resin price continues to record high. In terms of environmental protection, many manufacturers in Huangshan, Shandong and other places did not meet the environmental requirements, resulting in production reduction and stoppage, or increased production costs to meet the environmental requirements, thus promoting the continued rise in the price of epoxy resin.

As the most basic material of PCB, copper clad laminate is also called base material. When it is used in the production of multilayer boards, it is also called core. It is mainly divided into two categories: rigid copper clad laminate (CCL) and flexible copper clad laminate (FCCL). According to downstream requirements for different properties, it is subdivided into copper clad laminate of different material types. From the current market demand for copper clad laminate, there will be four major trends in the future:

(1) Meet the environmental requirements of lead-free and halogen-free;

(2) Light weight, high strength, thinner;

(3) Meet the requirements of high frequency and high speed in the future;

(4) It can adapt to more complex working environment, such as high heat resistance and corrosion resistance.

At present, Japan, the United States and Europe have focused on small and refined fields such as composite and special substrates.

In 2016, the global rigid copper clad laminate market increased from US $9.37 billion in 2015 to US $10.12 billion in 2016, an annual growth of 8.0%. Moreover, the CCL market is highly concentrated. Since 2013, the market share of the top ten PCB companies in the world has been more than 70%, reaching 74% in 2016. However, the capacity increase is too slow, with a compound growth rate of only 2.2% from 2013 to 2016. The supply and demand relationship between the copper clad laminate and PCB industries became tense at the end of 2016.

The biggest price rise of CCL was from the end of 2016 to the third quarter of 2017, with the average price soaring from 101 yuan/piece to 200 yuan/piece. Since the end of 2017, the price of copper clad laminate has loosened and basically dropped to 170 yuan/piece after a period of fluctuation. In January 2018, Jiantao took the lead in announcing the notice of price increase. However, from the downstream procurement situation, the price increase did not last long and was not implemented in the downstream mass purchase orders.

From the end of March 2018, CCL manufacturers began to reduce their prices, with an average price reduction of about 5%. However, since late May, downstream PCB orders have recovered significantly from the off-season. In June, the overall order schedule was tight, and the large CCL plants began to transmit the signal of price increase. We expect that the overall price increase of copper clad laminate will be limited this year. In the third quarter of 2018, some new capacity of copper clad laminate will be opened in succession, and the supply and demand relationship with downstream PCB enterprises will be further eased.