CITIC SEC: Aramid fiber as a PCB material has many advantages, recommending leading companies in the industry.

CITIC SEC released a research report stating that para-aramid fiber, as one of the three major high-performance fibers, has many advantages and a wide range of downstream applications. With technological advancements driving the development of para-aramid, there are mature technical solutions for para-aramid as a PCB substrate. Combining many advantages and high cost-effectiveness, there may be significant room for future development. The para-aramid industry is rated as "stronger than the market," and industry-leading companies are actively recommended. They will grasp the industry cycle on a macro level, lay out high prosperity sectors on a medium level, and select stocks with high performance certainty on a micro level. Two investment themes are comprehensively sorted: 1) selecting stocks with high growth performance and continuous valuation digestion targets. 2) focusing on industry leaders, core beneficiaries in the medium to long term. CITIC SEC's main points are as follows: Para-aramid fiber, as one of the three major high-performance fibers, has many advantages and a wide range of downstream applications. Compared to the most commonly used glass fiber cloth as a substrate reinforcing material for copper-clad laminates, para-aramid fiber or para-aramid fiber paper has many outstanding advantages: 1) Para-aramid paper has a much higher strength than glass fiber paper; 2) Para-aramid is an organic reinforcing material, which is more suitable for laser drilling compared to inorganic glass fiber cloth; 3) Para-aramid is about 30% lighter in weight, which is beneficial for the lightweight and flexibility of electronic products; 4) Para-aramid has a lower dielectric constant, which is beneficial for improving the high-frequency characteristics of the board and adapting to high-end PCB boards; 5) Para-aramid has a planar thermal shrinkage characteristic, which can reduce the planar thermal expansion rate of the board, making it beneficial for the high-density of electronic products, and can be used as various IC packaging substrates. Para-aramid as a PCB substrate has mature applications, but it has not been widely promoted due to high prices and other reasons. The application of para-aramid as a PCB electronic cloth started early. In the 20th century, Japan's Teijin Limited collaborated with Oji Paper Co., Ltd. and Shin-Kobe Electric Machinery Co., Ltd., to develop a series of reinforcing materials for leadless ceramic substrate carriers, producing special PCBs for the electronics industry. The Matsushita Electronics Division used Oji Paper Co., Ltd.'s para-aramid paper to manufacture boards and applied it to high-density interconnection. They invented a unique process called the ALIVH (ACIVALA) multilayer printed circuit board process, which was the first generation of the ALIVH process. Later, Japan's Matsushita Electric Works' ALIVH process became more mature. They used DuPont's Thermount dry para-aramid nonwoven fabric as electronic cloth, and with this technology, Matsushita Electric Works developed the then-world's thinnest, lightest, and most compact mobile phone, the PD series. Para-aramid nonwoven fabric, as a substrate material, has the characteristics of low dielectric constant and light weight. In addition, its low coefficient of thermal expansion and smoothness make it possible to produce MCM substrates for mounting flip chips. Therefore, para-aramid fiber spun into nonwoven fabric or processed into para-aramid paper can both be used as PCB electronic cloth, and they are two different technical routes. Later, due to the high price and high hygroscopicity of para-aramid, it gradually shifted to glass fiber cloth. The price of para-aramid has dropped significantly, giving it a price advantage as a PCB material. According to statistics from the General Administration of Customs, in recent years, the price of para-aramid has dropped substantially to around 100,000 yuan/ton. Processed into para-aramid nonwoven fabric or para-aramid paper for PCB use, the cost is lower than that of lowdk2 or Q cloth, showing good application potential. The bank believes that with the increasing demand for PCB processing requirements, such as low CTE, low dielectric constant (D), low dielectric loss (D), high strength, and high cost-effectiveness, para-aramid fiber cloth or para-aramid paper is expected to replace some glass fiber cloth and become a new development direction. Risk factors: New application expansion is lower than expected; material costs fluctuate significantly; labor costs increase; technological development progresses lower than expected; competition intensifies.