Zheshang Securities has released a research report indicating that PCB drill bits are entering a growth phase driven by the combined forces of rising volume, higher prices, and accelerated wear. The firm projects that demand for PCB drill bits used in AI servers will surge from 800 million units in 2026 to 3.92 billion units by 2030, with resource security, customer proximity, and continuous innovation positioning Chinese leaders to transition from market share dominance to high-end leadership.
Structural upgrades, industry expansion, high entry barriers, and domestic substitution are converging across four key investment themes, highlighting the sector's growing value proposition. The core findings are outlined below.
Three-Factor Synergy Unlocks Growth Phase
PCB drill bits, essential precision consumables for AI computing hardware, are shedding their traditional cyclical dependence on consumer electronics. The growth is now driven by three simultaneous factors: volume, price, and wear. On volume, AI server PCBs use 24-40 layers compared to 12-16 layers in traditional servers, with thick-board segmented drilling boosting drill bit consumption per board. On price, coated drill bits are expected to increase their global share from 35.4% in 2025 to 51.6% by 2030, with premium drill bits commanding prices 3-5 times higher than standard ones, making demand growth outpace AI server shipment growth. On wear, the adoption of M8/M9 high-frequency, high-speed copper-clad laminates reduces drill bit lifespan from 2,000-3,000 holes on FR-4 to just 100-200 holes on M9, significantly increasing replacement frequency.
AI Compute Expansion Lays Foundation for Market Growth
Data from Prismark and Frost & Sullivan shows the global PCB drill bit market has expanded from RMB 4.1 billion in 2021 to approximately RMB 6.0 billion in 2025. With global AI server shipments projected to rise from 3.1 million units in 2026 to 6.5 million units by 2030, alongside continuous increases in mechanical holes per board and drill bit consumption per hole, the firm estimates AI server PCB drill bit demand will climb from 800 million units in 2026 to 3.92 billion units by 2030. Given the rising share of high-end drill bits and improving average selling prices, the corresponding market value is expected to grow from RMB 1.93 billion to RMB 14.88 billion, making it the fastest-growing segment within the PCB drill bit sector.
High Barriers to Entry Reinforce Leader Concentration
Four key barriers—materials, equipment, process technology, and customer certification—create an oligopolistic landscape, with the global top five holding a 79.8% revenue share in 2025. High-end drill bits require a breakage rate below 0.01%, and customer adoption involves sample testing, batch validation, and long-term supply assessments, creating deep switching costs. Ultra-fine grain rod formulations, precision grinding, coating deposition, and micron-level inspection together form a comprehensive entry threshold. The top five global manufacturers held a combined 75.7% volume share in 2025, and rising quality demands from AI servers and IC substrates will further consolidate leadership among top players.
Chinese Leaders Poised to Shift from Share Dominance to High-End Leadership
China accounts for approximately 79% of global tungsten output and 53% of reserves, with tightened mining quotas and export controls on tungsten-related materials raising raw material costs for overseas manufacturers. Chinese mainland enterprises contribute 36% of global PCB production value, with 43 Chinese companies in the global top 100 generating USD 30.7 billion in output. Domestic drill bit manufacturers benefit from proximity to customers and faster response times. Coating technology advancements, combined with structural upgrades in ultra-high aspect ratios and ultra-fine diameters, have enabled Chinese companies to claim the top two global positions in drill bit sales by 2025, with leading players seeing simultaneous rises in average product prices and gross margins. The substitution process is transitioning from mid-to-low-end penetration to high-end leadership.
Four Investment Themes Converge to Highlight Sector Value
The firm recommends monitoring Dingtai High-Tech, China Tungsten and Hightech Materials, Xiamen Tungsten, Jiangxi Tungsten Equipment, Shareate Tools, and Oke Precision Cutting Tools. Dingtai High-Tech, as the global sales leader with the highest drill bit business purity, is seeing rising shares of high-end micro-drills and coated drill bits, making it the most direct beneficiary of AI server volume and price growth. China Tungsten and Hightech Materials operates an integrated "tungsten resource-rod-micro drill" chain, with Jinzhou Precision expanding capacity and a 130 million micro-drill renovation project set to reach full production by mid-2026. Xiamen Tungsten leads in high-end rod materials, benefiting from upstream domestic substitution. Jiangxi Tungsten Equipment plans a private placement of up to RMB 1.898 billion to acquire Jiangxi Hard, Huamao, and Jiuye, completing the tungsten powder-to-rod chain upon deal closure. Shareate Tools has entered the finished drill bit market through the acquisition of Huilian Electronics, achieving full-process autonomous manufacturing from rods to coatings. Oke Precision Cutting Tools, anchored in CNC inserts, plans to acquire controlling stakes in Yongxin Precision to extend into PCB micro-drills, with customers covering nearly 80 PCB manufacturers including Dongshan Precision and Victory Giant Technology.
Key Risks to Monitor
Risks include slower-than-expected AI server demand growth, significant volatility in tungsten and cobalt raw material prices, slower-than-anticipated M8/M9 material penetration, uncertainty in acquisition and closing processes, and intensified competition from overcapacity-driven industry expansion.