Zhongtai Securities Co.,Ltd. has released a research report outlining two core investment themes for the current stage of the PCB drill bit sector. The report identifies high-end micro-drill manufacturing capability as the decisive factor on the product side, while securing upstream materials represents the critical point on the supply side. Following these two themes, the firm recommends focusing on specific targets: on the drill bit side, leading high-end micro-drill manufacturers and new entrants via M&A; on the upstream and supporting side, manufacturers positioned in high-end rod materials, ultra-fine tungsten carbide powder, and high-end coatings.

PCB Drill Bit Three-Phase Model: Concurrent Acceleration and Reshaping

The report presents a three-stage model for the PCB drill bit industry, characterized by concurrent market acceleration and structural reshaping, with high-end micro-drills and upstream materials determining the outcome.

Phase One: Low Sentiment Consolidation (Pre-2025)

The industry operates under low market sentiment, with a duopoly structure already established. 1) Sentiment: Demand for high-end micro-drills is not yet prominent. PCB drill bits are priced according to general manufacturing logic, with neither significant industry growth nor outstanding profitability. 2) Competitive Landscape: A duopoly between 鼎泰高科 and 金洲精工 has formed, with their combined global market share rising from 37.0% in 2020 to 49.9% in 2024.

Phase Two: Duopoly Strengthening (2025-2026)

The ramp-up of AI servers drives improving sentiment, widening the gap between the duopoly and second-tier manufacturers. 1) Sentiment: Starting early 2025, with the batch delivery of GB200, PCBs evolve towards higher layer counts and micro-vias, increasing both the number of drill bits used per server and the price of high-end micro-drills. This leads to significant earnings improvement for leading manufacturers and a notable uplift in industry sentiment. 2) Competitive Landscape: Leading manufacturers leverage capital and technological advantages to accelerate capacity expansion, capturing high-end micro-drill demand first. Second-tier manufacturers are constrained by high-end capacity and resource limitations, widening the gap with the leaders.

Phase Three: Diversified Competition and Cooperation (Post-Q1 2026)

Rubin mass production boosts industry sentiment, shifting the competitive landscape to a "duopoly plus multiple new entrants" model. 1) Sentiment: Marked by Rubin's full-scale production in January 2026, PCBs enter a new stage with even higher layer counts and M9 ultra-hard substrates, significantly increasing drill bit usage and prices. Financially, revenue and profit growth for both leading and second-tier manufacturers see clear acceleration in Q1 2026, with industry growth benefits gradually diffusing from leaders to second-tier players. 2) Competitive Landscape: An M&A wave brings listed companies like 民爆光电, 新锐股份, 杰美特, and 欧科亿 into the PCB drill bit sector, shifting the industry from "duopoly-led" to "duopoly plus multiple new entrants." 3) Outlook: The industry enters a full-scale capacity expansion phase, with four manufacturers announcing expansions in H1 2026 alone. However, risks of supply disruption for overseas high-end rod materials are emerging. Whether expansion translates into effective supply depends on overcoming upstream material constraints. Competition shifts from "expanding capacity" to "competing on effective supply," with the ultimate outcome hinging on high-end micro-drill capability and nano-grade tungsten carbide powder capability.

High-End Micro-Drills: Materials, Equipment, and Process Define Competitors

The core characteristics of high-end micro-drills are small diameter, high aspect ratio, and advanced composite coatings. Under the Rubin architecture, increased PCB thickness, layer count, and interconnect density, coupled with the introduction of M9 material, raise micro-drill requirements: diameter needs to be compressed to 0.15mm or below, aspect ratio needs to reach 25:1 or higher, and wear-resistant composite coating capability is required to handle high-hardness, high-abrasion substrates. M9 processing capability can serve as a key validation standard for high-end micro-drills. The key to mass-producing high-end micro-drills lies in materials, equipment, and process, which are the core determinants of competitive success. 1) Materials determine the performance ceiling. High-end micro-drills rely on nano-grade tungsten carbide powder and high-end rod materials. The grain size, density, and batch consistency of the materials directly impact drill bit hardness, toughness, and lifespan, forming the foundational basis for processing high-hardness substrates like M9. 2) Equipment determines processing precision and expansion rate. High-end micro-drills place extremely high demands on grinding machine accuracy and stability. Equipment must consistently produce uniform cutting edge shapes at极小 diameters while controlling bit runout and breakage risk. The inventory and delivery cycle of such equipment determine the speed of high-end capacity release. 3) Process determines mass production yield. High-end micro-drills require the synergy of grinding, composite coating, and consistency control: grinding determines geometric precision, coating enhances wear resistance and lifespan, and consistency control ensures stable batch output, ultimately reflected in low breakage rates, high hole wall quality, and stable lifespan.

Tight Tungsten Supply Opens Window for Domestic Upstream Material Substitution

High international tungsten prices and tight supply are accelerating the exposure of bottlenecks in high-end rod materials and nano-grade tungsten carbide powder. 1) The performance ceiling of high-end drill bits depends on high-end rod materials, whose quality in turn depends on the source tungsten carbide powder. High-end PCB rod materials require nano-grade tungsten carbide powder with a particle size below 0.2μm. Based on the mass production experience of Sumitomo and H.C. Starck, the "one-step method" is seen as the winning formula for future domestic nano-grade WC powder production. 2) High-end PCB rod materials and nano-grade tungsten carbide powder have long relied on imports from Japan. Japanese manufacturers, affected by China's tightening export controls on tungsten raw materials, have significantly increased rod material prices. For instance, Mitsubishi Materials and Sumitomo Electric raised prices for core ultra-hard components by over threefold effective June 1st, putting pressure on domestic raw material supply. It is foreseeable that high-end rod materials and nano-grade tungsten carbide powder will enter an inflationary phase. With the simultaneous explosion of downstream high-end micro-drill demand and contraction of overseas material supply, upstream material segments, especially high-end tungsten carbide powder manufacturers, are poised for a potential revaluation.

Key Risk Factors to Consider

The report concludes by highlighting several risk factors, including potential shortfalls in AI server demand, slower-than-expected capacity expansion by manufacturers, intensifying industry competition, volatility in raw material prices, potential errors in industry space calculations, and risks associated with untimely data updates.