The explosive demand for AI computing power has fueled sustained prosperity across the entire printed circuit board (PCB) industry chain.

From copper-clad laminates, electronic glass fabric, and copper foil, to midstream PCB manufacturers, and up to the most upstream segments like carbide rod stock and consumable drill bits and end mills, every link has benefited significantly from the era of AI infrastructure buildout, giving rise to numerous stocks with astonishing gains.

Among them are Tongguan Copper Foil (301217.SZ), which rose up to 17-fold at its peak over two years; PCB manufacturer Shenghong Technology (300476.SZ), which surged up to 21-fold over three years; and the dramatic performance of PCB drill bit leader Dingtai Hi-Tech (301377.SZ), which skyrocketed up to 31-fold over two years.

The meteoric rise of Dingtai Hi-Tech clearly highlights the severe shortage in China's PCB drill bit segment.

Against this industrial backdrop, Tiangong International (TIANGONG INT'L) (00826), which is accelerating its transformation and upgrade from a traditional special steel leader to a high-end materials platform, has already extended its business reach into titanium alloys and nuclear fusion materials, and is now accelerating its layout in the PCB micro-drill field, aiming to add new momentum to its upgrade path.

Recently, the company took a crucial step in the high-end PCB precision tooling sector.

Its indirectly owned subsidiary, Jiangsu Tiangong Hard Alloy Technology Co., Ltd., officially commenced construction on July 7th for a project to expand production capacity to "300 tons annually of ultra-fine grain carbide rod stock for PCB tools, alongside 100 million PCB end mills and 300 million PCB drill bits per year."

This marks Tiangong International's formal entry into the most upstream consumables segment of the PCB industry chain.

Leveraging the technical foundation of its powder metallurgy parent platform and the process commonality with its hard alloy subsidiary, Tiangong International holds significant industrial chain synergy advantages for this project, with progress likely to exceed market expectations.

Following successful product validation and the steady ramp-up of capacity, the PCB micro-drill and upstream rod stock business is poised not only to contribute substantial incremental growth but also to establish itself as the company's third major growth pillar, following titanium alloys and nuclear fusion materials.

Contraction in Rod Stock Supply Widens Market Gap, Cost Pressure Accelerates Downstream Transmission

The root cause of the ongoing prosperity across the PCB value chain lies in the increasingly thick PCB boards inside AI servers.

To accommodate more GPUs and high-speed signals, Nvidia has increased board layers from 16-18 for the H100 to 20 for the GB200, with the future Rubin orthogonal backplane reaching an astonishing 78 layers, while board thickness has also jumped sharply from the traditional 3mm to 8mm.

This physical structural change directly causes drilling difficulty to rise exponentially.

The era of using a single drill bit per hole is over; now, a single hole often requires four different drill bits with varying length-to-diameter ratios working in sequence, effectively doubling consumable usage per hole.

More critically, to handle the high thermal load from intense computing, PCBs are widely adopting high-silicon specialty materials like M9, which are extremely hard.

This slashes the lifespan of ordinary HDI drill bits from 2,000 holes to just 200, instantly increasing wear rates by 4 to 5 times, thereby boosting the industry's overall drill bit consumption to 5 to 8 times traditional levels.

Only ultra-micro drills with diameters below 0.1mm can work on such "hard bones."

The price of these high-end products is typically 25 times that of ordinary drill bits, with models compatible with M9 materials costing 15 to 20 times more than those for the M7/M8 era, forming a solid foundation for the "volume and price increase" dynamic for PCB drill bits.

However, even more critical than the drill bit shortage is the shortage of the most upstream material: the rod stock that forms the "skeleton" of PCB drill bits.

For a long time, the supply of ultra-fine, high-aspect-ratio high-end rod stock below 0.2mm has been tightly controlled by Japan's Sumitomo, Mitsubishi, and Kyocera.

Sumitomo's AF series alone holds over 40% of the global market share, with a near-monopoly in ultra-fine specifications.

But the industry landscape shifted dramatically starting in 2026.

Following three consecutive months of zero tungsten carbide exports from China to Japan since February, Japanese manufacturers' low-cost inventories rapidly depleted.

Sumitomo Electric's president confirmed in a May earnings call that "tungsten supply from China has completely stopped," with about 30% of raw materials long dependent on China.

The contraction in tungsten inventories has triggered a wave of price increases for rod stock.

Sumitomo's AF series raised prices twice in January and June, with single increases of 15%-25%, and some specifications switched to "negotiated per order."

Mitsubishi went further, raising procurement prices for upstream ultra-hard alloy blanks by 300% in one go, with high-end ultra-fine grain tungsten steel raw materials supplied in limited quantities.

The upstream shockwave has traveled down the chain, transmitting cost pressure to the drill bit end.

Leading domestic drill bit manufacturers opened a price increase window in July, while Japanese suppliers proposed "limiting deliveries to 20%" and extended lead times from 4-6 weeks to over 12 weeks (24 weeks for ultra-micro diameters below 0.1mm).

On one side, Japanese supply is retreating; on the other, the mass production of Nvidia's Rubin is pushing the per-hole drill bit consumable cost for AI PCBs from 6.3 yuan to 16.3 yuan.

Under such intense pressure from both supply and demand, the shortage of high-end rod stock is no longer just a "domestic substitution option" for added benefit, but a "necessity that must be filled" concerning industrial chain security.

As cracks appear in the Japanese supply chain, the rigid supply constraints of upstream raw materials like rod stock are far more severe than the capacity expansion of midstream drill bits.

Whoever can first fill this critical gap holds the ticket to the core AI hardware supply chain.

Technology and Process Commonality May Expedite Production, Potential Output Value Could Reach 20 Billion at Full Capacity

Tiangong International's entry into the PCB micro-drill arena is not a speculative cross-border gamble chasing a hot trend, but a natural extension based on its existing business framework.

This means the company is not starting from scratch in this new business line; instead, it is precisely transferring the process expertise from its powder metallurgy parent platform and hard alloy subsidiary to the application scenario of PCB ultra-fine rod stock and micro-drills.

This constitutes a unique barrier that other new entrants into the PCB micro-drill field lack.

The most critical and difficult aspect of PCB drill bit rod stock is achieving a grain size below 0.2μm, a lifeline for ultra-micro drills below 0.1mm.

If the grain size is coarser, the cutting edge is prone to chipping when drilling ultra-micro holes below 0.1mm, especially given the higher hardness of M9 materials used in AI servers, leaving almost zero tolerance for grain size deviation.

Globally, players capable of producing ultra-fine WC powder with grain sizes below 0.2μm number fewer than five.

Japan's Sumitomo, with its AF209/AF308 series, is the absolute leader in this field for 0.1–0.8mm micro-drills, while in the segment for rod stock for ultra-micro drills ≤0.05mm (used in AI/IC substrates), Sumitomo holds a global market share of about 20-25%, forming a duopoly with Kyocera.

In this most challenging aspect of PCB drill bit rod stock, Tiangong International already possesses related foundational technology.

It is well-known that Tiangong International is China's sole full-series manufacturer of powder metallurgy tool and die steels.

By 2025, its powder metallurgy steel capacity reached about 1,500 tons, with high-alloy powder atomization capability of 8,000 tons, and its powder metallurgy process has been operational for 6-7 years.

The process chain for powder high-speed steel involves "gas atomization into powder → hot isostatic pressing → sintering → forging/rolling."

This process shares common technological roots with controlling particle size distribution, carbon-nitrogen balance, and sintering densification for tungsten carbide powder.

Furthermore, Tiangong International's powder metallurgy steel follows an "iron-based powder + alloying" technical path, while producing ultra-fine WC rods follows a "tungsten carbide powder + cobalt binder phase" path.

The core underlying technology for both is "making the powder fine and controlling sintering stability."

Previous media reports indicated that the lifespan of Tiangong International's powder metallurgy steel has significantly increased from the traditional 6,000 molding cycles to over 20,000 cycles, demonstrating that the company's "ultra-fine powder + high-temperature sintering" process has been operational for at least five years.

It now only needs to migrate this process specifically towards WC-based ultra-fine rods.

Looking further downstream at the drill bit/tooling link, Tiangong International's synergy advantages are even more apparent.

The PCB micro-drill business line is not a recent idea for Tiangong International in 2026.

Its indirectly owned subsidiary, Jiangsu Tiangong Hard Alloy Technology Co., Ltd., established as early as 2021, primarily focuses on double-helix hole rod stock, solid carbide tools, and CNC inserts.

Its Auster brand began upgrading from ordinary carbide tools to powder metallurgy tools starting in 2025, with its spiral point taps, straight shank drills, and micro-diameter end mills already penetrating applications in 3C electronics, robotics, and aerospace.

In other words, Tiangong International is not a newcomer to the "five-axis grinding + coating" processes required for PCB drill bits.

The ROLLOMATIC-type grinding machines and TiAlN/AlCrN coatings needed for taps and micro-diameter end mills have high overlap with the equipment and processes for PCB drill bits.

The differences lie in the specific know-how for "drill bit-specific helix angles, point geometry, and flute design," which could be mastered within six months.

Additionally, the double-helix hole rod stock, a core base material for internal coolant drills, has already been mass-produced by Jiangsu Tiangong Hard Alloy Technology.

The new 300-ton "ultra-fine grain PCB-specific" project essentially represents a targeted upgrade of double-helix hole rod stock from "general-purpose hard alloy" to "PCB drill bit-specific."

Although the specifications for dedicated materials are narrower and grain size control standards more stringent, its process foundation fully relies on mature existing production lines, representing an elevation on solid ground rather than building from scratch.

Leveraging the process commonality between its powder metallurgy platform and hard alloy subsidiary, Tiangong International could achieve batch production of ultra-fine grain PCB rod stock within six months, providing significant tactical flexibility.

On one hand, it can quickly market rod stock products to downstream drill bit manufacturers facing supply shortages, precisely capturing the window of Japanese supply contraction and playing the role of a "supplier."

On the other hand, as certifications from downstream PCB manufacturers are secured, Tiangong International can rapidly expand rod stock capacity and, through an integrated approach, drive its end mills and drill bits towards scaled production.

According to industry calculations, based on current market prices of 2,000-2,300 yuan/kg for ultra-fine rod stock, 1.7-1.8 yuan/piece for AI-coated drill bits, and 5-8 yuan/piece for PCB end mills, the project at full capacity could generate annual terminal tool revenue of 9-14 billion yuan if using an integrated model.

If rod stock is partially sold externally, the project's total theoretical output value could reach 13-20 billion yuan.

Thus, PCB micro-drills are set to become the core engine driving Tiangong International's performance growth in 2027.

More critical than the incremental earnings, however, is the potential revaluation of the company.

As the PCB micro-drill business moves from "expectation" to "realization," Tiangong International could completely shed the valuation constraints of a traditional special steel company, accelerating its transition towards a high-end materials platform.

Once the market recognizes its consumables business model, the valuation multiple could potentially rise above a P/E of 20x.

Under the combined effect of "earnings growth and valuation expansion," the company's market capitalization potential could be fully unlocked.