Goldman Sachs maintains a bullish view on high-end CCL leaders EMC and TUC, believing that 2H26 price hikes and gross margin expansion will continue

Overview

This report focuses on Taiwan high-end CCL manufacturers Elite Material and Taiwan Union Technology Corp. Goldman Sachs believes that driven by demand for AI servers, LEO, and high-end switches, the high-end CCL industry has already started to see clear gross margin expansion in 2Q26, with further room for price increases and product mix improvement in 2H26 and over the longer term. The report maintains Buy ratings on EMC and TUC and raises target prices and earnings forecasts.

Core views

The core views include: first, tight supply and demand in high-end CCL and customers' need for yield improvement are making PCB customers willing to accept higher prices to secure supply of high-quality M8+ materials; second, both EMC and TUC will continue to expand capacity in 2027-2028E, and high-end customers have already booked future capacity, alleviating market concerns over demand sustainability; third, EMC will benefit from AI server programs such as Trainium3, Rubin, and TPU v8 as well as volume ramp-up in substrate CCL, while TUC will benefit from the ramp-up of its new Thailand plant and acceleration of Trainium3/Rubin programs; fourth, Goldman Sachs expects investor preference may rotate back from low-end CCL makers to high-end CCL makers.

Analysis framework

The report evaluates EMC and TUC's revenue, gross margin, net profit, and target prices by combining 2Q26 earnings versus consensus, 3Q26 operating outlook, supply chain checks, pricing assumptions, capacity planning, market share changes, and a P/E valuation framework.

Methodology notes

• Earnings forecastingEarnings forecast revision

  Adjustments to revenue, gross margin, and net profit forecasts

  Goldman Sachs raises EMC's 2026/27/28E net profit forecasts by 3%/7%/7% and also raises TUC's earnings forecasts for the relevant years to reflect stronger-than-expected high-end CCL demand and improved pricing outlook.

• Valuation methodsP/E target price method

  Set a 12-month target price based on forward P/E multiples

  EMC's target price is based on 27x 2H27-1H28E P/E; TUC's target price is based on 22x 2027E P/E, also reflecting upward earnings revisions.

• Industry researchSupply chain checks

  Validation of customer bookings and tight capacity

  The report cites supply chain checks indicating that incremental high-end capacity over the next several quarters to years has already been booked by AI server, LEO, and high-end switch customers.

• Risk and style analysisGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite factors

  The disclosure section states that the Goldman Sachs Factor Profile uses standardized rankings to compare stocks' growth, financial returns, valuation multiples, and composite characteristics versus the market and industry peers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Elite Material (2383.TW)

  One of the core recommended names; Maintain Buy

  Strengths

  Leading market share in high-end HDI and SLP materials, with AI server CCL projects covering customers such as Nvidia, Google, and AWS, while substrate CCL is expected to contribute higher gross profit from 4Q26.

  Weaknesses

  Limited capacity expansion in 2H26, with much of the new capacity not coming onstream until after late 4Q26.

  Comparison

  The report believes EMC has advantages in high-end CCL leadership, manufacturing capability, and long-term earnings growth.

  Risks

  RCC replacing high-end smartphone HDI designs, trade frictions weakening smartphone and server shipments, and rising competition from mainland China peers.

• Taiwan Union Technology Corp. (6274.TWO)

  One of the core recommended names; Maintain Buy

  Strengths

  Focused on M7+ high-speed CCL, with 20%+ market share in high-end switch and AI server materials, while the new Thailand plant is ramping faster than expected.

  Weaknesses

  2Q26 EPS was dragged by a higher-than-expected tax rate, and losses at the Thailand plant led to unstable tax rates, though the report expects it may reach breakeven in 3Q26.

  Comparison

  The report believes TUC remains undervalued on P/E versus Taiwan CCL peers and has room to gain share in servers and switches.

  Risks

  Slower-than-expected share gains in low-loss CCL, weaker global server and switch shipments due to trade frictions, and intensifying competition from mainland China peers.

• High-end CCL industry

  Beneficiary theme

  Strengths

  Demand from AI server, LEO, and high-end switch customers is driving demand for M8+ and high-quality CCL, with tight supply and demand supporting price hikes and gross margin expansion.

  Weaknesses

  The industry's capacity expansion cycle is long, and short-term supply bottlenecks may limit shipment elasticity.

  Comparison

  The report believes the outlook for high-end CCL is more favorable than that of mid- to low-end CCL suppliers, especially during a slowdown in consumer electronics demand.

  Risks

  AI project demand falling short of expectations, changes in customer bargaining power, and competitors expanding capacity more than expected.

Key data

• EMC 2Q26 core businessCore business OPI met Goldman Sachs' expectations and was 18% above BBG consensusDriven by faster-than-expected 2Q price increases and product mix improvement.
• EMC 2Q26 marginsGM/OPM rose 4.4/5.4ppt QoQRespectively 1.4/1.8ppt above BBG consensus.
• TUC 2Q26 core businessCore business OPI was 7% above BBG consensusMainly driven by gross margin expansion and ramp-up of new projects from high-end AI customers.
• TUC 2Q26 gross marginRose 4.6ppt QoQ1.8ppt above BBG consensus.
• 3Q26 EMC outlookRevenue expected to grow 21% QoQ, with GM rising from 33.9% to 36.8%Driven by projects such as Trainium3, Rubin, and TPU v8 and potential 0%-10% QoQ price increases.
• 3Q26 TUC outlookRevenue expected to grow 23% QoQ, with GM improving 3.4ppt QoQDriven by earlier-than-expected contribution from the new Thailand plant and accelerating Trainium3/Rubin demand.
• 2H26 pricing assumptionsM7 and below grades to rise 10%-40%+ per quarter; M8+ to rise 10%+ from late 3Q26Based on the report's view on supply-demand and customer acceptance.
• Capacity expansionEMC and TUC average monthly capacity in 2027 to expand 35%-40% YoY, with at least 20%-50% expansion in 2028EThe report says future new capacity has already been booked by high-end customers.
• Target price revisionsEMC NT$10,200；TUC NT$3,010Raised from NT$9,500 and NT$2,860, respectively.

Impact & implications

If the report's view plays out, the high-end CCL industry may continue to enjoy earnings expansion driven jointly by pricing, product mix, and capacity utilization. Valuation upside for EMC and TUC would come from upward earnings revisions, increased share in AI server materials, and improved visibility on long-term demand from high-end customers. In contrast, low-end CCL makers are more dependent on consumer electronics demand and may face slowing demand and capital outflow pressure after 4Q26.

Risks

• RCC may replace all high-end smartphone HDI designs.
• Escalating trade frictions may lead to weaker-than-expected smartphone, server, and switch shipments.
• Intensifying competition from mainland China peers may compress pricing and gross margins.
• TUC's low-loss CCL share gains may be slower than expected.
• If demand from AI server, LEO, or high-end switch customers falls short of expectations, utilization and pricing power for planned future capacity could be affected.

What to watch

• Whether quarterly 10%-40%+ price increases for M7 and below CCL in 2H26 materialize.
• The pace of implementation of 10%+ price increases for M8+ grade CCL starting in late 3Q26.
• Progress of EMC substrate CCL passing certification in 3Q26 and starting to contribute earnings in 4Q26.
• Whether TUC's new Thailand plant reaches breakeven in 3Q26 and stabilizes its tax rate.
• The ramp-up speed of AI server programs such as Trainium3, Rubin, and TPU v8.
• Whether 2027-2028E capacity expansion is released as planned, and whether customer bookings can convert into actual orders and revenue.