UBS: Potential Kyber backplane delay is in line with expectations, with a more near-term preference for upstream CCL

Overview

This report focuses on China's PCB industry chain, with core discussion on potential delay of the PCB backplane in NVDA's Kyber rack architecture, CCL and BT substrate price changes, mSAP capacity expansion, and sector allocation preferences. UBS believes the possible delay of Kyber orthogonal backplane to 2028 is consistent with its earlier industry-research judgment and should not be interpreted as a cancellation of demand in the short term. By contrast, conventional CCL price hikes and AI-driven supply tightness have a more direct impact on upstream profit uplift.

Core views

First, the Kyber orthogonal backplane delay is mainly due to the difficulty of processing M9+Q-glass, constrained supply, and relatively high costs; while the PTFE alternative offers better performance and improving yields, the supply chain still needs testing and preparation. Second, Kyber was originally expected to be introduced in small volume on Rubin Ultra late in 2027, so even if the timeline slips, the impact on 2026/27E PCB earnings is limited. Third, conventional CCL price increases are more sustainable, as AI demand is squeezing traditional supply and short-term incremental capacity is limited, supporting further hikes from 2H26 to 1H27. Fourth, valuations of PCB names rose sharply over the past six months on Kyber expectations, and investors are now likely to be more cautious in assessing incremental TAM after 2027.

Analysis framework

The report combines value-chain tracking with top-down event interpretation: it uses news and industry research to assess Kyber backplane material routes and timelines, supplier price announcements and channel checks for CCL and BT substrate pricing, and tracks listed-company financing plus expansion plans to gauge mSAP supply, before combining valuation and customer structure to derive sector allocation preferences.

Methodology notes

• Valuation methodssum-of-the-parts

  sum-of-the-parts valuation

  FastPrint Circuit and Shennan Circuit valuations apply a sum-of-the-parts approach, using separate PE multiples for the core business and new ABF business.

• Valuation methodsprice-to-earnings

  P/E valuation

  Shennan Circuit values its core business at 22x 2024E PE and new ABF business at 30x 2027E PE; Avary is valued using a target PE method.

• industry_analysissupply-demand and capacity tracking

  supply-demand and expansion tracking

  The report gauges chain sentiment through CCL repricing pace, AI demand crowding out traditional capacity, BT substrate utilization, and mSAP expansion plans.

Asset mapping & comparison

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

• Upstream CCL players

  benefit from conventional FR4 CCL repricing and AI demand crowding out traditional supply

  Strengths

  The pricing rhythm is fast, and upside visibility on margin expansion is relatively high with limited short-term incremental capacity.

  Weaknesses

  If AI demand slows or traditional supply recovers, pricing resilience may weaken.

  Comparison

  Relative to downstream PCB, UBS is more constructive on upstream CCL in the near term.

  Risks

  Raw materials, customer bargaining power, and changes in incremental capacity can affect the price cycle.

• PCB makers

  sensitive to Kyber backplane, AI servers, and optical module PCB demand

  Strengths

  mSAP, AI server, and optical module demand provide medium-to-long-term growth opportunities.

  Weaknesses

  A delayed Kyber timeline, manufacturing difficulty for boards above 100 layers, and still-uncertain material yields create execution risks.

  Comparison

  Within PCB, UBS prefers companies with diversified AI customers and NVDA chain share-gain potential.

  Risks

  Kyber expectations are already partially priced in; post-2027 earnings growth could be repriced again.

• BT substrate makers

  affected by storage customer pricing negotiations and utilization rates

  Strengths

  Chinese BT substrate makers report no evidence of Korean memory customers forcing price cuts; UBS sees a favorable H226 pricing environment and high utilization.

  Weaknesses

  If customers push harder on price or demand weakens, pricing resilience may fall.

  Comparison

  Against broader rumors of repricing, UBS's channel checks are relatively constructive.

  Risks

  Memory cycle timing, customer concentration, and intensified competition.

• FastPrint Circuit

  one of PCB and ABF valuation subjects, with an mSAP expansion plan

  Strengths

  Plans to build a Zhuhai premium mSAP plant to serve optical module PCB demand.

  Weaknesses

  There is uncertainty around ABF ramp-up and recovery of core PCB operations.

  Comparison

  Valuation is based on a segmented PE method separating core business and new ABF business.

  Risks

  ABF order throughput may miss expectations, ABF ramp-up may be slow, and core PCB recovery may lag China PCB market recovery.

• Shennan Circuit

  subject of BT substrate channel checks and segmented valuation

  Strengths

  Relatively constructive view on BT substrate pricing and utilization.

  Weaknesses

  Server demand and the break-even timing of ABF remain key variables.

  Comparison

  The valuation applies 22x 2024E PE to the core business and 30x 2027E PE to new ABF business.

  Risks

  Slow recovery in global and China server demand, strong customer pricing pressure, increased competition, and delayed ABF break-even.

• Avary

  linked to AI servers, optical modules, and high-end HDI expansion

  Strengths

  Plans to raise up to RMB 9.6bn, adding 655.6k square meters of annual high-end HDI capacity.

  Weaknesses

  Traditional consumer electronics-related businesses may still be affected by shipment and ASP volatility.

  Comparison

  Valuation uses a target PE method.

  Risks

  A larger decline in FPC ASP, weaker-than-expected iPhone shipments, soft AR/VR demand, limited mini-LED application, and adverse FX.

Key data

• Kyber backplane timeline2028UBS still expects Kyber backplane to be introduced in 2028, with the delay broadly in line with prior expectations.
• KBL latest conventional FR4 CCL price increase15%After two hikes of 15% and 10% in June, KBL announced another 15% increase.
• Reference peak of previous cycleabout RMB 220/panelUBS believes current conventional CCL prices are already above the peak of the previous upcycle.
• Avary fundraising planup to RMB 9.6bnThis is intended for the Huai'an factory, adding 655.6k square meters of high-end HDI annual capacity for AI servers and optical modules.
• FastPrint fundraising planup to RMB 3.9bnOf this, RMB 2bn is for a Zhuhai premium mSAP plant over a two-year build period, adding 120k square meters of optical module PCB capacity per year.
• Victory Giant investmentabout RMB 1bnFunds are directed to the No. 12/13 mSAP lines at Plant 4, with further expansion of optical module-focused mSAP capacity in Plants 12 and 13 for core customers.
• Optical module demand1.6T/3.2TRising high-speed optical module demand is driving PCB makers to expand mSAP capacity.

Impact & implications

For investors, the key signal from the report is that chain sentiment has not reversed due to Kyber delay, but profit leverage and visibility are differentiated across segments. Upstream CCL has stronger support from pricing and supply tightness, while downstream PCB remains exposed to material-route, yield, customer-structure, and valuation expectations, requiring a shift from simply betting on Kyber to selecting names with better customer diversification, ASIC exposure, and share-gain capability.

Risks

• Kyber backplane material routes and supply-chain readiness may take longer than expected, further delaying a 2028 launch.
• Yield outcomes of M9+Q-glass or PTFE solutions in >100-layer PCB structures may fall short of expectations.
• The CCL pricing cycle may disappoint, or incremental supply and demand slowdown may weaken price support.
• Customers may exert stronger price pressure on BT substrates or PCB products amid stronger competition.
• Valuations of AI-related PCB names may already embed Kyber and optical module demand ahead of realization; shares may come under pressure if incremental TAM is reset lower.
• ABF capacity ramp, server demand recovery, consumer-electronics demand, and FX movements could all affect valuations of related names.

What to watch

• The final Kyber backplane material route, especially whether a PTFE-M9 hybrid approach becomes the preferred choice.
• Actual launch timing and order volumes of NVDA Rubin Ultra and Kyber-related products.
• Whether conventional FR4 CCL monthly hikes persist into 2H26 and 1H27.
• Outcomes of BT substrate price negotiations and utilization changes at Chinese peers.
• Build progress, customer qualification, and capacity utilization of mSAP expansion projects at Avary, FastPrint, and Victory Giant.
• Whether PCB sector valuation resets 2027+ earnings growth and Kyber incremental TAM assumptions.