Kyber orthogonal backplane delay in-line with our expectation
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UBS notes that NVIDIA's Kyber rack architecture delay to 2028 aligns with their expectations, based on due diligence with upstream copper-clad laminate (CCL) suppliers. The Kyber backplane faces significant supply chain challenges, including processing difficulties with M9 and Q-glass materials, suspended due to cost and supply constraints, and the need for further supply chain validation of PTFE alternatives. Consequently, PCB yield rates for 100-plus layer boards remain problematic.
However, UBS believes the impact on PCB companies' 2026 and 2027 earnings is limited, as Kyber was only scheduled for small-volume shipments by late 2027. Meanwhile, conventional CCL prices are accelerating. KBL announced another 15% price increase, pushing current prices approximately RMB 220 per sheet above the previous cycle peak. UBS expects monthly price hikes to continue through 2H26 to 1H27 as AI demand absorbs conventional supply.
BT substrate pricing remains favorable for Chinese manufacturers in 2H26 despite pressure from Korean memory customers, supported by high capacity utilization. The mSAP capacity expansion is also accelerating, driven by robust demand for 1.6T and 3.2T optical modules. UBS reiterates a short-term preference for upstream CCL exposure while maintaining a selective approach toward PCB names, prioritizing companies with diversified AI customer exposure and share gain potential across the NVIDIA supply chain.