Morgan Stanley’s latest in-depth report on the AI optical module and PCB supply chain, released in June 2026, forecasts that the global AI optical module PCB market will expand from $620 million in 2025 to $3.77 billion in 2028. That’s more than a fivefold increase in three years, with an annual compound growth rate of 83%, far outpacing the optical module market’s 60% growth rate over the same period.
This projection isn’t just a simple linear extrapolation—it’s grounded in two core drivers. First is volume growth. Morgan Stanley has significantly raised its forecast for AI optical module shipments over the next three years, expecting 73 million units in 2026, 141 million units in 2027, and 158 million units in 2028. These figures are up 38%, 98%, and 86% respectively from previous estimates, reflecting an accelerating surge in demand across the supply chain.
Second is the increase in unit price. As optical modules upgrade from 400G to 800G, 1.6T, and even 3.2T, the internal PCB’s material grade, layer count, and manufacturing process are all undergoing comprehensive upgrades. Morgan Stanley’s analysis shows that the unit price for a 400G optical module circuit board is about $55. For 800G, it rises by $15–$25, and for 1.6T, it increases another $20–$30. This means PCB value growth isn’t solely dependent on shipment expansion—the value per PCB is rising on its own.
What Does the Record High for Kingboard Laminates Reveal About Market Pricing Logic?
Hong Kong-listed PCB concept stocks surged collectively on June 15, 2026. Kingboard Laminates jumped more than 21% in a single day, while Kingboard Holdings rose over 13%, both reaching all-time highs. Previously, Kingboard Laminates had seen five consecutive days of net southbound capital inflows, totaling HK$3.059 billion.
Citi simultaneously raised its earnings forecasts for Kingboard Laminates, increasing projections for 2026–2028 by 7%, 12%, and 16%, respectively. The target price was raised from HK$80 to HK$100, maintaining a "Buy" rating, reflecting stronger-than-expected profitability from AI glass fiber cloth. Citi noted that prices for electronic-grade glass fiber cloth soared in the first half of the year, and it expects Kingboard Laminates’ net profit for H1 to rise 2.97 times year-over-year to HK$3.71 billion.
Shenwan Hongyuan also initiated coverage on Kingboard Laminates with an "Overweight" rating, forecasting revenues of HK$26.8 billion, HK$35.6 billion, and HK$38.3 billion for 2026–2028, with gross margins rising to 30%, 31%, and 32%. The market’s pricing logic isn’t just about cyclical recovery in traditional copper-clad laminate business—it’s also reassessing the company’s transformation and upgrade toward integrated AI materials.
Why Are Upstream Materials the Center of Pricing Power in This Cycle?
Value distribution in the PCB supply chain has shifted markedly upward amid this AI-driven demand surge, with pricing power concentrating in upstream materials. According to industry sources, NVIDIA has bypassed copper-clad laminate manufacturers to directly connect with HVLP4 copper foil and T-glass fiber cloth suppliers, locking in critical capacity more than a year ahead via direct consignment. CCL suppliers have even adopted quota-based allocation, requiring substrate and PCB manufacturers to pick up goods based on actual usage, further highlighting the scarcity of upstream materials.
Citi believes PCB manufacturing capacity is growing fastest, followed by copper-clad laminates, with electronic cloth lagging furthest behind. But pricing power is the opposite—the further upstream, the greater the price elasticity. Shanxi Securities’ analysis supports this: the global delivery cycle for core equipment needed for electronic cloth exceeds one year, severely limiting expansion of high-end electronic cloth capacity. HVLP copper foil, with high technical barriers, is concentrated among a few suppliers, and expansion cycles are also lengthy.
Kingboard Laminates, as the world’s largest rigid copper-clad laminate seller (accounting for 14.4% of global sales in 2024), has an integrated supply chain from copper foil, glass fiber, and resin to copper-clad laminates. This gives it unique structural advantages in this round of material price hikes. The company has already launched production of first-generation low dielectric glass fiber yarn and plans to expand lines for first- and second-generation low dielectric and Low CTE products in 2026–2027.
How Does the Technical Upgrade Path for AI Optical Module PCBs Impact Industry Competition?
The evolution of optical modules from 400G to 800G, 1.6T, and eventually 3.2T is driving simultaneous upgrades in PCB technology on three fronts. First, copper-clad laminate materials are moving from M6 grade in the 400G era to widespread use of M7 and even M8 grades in the 800G and 1.6T era—higher grades mean higher prices. Second, PCB layer counts are rising from 10–12 layers for 400G to 12–14 for 800G and 14–16 for 1.6T. Third, manufacturing processes are shifting from traditional HDI to improved mSAP semi-additive methods. The 1.6T optical module demands much finer circuit lines, and traditional HDI line width limits can’t handle 224Gbps high-speed signal transmission, while mSAP can reliably achieve ultra-fine lines of 15–20 microns.
Morgan Stanley also offers compelling evidence from a bill of materials breakdown for NVIDIA’s next-gen Rubin rack. A Rubin VR200 NVL72 rack, priced at about $7.8 million, has PCB content value up 233% over the previous GB300 generation—from about $35,100 to $116,700. New ConnectX module PCBs and mid-board PCBs, absent in the GB300, alone contribute about $46,400 in added value. By contrast, the GPU’s share of the total bill of materials actually dropped from about 65% to 51%. This means PCBs are shifting from a "supporting role" to a core value carrier in AI computing systems.
How Long Will the Supply-Demand Gap Between Material Bottlenecks and Capacity Expansion Persist?
The tightest supply-demand gaps are concentrated in upstream high-end electronic cloth and HVLP copper foil. The delivery cycle for core equipment needed for electronic cloth exceeds one year, and HVLP copper foil faces both technical barriers and long expansion cycles, making it impossible for capacity to ramp up as quickly as PCB manufacturing.
Price signals show that traditional 7628 electronic cloth saw six price hikes in 2026, with tax-inclusive prices rising from RMB 4.5/meter to RMB 7.4/meter. FR-4 copper-clad laminate prices went up four times, expected to rise from RMB 150/sheet to RMB 240/sheet. Even in June, typically a slow season, 7628 electronic cloth accelerated price hikes by RMB 0.7/meter, compared to only about RMB 0.5/meter per round from February to May. Guotai Haitong Securities expects that, given tight upstream 7628 electronic cloth inventory and high utilization rates among midstream copper-clad laminate makers, the "cloth-to-board" price transmission mechanism is smooth, and further price hikes across the supply chain in July–August are highly likely.
On the capacity expansion front, Kingboard Laminates’ specialty electronic cloth output is planned to rise from 28.8 million meters in 2026 to 56.4 million meters in 2028, with simultaneous expansion into first- and second-generation low dielectric and Low CTE cloth products. For copper foil, the new 21,000-ton capacity mainly focuses on high-frequency, high-speed, low signal loss RTF, HB, and VLP copper foils. However, even with these expansion plans, the supply-side constraints due to equipment delivery cycles and technical barriers will be difficult to fundamentally ease in the short term.
Summary
The PCB supply chain is undergoing a structural growth cycle driven by AI computing demand. Morgan Stanley’s forecast of 83% annual compound growth, Kingboard Laminates’ record-setting stock performance, and the shift of pricing power upstream together paint a complete picture of this "AI hardware diffusion" cycle.
From a technical perspective, bottlenecks in AI computing systems are shifting from the chip layer to the interconnect layer. PCBs, as the core carrier for high-speed signal transmission, are moving from quantity-driven to value-driven growth. Structurally, upstream electronic cloth and copper foil segments face rigid capacity constraints but greater pricing flexibility. In terms of asset pricing, the market’s reassessment of supply chain leaders like Kingboard Laminates has moved beyond traditional cyclical recovery logic, now reflecting their growth options as they pivot toward high-end AI materials.
Frequently Asked Questions (FAQ)
Q1: Morgan Stanley forecasts a fivefold increase in AI optical module PCB over three years. What exactly does this figure represent?
According to Morgan Stanley’s report, the global AI optical module PCB market is expected to grow from $620 million in 2025 to $3.77 billion in 2028, with an annual compound growth rate of 83%, far outpacing the optical module market’s 60% growth rate. This growth comes from both rapid expansion in AI optical module shipments and the value increase per PCB due to technical upgrades.
Q2: What are the core drivers behind Kingboard Laminates’ latest surge?
There are two main reasons for Kingboard Laminates’ market revaluation: First, rising prices for upstream electronic cloth and copper foil have significantly improved profitability, with Citi projecting nearly a threefold year-over-year increase in net profit for the first half. Second, the company is transitioning from a traditional copper-clad laminate leader to an integrated supplier of high-end AI materials, rapidly expanding specialty electronic cloth and low dielectric capacity related to AI.
Q3: How does this PCB supply chain upcycle differ from traditional PCB cycles?
Unlike cycles driven by traditional consumer electronics, this upcycle is fundamentally different because AI computing infrastructure construction is driving systemic upgrades to PCB technical standards—including material grades moving from M6 to M7/M8, increasing layer counts, and manufacturing processes evolving from HDI to mSAP. These upgrades are not just about volume growth, but also structural increases in PCB value per unit.
Q4: How long will PCB demand growth continue?
Morgan Stanley’s breakdown of NVIDIA’s Rubin rack bill of materials shows PCB’s value share in AI racks is rising—from about $35,000 in the previous GB300 generation to about $117,000, up 233%. As compute clusters expand from tens of thousands to hundreds of thousands or even millions of GPUs, demand for optical connections continues to accelerate, suggesting PCB demand will remain robust for the foreseeable future.
Q5: Should the PCB supply chain’s performance be used as an indicator for AI infrastructure expansion?
Yes. As the foundational carrier for signal transmission between GPUs, switches, and optical modules in AI hardware systems, changes in PCB demand and pricing directly reflect the pace of AI computing infrastructure expansion and technical upgrades. Compared to GPU price signals, the PCB supply chain offers more dimensions for observation—including material prices, layer upgrades, and process evolution.
