PCB drill bit leader Dingtai High-Tech invests 5 billion in expansion, can the gamble on the AI boom pay off?

Interface News reporter | Chen Huidong

The expansion boom in the PCB (printed circuit board) industry is still ongoing. This time, it is following up on Dingtai High-Tech (301377.SZ).

On March 26, Dingtai High-Tech released its most impressive set of “results” since it went public. In 2025, the company achieved operating revenue of RMB 2.144 billion, up 35.70% year over year; net profit attributable to shareholders was RMB 434 million, up 91.14% year over year.

On the same day, the company announced that it plans to invest RMB 5 billion in Dongguan to build an intelligent manufacturing headquarters base. The fixed-asset investment is RMB 4 billion, to be advanced in three phases, focusing on the R&D and production of micro drill bits, high-end industrial cutting tools, and high-performance film materials. This is the company’s fourth round of capacity expansion since it listed in November 2022.

Dingtai High-Tech’s four rounds of capacity expansion Data source: announcements; chart by Chen Huidong

“Currently, the monthly production capacity of our micro drill bits can reach between 120 and 130 million pieces.” Dingtai High-Tech responded exclusively to Interface News. “By investing the over-raised funds, the production capacity scale of our drill bits will expand from the original 480 million pieces per year to around 580 million pieces. The company’s current focus is on high-end products in the micro drill bit field. Such products can be used in areas such as AI servers. Although the overall revenue contribution of high-end products is not yet very high, the profit margins are relatively large.”

Demand-side market conditions drive the urge to expand drill-bit capacity

Dingtai High-Tech’s main products include four categories: precision cutting tools, grinding and polishing materials, functional film materials, and intelligent CNC equipment. These are mainly used in fields such as PCB, 3C, and precision machinery manufacturing, and they also widely serve end markets such as artificial intelligence, humanoid robots, and low-orbit satellites.

Dingtai High-Tech’s business shows the characteristic of “one industry dominating.” Precision cutting tools (main products include drill bits, end mills, and CNC tools) account for more than 80% of revenue, and their core application is the PCB field—deeply tied to the market ups and downs of the PCB industry. According to data from Frost & Sullivan, based on the company’s 2024 sales volume, its global market share for PCB drill bits is 26.8%, ranking first in the industry.

But after listing on China’s A-share market, over the following two to three years, Dingtai High-Tech’s performance did not show any significant leap. From 2022 to 2024, operating revenue increased from RMB 1.219 billion to RMB 1.58 billion, while net profit attributable to shareholders rose from RMB 223 million to RMB 227 million, resulting in the situation of higher revenue but no corresponding increase in profit.

The situation changed in 2025. Not only did operating revenue cross the RMB 2 billion mark, net profit attributable to shareholders also nearly doubled.

The company’s profitability improved significantly, mainly due to optimization of its product mix. In its 2025 performance forecast, Dingtai High-Tech stated that with the continued surge in demand for servers and data centers, demand in the high-end PCB market has increased markedly, driving growth in demand for the company’s products such as precision cutting tools and polishing materials. The annual report shows that in 2025, the share of micro drill bit sales for 0.20mm and below rose to 29.65%, and the share of coated drill bit sales reached 39.40%. The gross margin of precision cutting tool products increased from 35% in 2024 to 41.67%.

On the same day the annual report was released, Dingtai High-Tech also issued an announcement adjusting the investment amounts of certain raised-investment projects. The announcement shows that one of the precision cutting tool product capacity expansion projects among its GEM IPO raised-investment projects plans to use RMB 366 million, with actual investment of RMB 243 million. The company plans to adjust all the remaining raised funds of RMB 107 million to the “Construction Project of a PCB Micro Drill Bit Production Base.”

“Right now, downstream market demand is strong, and the company’s drill-bit products are in a state of full production and full sales. Through investment of the over-raised funds, the production capacity scale of our drill bits will expand from the original 480 million pieces per year to around 580 million pieces. Currently, actual production capacity has already reached 380 million pieces per year.” Dingtai High-Tech told Interface News that the company is currently mainly focusing on high-end drill bit products, especially high-end drill bits with a length-to-diameter ratio exceeding 30x, which are used in the AI field.

According to an industry research report, the amount of drilling on a single AI server PCB is 5 to 10 times that of a conventional server. Also, hard substrates such as M9 significantly shorten drill bit life, increasing consumption by more than 30 times. In addition, according to a research report by Everbright Securities, global AI compute demand continues to grow at a high speed, and at the same time, AI inference is increasingly requiring low latency. The heterogeneous architecture of GPU+LPU is expected to accelerate implementation. Industry upcycle conditions may extend to the PCB equipment sector as well, and PCB drill bits may see a high-demand situation with product shortages and price increases.

However, the executives at Dingtai High-Tech also admitted that the company’s current capacity share in the high-end drill bit segment is still low—“roughly below 10%, and it is still in the growth stage.”

Large players expanding capacity intensify competition

The total investment in Dingtai High-Tech’s intelligent manufacturing headquarters base this time is RMB 5 billion, including RMB 4 billion in fixed-asset investment, implemented in three phases, with an estimated construction cycle of 3–5 years. The project’s core focus is on three major areas: micro drill bits (for AI servers, IC substrates, high-end HDI board demand, etc.); high-end industrial cutting tools (expanding into automotive electronics, aerospace, precision manufacturing, etc., to increase the proportion of revenue from non-PCB fields); and high-performance film materials (restarting the functional film materials business to build a second growth curve).

When comparing capacity expansion among peers, Dingtai High-Tech’s expansion scale is larger and the timeline is longer, and its aggressiveness is higher than that of its peers.

Jinzhou Precision, a subsidiary of Tungsten High-Tech (000657.SZ), is Dingtai High-Tech’s direct competitor in the PCB drill bit field and has a cost advantage across the entire tungsten resource industrial chain. In December 2025, the company added two capacity investment projects: a micro drill technical transformation project of 130 million drill bits, with a total investment of RMB 163 million, a construction period of two years, and expected full production in the third year; and an investment project for ultra-long length-to-diameter precision micro tooling for AI PCB, with an estimated total investment of RMB 175.5 million, a construction period of three years, and full production in the fourth year. Soochow Securities expects the company’s monthly drill-bit production capacity to reach 90 million pieces by end-2025, and the monthly capacity to potentially reach 110 million pieces by end-2026.

The upstream of the industrial chain is also planning capacity expansion. On February 10, Tungsten High-Tech announced that its wholly owned subsidiary Zhu Qiang Group (the direct parent of Zhuzhou Diamond) plans to invest RMB 145 million to build a “technical transformation project for adding 30 million PCB drill bit rods per year,” with a construction period of 12 months. Drill-bit rods are the only upstream raw material base for manufacturing PCB micro drill bits. The purity and crystal grain uniformity of the material directly determine the precision, service life, and yield of the drill bits.

Capacity expansion among peer companies in the same industry. Data source: announcements; chart by Chen Huidong

A person with knowledge of Jinzhou Precision told Interface News, “Jinzhou Precision’s capacity expansion pace in the drill bit segment is relatively fast in the industry, and it is even more focused on the high-end PCB tooling track driven by AI compute. Compared with peers, the construction cycles of related projects are relatively short. This mainly takes into account that the PCB industry is cyclical, and it helps avoid the impact of capacity overhang and price wars on profits.”

Three major hidden concerns: funding, costs, and capacity oversupply

Even if Dingtai High-Tech is a leading company in the PCB drill bit field, with such a large-scale capacity expansion plan, there are several hidden concerns behind it.

Hidden concern 1: funding pressure. Although Dingtai High-Tech’s performance has been stable in recent years, as of the end of 2025, the company’s cash on hand was RMB 418 million. Cash flow from operating activities amounted to RMB 291 million, which is a huge discrepancy compared with the planned RMB 5 billion expansion plan.

“To match the capacity expansion demand of downstream large customers such as Jingwang Electronics (603228.SH) and Shenghong Technology (300476.SZ), the company has expanded drill-bit capacity significantly over these two years. At the beginning of last year, monthly capacity was only 70–80 million pieces. From April and May onward, it expanded by about 6 million pieces per month, and now capacity has reached 130 million pieces per month.” Dingtai High-Tech told Interface News that with this capacity expansion pace, most of the company’s funds come from bank loans, which is sufficient to support the company’s expansion needs.

However, Interface News noted that Dingtai High-Tech’s asset-liability ratio has been trending upward in recent years, rising from 25.43% to 41.63% from 2022 to the end of 2025. According to financial reports, as of the end of 2025, the company’s short-term borrowings balance was RMB 510 million, up significantly from RMB 188 million at the beginning of the year.

Hidden concern 2: cost pressure affecting performance stability. Since last year, amid a wave of price increases for upstream raw materials in the industry, Dingtai High-Tech’s cost pressure has also been increasing. The financial reports show that the company’s raw materials costs increased from RMB 481 million in 2024 to RMB 652 million in 2025, up 35.55% year over year. The share of raw materials costs in operating costs also rose from 47.40% to 52.72%.

And large-scale capacity expansion will undoubtedly magnify the risk of upstream fluctuations. The above-mentioned staff said the company will intensify efforts to ensure stability in upstream raw material prices and supply.

Hidden concern 3: capacity oversupply risk. Dingtai High-Tech’s PCB drill bit market share has already reached 26.5%, and competition in the industry is fierce, making further improvement difficult. Second, risk related to concentration among downstream customers. In its financial reports, Dingtai High-Tech states that downstream customers have stringent requirements for precision and stability of drill-bit products. Typically, they choose suppliers with strong technical capabilities and well-established supply systems to build long-term cooperation. The company’s customers are mainly leading PCB companies, such as Shenghong Technology, Shenzhen Nanhuan Circuit (002916.SZ), etc., resulting in a high concentration of customers. If downstream customers’ capacity expansion falls short of expectations, orders shift elsewhere, or business risks arise, it will directly affect the absorption of the company’s production capacity.

On the risk of oversupply in high-end capacity, Dingtai High-Tech also expressed concerns to Interface News, stating, “There is absolutely no need to worry about capacity absorption in the next two years, and this is a common judgment among industry professionals such as equity analysts at brokerages. At present, downstream demand is still strong. But in the long run, it is indeed necessary to be alert to the problem of capacity oversupply. Many of China’s industries—for example, solar energy and batteries—have experienced cyclical capacity oversupply. The PCB industry’s domestic share is currently only a bit above 50%. If the domestic share increases to above 80% in the future, competition and capacity pressure will obviously intensify.”

An industry leader in the tungsten industrial chain that has previously done PCB drill bit business told Interface News, “The company also used to make PCB drill bits, but at that time the products were not profitable—earning only a few tenths of a yuan per drill bit. Recently, demand has been stimulating it because of the AI server field. But if demand such as AI growth does not meet expectations, then in the long term the market outlook for the drill bit business still has uncertainty.”