AI Boom Drives ABF Substrate Demand! NVIDIA, AMD, and Tech Giants Secure Capacity Through 2028, with Clients Already Discussing 2029 Expansion Partnerships

Demand for AI accelerators and High Bandwidth Memory (HBM) is exploding, causing advanced packaging capacity constraints to ripple upstream, making IC substrates—particularly ABF (Ajinomoto Build-up Film) substrates—the new bottleneck.

Latest industry reports indicate that NVIDIA, AMD, and major cloud service providers have extended their long-term ABF substrate procurement agreements through 2028. However, supply concerns remain unresolved, with some customers directly requesting substrate manufacturers to initiate preliminary expansion planning for 2029 to 2030. There is also a resurgence of the 'co-investment model' previously seen during the pandemic, where customers manage equipment off-site, pay equipment prepayments, or share factory construction costs in exchange for priority supply. This approach halves the capital expenditure risk for substrate manufacturers.

According to China's科创板 Daily, Taiwanese manufacturers are already taking action. Unimicron has raised its 2026 capital expenditure to NT$53.7 billion, focusing investment on its Kuang-Fu Plant II and Yangmei Plants II and III. Meanwhile, Kinsus has added NT$19.6 billion in investment to launch construction of K6C and K6D facilities in Yangmei and is scouting land for future K7 and K8 plants.

These developments closely resemble the 2021–2022 period. Back then, demand from stay-at-home economies, 5G device upgrades, and early AI deployments pushed substrate order visibility out to 2027. Major firms prepaid to secure capacity, but demand reversed in the second half of 2022, leading to widespread order cancellations. At the same time, new production capacity came online between 2022 and 2023, plunging the industry into a sudden downturn.

Supply chain players are now more optimistic about whether history will repeat. While AI infrastructure investment may slow, it is not expected to halt abruptly. Currently, there is no evidence of duplicate orders, and mechanisms like prepayments and profit guarantees have already mitigated expansion risks in advance—key differences from the previous cycle.

China's CICC (China International Capital Corporation) notes that key materials such as specialty resins, copper foil, and glass fiber cloth remain tight, with cost pressures being passed through to substrate pricing. As a result, average prices for high-end ABF substrates and the industry's profit margins are expected to rise. In other words, this round of substrate expansion is not blind overcapacity—it's a strategic move funded by customers to lock in five years of future production capacity.