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AMD is having a tough time delivering IC products owing to IC substrate shortages, according to a report from Fubon, an investment research institute in Taiwan.
AMD production constrained
AMD has partnered with TSMC and is projected to become the leading foundry’s second-largest customer, however, recent news revealed ABF substrate had constrained AMD’s CPU production and held the company back amid tight competition with Intel.
Fubon report stated that while Intel had been losing its game in chip manufacturing behind TSMC and Samsung, the company had had its eye on substrate productions this year and secured production capacity to prevent its PC and server market share from shifting to its competitor AMD.
Why has ABF substrate become so important?
ABF substrate, also known as“Ajinomoto build-up film” is a layer connecting components of a processor. In the early years, it was used in gaming and CPUs on computers and was less popular at a time when advanced packaging became a more viable option.
But as communication speed and high-performance computing is making groundbreaking advancement paving the way for various technologies, ABF substrates have been brought to the spotlight again.
ABF substrate is widely applied in high-performance computing processors such as CPU, GPU, and ASIC.
In a trend of blooming cloud computing, data center deployments, and artificial intelligence, servers are vastly needed, which indirectly raises demands for ABF substrates used in these speedy processors.
Aside from cloud computing and data centers, the large-scale deployment of the 5G network will also play a part in consuming ABF substrates at large quantities.
Who are the providers and why is there a shortage?
There are currently three main ABF substrate providers in Taiwan.
Unimicron, Nan Ya and Kinsus, had all previously undergone tough survival periods due to lowered pricing negotiated by chipmakers through IC packaging firms. IC substrate profit gains remained low while the technology is complicated and production facilities are costly to build. IC substrate makers are therefore unfavorable in expanding IC substrate divisions in spite of the foreseeable surge of demands.
Since the pandemic hit, laptops have seen a surge, and chipmakers are skipping IC packaging firms to purchase from the IC substrate makers directly seeking to secure production capacity.
Investments are increasing
According to people familiar with the subject, ABF substrate is likely to become the major factor of shortages in CPU and GPU productions this year.
With the current tight capacity, ABF substrate lead times are 24 weeks or more. The monthly demand capacity for ABF substrate is predicted to rise from 185 million units to 345 million units between 2019 to 2023, with a compound annual growth rate reaching 16.90%.
Industry sources indicated that Intel had secured all production capacity from an expanded IC substrate division of Unimicron back in 2019. Unimicron also announced to increase the budget this year by TWD$ 9.6 billion reaching TWD$ 27 billion of which 95% is allocated to the IC substrate production.