The market for advanced build-up film (ABF) substrates faces a widening supply deficit as AI chip designs grow more complex, forcing substrate manufacturers to accelerate expansion plans originally projected for later in the decade.
AI GPUs, CPUs and application-specific integrated circuits are advancing to new generations requiring larger substrate sizes and higher layer counts, intensifying pressure on existing manufacturing capacity.
Analysts estimate a 39 percent compound annual growth rate for ABF substrate demand area from 2025 to 2028. The ABF supply-demand gap could reach approximately 10 percent in the second half of 2026, widening to around 21 percent in 2027 and potentially exceeding 40 percent by 2028.
Chipmakers are now paying substrate manufacturers to launch expansion projects ahead of schedule. Methods include prepayments for future capacity, direct payment for production line equipment and joint factory construction.
Unimicron, a major substrate producer, raised its 2026 capital expenditure to NT$53.7 billion to boost output for advanced packaging requirements.
Kinsus Interconnect plans to add NT$19.6 billion in capital expenditure over three years, with NT$14 billion projected for 2026 and NT$16 billion for 2027.
Nan Ya PCB is raising capital expenditure to expand existing plants and will lease and convert a facility in southern Taiwan to increase substrate supply.
Leading Interconnect, a ZDT Group subsidiary based in China, aims to expand to seven or more plants in Shenzhen by 2030 to address regional demand for advanced packaging components.
AMD CEO Lisa Su recently visited Taiwan and announced U.S. $10 billion in supply chain investments targeting the elevated fanout bridge advanced packaging ecosystem, where substrate makers hold a central role.
Advanced packaging has become a binding constraint in the AI supply chain. Nvidia's, AMD's and TSMC's ability to scale AI chip output depends directly on securing sufficient high-quality ABF substrates.
These direct client funding arrangements deepen ties between chip designers and substrate manufacturers, establish stronger competitive moats for incumbent players and raise barriers for new entrants in the advanced packaging sector.
