AI Demand Drives ABF Substrate Shortage to Extend Through 2028
0xBroomberg
ABF substrates — the thin-film material essential to advanced AI chip packaging — entered a formal shortage in the first half of 2026, with the supply gap expected to persist through 2028. The bottleneck is now constraining shipment schedules for Nvidia, AMD, and major cloud providers, while substrate makers enter a structural pricing upcycle.
What is an ABF substrate, and why has it run short?
An ABF substrate — Ajinomoto Build-up Film, a thin layer inside a chip package that carries signals between the chip and the circuit board — is a non-negotiable component of advanced AI chip packaging. Without it, the chip cannot be assembled.
The shortage stems from two bottlenecks hitting at once: upstream raw materials cannot keep up, and downstream manufacturing capacity cannot expand fast enough.
This means → this is not a single-point failure but a simultaneous jam across the entire supply chain, from materials to fabrication — unlikely to be resolved by any quick fix.
Who is competing for materials, and what exactly are they fighting over?
The 2.5D and 3D advanced packaging used by AI chips — including TSMC's CoWoS process — demands far tighter warpage and impedance specs from substrates. That has spiked demand for T-type glass fiber cloth, a specialty fabric with a low thermal expansion coefficient that keeps substrates from warping under heat.
The scramble is not limited to Nvidia, Intel, and AMD. Broadcom, Marvell, and MediaTek — all ASIC vendors — have also entered the race, broadening the demand base beyond earlier expectations.
In plain terms = a handful of large buyers used to need this specialty material. Now every company building custom AI chips has piled in, and suppliers were never set up to handle this many orders.
When will material supply catch up?
Nittobo, the leading supplier of T-type glass fiber cloth, plans to add capacity in 2027. New entrants like Taiwan Glass are also expanding. But the industry consensus is that new supply will not meaningfully ease the crunch before 2028.
Prices are already rising: Japan's Resonac (formerly Showa Denko) and Mitsubishi Gas Chemical have both raised prices.
This means → copper-clad laminate prices will stay elevated for at least two years. Materials cost more *and* are hard to get — that cost pressure will pass all the way through to finished AI servers.
How will the supply-demand gap evolve?
The ABF substrate market is projected to flip from oversupply in 2025 to shortage in the first half of 2026, with the gap widening further through 2027–2028.
Some customers have already begun locking in capacity with upstream suppliers for 2029 and beyond, signaling that supply-chain stress is propagating into the long term.
This reflects a downstream judgment that this is not a cyclical blip but a structural shortage — whoever secures capacity first will protect shipments for the next two to three years.
Which companies stand to benefit most?
Key beneficiaries include Japan's Ibiden, South Korea's Samsung Electro-Mechanics (Semco), Austria's AT&S, and Taiwan's Unimicron, Kinsus, Nan Ya PCB, and Elite Material.
Several of these companies have begun cutting BT substrate capacity — a lower-end product line — and converting factory space to ABF substrate production.
In plain terms = these firms are shutting down lines that earn less to make room for the product that earns more — a textbook capacity pivot driven by a structural opportunity.
What happens after 2028?
The ultimate trajectory depends on two variables: how fast T-type glass fiber cloth capacity comes online, and how much further AI chip packaging evolution raises the bar on material specs.
Next-generation AI chips are larger, require more substrate layers, and consume more total area. This means → even if material capacity catches up, the chips' own "appetite" is growing in parallel — whether supply and demand can balance remains an open question.
This reflects a deeper shift: the binding constraint in the AI hardware supply chain is migrating from "can't fabricate the chip" to "packaging materials can't keep up" — the bottleneck keeps moving further down the stack.
Content is for reference only, not financial advice.