AI Packaging Demand Surges as Taiwan's Material Supply Chain Gap Widens
Nashnova编辑部
ASE's VP Hiro Huang says the material supply chain covers less than half of forecast customer demand, with nearly all new capacity for the next three years already booked — AI orders consumed three years of built-up capacity in under twelve months.
How big is the shortage?
The AI compute investment wave is concentrating pressure on advanced packaging materials. ASE (日月光投控) VP Hiro Huang told a SEMI Taiwan materials alliance launch event that existing supply covers less than half of customer demand.
This means → even at full output, buyers get roughly half of what they need. The industry spent two years worrying about overcapacity, but AI orders absorbed three years of built-up capacity in under a year, flipping the market from surplus to shortage.
Huang admitted that during the worst of the crunch, he had to fly around the world personally to secure supply — effectively "begging on his knees" for material.
Local sourcing is 60–70% — so why the risk?
ASE's local procurement ratio for direct materials sits at roughly 60%–70%. That sounds reassuring, but Huang stressed the need to trace risk back to "your supplier's supplier," not just the direct vendor.
In plain terms = Taiwan substrate makers operate locally, but ABF — Ajinomoto Build-up Film, a key insulating layer used to stack circuit layers on substrates — is 90%–95% concentrated among a handful of Japanese and American firms.
This means → if those upstream sources are disrupted, local packaging lines shut down too. "Local" on paper does not equal "safe" in practice.
Why are AI chips so demanding on materials?
AI-driven chip packages keep growing — from early mobile-device sizes to today's large heterogeneous integration modules, which assemble chips of different functions into a single package.
A single advanced package with a 100 mm edge length can be worth hundreds of thousands of dollars, with extreme thermal, electrical, and stress requirements.
In plain terms = the bigger and pricier the chip, the less room for error. Any tiny material defect can scrap the entire high-value die — material quality is no longer a cost line; it is a pass-or-fail gate.
How fragile is a concentrated supply chain?
Huang noted that some critical material suppliers control 80%–90% of global market share. If a primary source goes down, every competitor worldwide scrambles for the same limited backup capacity.
He cited three events that already proved this fragility: Covid lockdowns, the Ever Given blocking the Suez Canal, and geopolitical conflicts.
This reflects a systemic vulnerability that has been tested repeatedly — concentration risk is not theoretical.
Why is now the window to invest?
Taiwan's semiconductor materials supply chain is in an unprecedented upcycle, Huang said. Market caps and profitability have risen sharply.
He urged material suppliers to invest while cash flow is strong. In the past, thin margins made self-funded expansion nearly impossible; now that valuations have risen, companies should channel profits into R&D, advanced equipment, and talent.
This means → the competitive edge in procurement is no longer about squeezing costs — it is about spotting supply-chain risks before competitors do and acting first.
Can the gap close within three years?
Nearly all new capacity for the next three years has already been booked, narrowing the window for new entrants.
Huang called on Taiwan material firms to deepen partnerships with global material groups on Taiwanese soil, building a more resilient local semiconductor ecosystem.
Put simply = whether the supply gap narrows meaningfully in three years depends on whether Taiwan's material makers can leap from R&D to volume production during this upcycle — that is the core test of whether this materials-sector boom has staying power.
Content is for reference only, not financial advice.