Ibiden Races to Expand Amidst AI Substrate Demand Surge
1min read Nvidia's primary supplier of chip package substrates, Japan’s Ibiden Co., is considering expediting its production capacity expansion to meet surging artificial intelligence demands. The 112-year-old company has witnessed robust sales for its AI-centric substrates, leading to a situation where customers have entirely snapped up available products, according to CEO Koji Kawashima. He anticipates this heightened demand to persist at least through the coming year.
Currently constructing a new substrate factory in Gifu Prefecture, central Japan, Ibiden anticipates the facility to be operational by the latter part of 2025, with plans to reach 50% capacity by March 2026. Nevertheless, Kawashima acknowledges this may prove insufficient and mentions that discussions are underway to determine the timeline for scaling up the remaining 50% capacity.
Ibiden's clientele includes industry giants like Intel Corp., Advanced Micro Devices Inc., Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co., and Nvidia. These companies often engage Ibiden early in the product development process due to the necessity of tailoring substrates to specific chip designs. The substrates, essential for transferring signals from semiconductors to circuit boards, must endure the heat emitted by Nvidia’s GPUs to facilitate AI chip package construction incorporating components like memory.
In the past, Intel accounted for a significant 70% to 80% of Ibiden’s chip package substrate revenue, a figure that decreased to approximately 30% by the fiscal year ending in March, following Intel's profitability challenges. This decline adversely impacted Ibiden’s share price, which saw a drop of about 40% this year. Despite these challenges, Kawashima maintains optimism about Intel's future prospects and emphasizes the importance of expanding business with other chip manufacturers.
While American market entry challenges persist due to foreign chipmakers' reluctance to transfer cutting-edge technology to the U.S., Ibiden remains poised to capitalize on its strong relationship with Nvidia, which utilizes Ibiden’s substrates for all its AI semiconductors. Despite interest from Taiwanese competitors, analysts acknowledge that replicating Ibiden's supply position is challenging, given its capability to mass-produce these sophisticated substrates at a high volume.
AI semiconductors currently constitute over 15% of Ibiden’s ¥370 billion ($2.3 billion) in sales, a share expected to increase as Nvidia advances with the production of its next-generation Blackwell chips. In a fiercely competitive landscape involving companies like Marvell and Broadcom, along with potential in-house developments from Google and Microsoft, Ibiden is confident in its ability to accommodate various chip designs, assuming the packaging designs and materials remain similar.
