AI supply crunch spreads to wafers, ABF locked through 2028

The AI semiconductor supply chain bottleneck is spreading upstream from HBM and advanced packaging to silicon wafers and ABF substrates, as wafer makers hit maximum utilization and substrate capacity is locked through 2028.

"Even though ABF substrates have been secured through long-term contracts through 2028, customers' concerns about supply shortages have not been resolved," Yang Seung-soo, a researcher at Meritz Securities, said. "Some customers are once again pursuing joint investment models to secure capacity through 2030."

GlobalWafers, the world's third-largest wafer maker by 300mm output, said during its second-quarter earnings call on Aug. 4 that its 12-inch, 8-inch, and 6-inch production facilities had reached maximum utilization, with supply constraints emerging for some advanced 12-inch products. Siltronic, the No. 4 wafer maker, said 300mm wafer orders are rising again as inventory adjustments by memory and system semiconductor makers end. Shin-Etsu Chemical and SUMCO, the top two players, also reported higher shipments. Ibiden, the world's largest AI substrate maker, plans to invest 500 billion yen ($3.4 billion) from this year through 2028 to expand IC package substrate capacity for AI servers.

The tightening supply chain threatens to delay AI chip deliveries for NVIDIA, AMD, and hyperscalers, while Apple faces a separate but related crisis — TSMC is holding roughly $1 billion in finished A20 Pro silicon that cannot be packaged because LPDDR5X memory has been claimed by AI data center demand.

Wafer Makers at Full Capacity as AI Demand Rises

A silicon wafer is the base material on which semiconductor circuits are etched. Every chip — DRAM, NAND flash, GPU, AI accelerator, and ASIC — is produced on wafers, and most AI server chips use 300mm wafers. Even if companies secure advanced packaging or HBM production capacity, chip output cannot increase without enough wafers.

GlobalWafers said orders for high-value-added wafers, including high-purity and low-defect products, are rising quickly as demand expands for AI, high-performance computing, and advanced packaging. Customers are increasingly signing long-term agreements to secure supply for the AI chip supply chain.

Industry observers expect wafer supply and demand to tighten further after next year, when AI memory expansion by Samsung Electronics, SK hynix, and Micron begins in earnest. An industry source said wafer shortages have not yet become a direct bottleneck, but companies are already competing to secure supply in advance across the entire chain.

Substrate Lockups Extend Through 2030

Competition to secure production capacity is intensifying not just for wafers but for ABF substrates — the key material connecting semiconductor chips to the main board. NVIDIA, AMD, and global hyperscalers have secured ABF capacity through long-term contracts through 2028. More recently, some customers have begun asking substrate makers to expand capacity early or share capital investment costs to secure production through 2029 and 2030.

Taiwan's IC substrate makers are responding with aggressive expansion. Unimicron, the largest Taiwanese IC substrate maker, has raised 2026 capital expenditure to NT$53.7 billion ($1.7 billion), focusing on its Guangfu Plant 2 and Yangmei Plants 2-3. Kinsus has added NT$19.6 billion ($620 million) in capex for its Yangmei K6C and K6D plants and is scouting land for K7 and K8. Nanya PCB is upgrading its Shulin and Jinhsing plants and leasing parent group facilities in southern Taiwan.

AMD CEO Lisa Su announced more than $10 billion in additional Taiwan investment, including an EFB (elevated fanout bridge) 2.5D packaging network — seen as an alternative to TSMC's CoWoS — with Unimicron, Kinsus, and Nanya PCB named as partners.

Supply-side constraints are compounding the pressure. T-glass fiber cloth, a high-performance material used in advanced IC substrates, is in short supply, limiting substrate makers' ability to expand even with equipment in place. ABF and BT substrate prices have entered a rising cycle, with market expectations of roughly 8 percent quarterly price increases in the second half of 2026.

For investors, the supply chain tightening is a double-edged sword. Substrate makers like Unimicron, Kinsus, and Nanya PCB benefit from a seller's market with multi-year capacity locked via LTAs. But the bottleneck represents a delivery risk for NVIDIA, AMD, and hyperscalers scaling AI infrastructure. AT&S, the Austrian substrate maker, reported fiscal 2025/26 revenue of 1.8 billion euros, up 21 percent year over year, with EBITDA margin of 23.3 percent — evidence of the pricing power flowing to substrate suppliers.

This article is for informational purposes only and does not constitute investment advice.