The pain of ABF carrier boards is hidden behind the shortage of semiconductors

Abstract: Recently, Apple AR/MR has a new trend. Supply chain news said that Apple has begun to plan the second generation of AR/MR headsets, which will be shipped in the second half of 2024. This device will be equipped with dual CPUs, and both CPUs will use ABF carrier boards. It is worth mentioning that Apple's goal is that AR can replace the iPhone in 10 years, in this case, the demand for ABF carrier boards for Apple's AR equipment alone will exceed 2 billion pieces.

Recently, Apple AR/MR has a new trend. Supply chain news said that Apple has begun to plan the second generation of AR/MR headsets, which will be shipped in the second half of 2024. This device will be equipped with dual CPUs, and both CPUs will use ABF carrier boards. It is worth mentioning that Apple's goal is that AR can replace the iPhone in 10 years, in this case, the demand for ABF carrier boards for Apple's AR equipment alone will exceed 2 billion pieces.

The demand for ABF carrier boards is extremely strong, but the expansion speed of ABF carrier boards is surprisingly slow, resulting in a continuous shortage of ABF carrier boards, and Fubon Investment Advisory estimates that the gap rate of ABF carrier boards in 2022 is still more than 20%.

Executives at Intel, Nvidia and AMD have all warned of shortages of ABF carrier boards in recent months. Broadcom recently told customers that the lead time for its main router chips will be extended from 63 weeks to 70 weeks due to the lack of carrier boards.

In fact, the current shortage of GPUs and the tight supply of ABF also have a lot to do with it. What kind of magic does a small ABF carrier board have?

The root cause of GPU price increases

ABF carrier boards are mainly used in high-speed computing chips such as CPUs and GPUs.

Since abf board materials are mostly suitable for CPUs used in computers, in the first decade of the 21st century, smartphone sales gradually replaced PCs, and ABF carrier boards were left out in the cold.

But since 2017, thanks to the recovery of laptops and the rise of cloud and AI applications, the demand for ABF carrier boards has been growing for three consecutive years.

In recent years, with the drive of emerging applications such as 5G, autonomous driving, cloud computing and AI, the demand for processors has risen. Due to the large size of the new processor and the fact that the new packaging technology requires more ABF carrier layers, the demand for their capacity is gradually increasing.

According to data from Tuopu Research Institute, it is estimated that the average monthly demand for abfboards in the world will grow from 185 million to 345 million from 185 million to 2023, with a compound annual growth rate of 16.9%.

Xinxing Electronics, the world's largest carrier board supplier, said its ABF carrier board production capacity has been scheduled for 2025.

Although abf carrier boards are hot in the semiconductor market, ABF carrier boards are in short supply.

In the case of insufficient global semiconductor production capacity, the tight supply of ABF carrier boards has led to a capacity crisis for many semiconductor manufacturers.

According to CLSA's research, orders from first-line board factories have spilled over to second-tier factories. Some industry chain people said that the delivery cycle of ABF carrier boards has been as long as 30 weeks.

The shortage of upstream ABF carrier boards directly affects the manufacturing of semiconductor manufacturers, and behind the price increase of GPUs and CPUs, a large part of it is also due to the imbalance between supply and demand.

ABF carrier board behind the fiery

Monopolized upstream

ABF carrier boards, also known as Ajinomoto substrates, are developed and monopolized by Ainosin, a Japanese packaging material supplier. And this company is actually the inventor of MSG.

In the 1970s, while exploring sodium glutamate by-products, the group stumbled upon a by-product made of some kind of MONOSG. It can make synthetic resin materials with extremely high insulation, so it creates a film with important characteristics such as high durability, low expansion, and ease of processing, and the film is named ABF.

With the rapid development of the computer market in the 1990s, the demand for CPU substrates for multilayer circuit design increased, and printing needed to prevent interference between circuits, which made the requirements for insulating materials more demanding.

Intel was the first company to adopt an ABF carrier board, and since then, ABF carrier board technology has found use in most GPU designs as well as in the packaging of CPUs, chips, integrated network circuits, automotive processors, and more.

Therefore, abf film, the key material of ABF carrier boards, is monopolized by Avanofra, and its ABF film production accounts for 99% of the total global output.

Although Ajinomoto has announced an increase in production, the scale of the increase is conservative. In June 2021, it announced a CAGR of 14% for the next four years, which is well below the growth rate of the market FC package.

The lack of core material output will inevitably seriously restrict the expansion of ABF carrier board capacity.

A game for a few people

IC carrier board is the most valuable consumable in the packaging process, and is an important material used to connect the chip and pcB motherboard in the chip package. In high-end packages, IC carrier boards even account for 70%-80% of the cost of materials.

Among ic carrier boards, ABF carrier boards are the most widely used. The barrier to entry into the carrier board market is extremely high. IC carrier boards are demanding in core parameters, and the density and technical requirements are generally higher than those of PCB boards. Moreover, the carrier board industry has extremely high customer barriers. Generally speaking, new entrants cannot obtain customer certification for 2 to 3 years.

From the perspective of yield rate, the ABF carrier board area increases, the number of layers increases, and the complexity increases greatly reduces the yield of the product. According to estimates, the yield of 6 * 6 square centimeters is only 30-50%. At present, the design of 7 * 7 square centimeters in the market has gradually increased, and the design of 10 * 10 square centimeters is not uncommon.

Losses from yield declines will inhibit the expansion of ABF carrier board capacity, and the actual capacity increase will be significantly lower than the expansion rate of capacity.

The large capital investment, the long construction cycle caused by technical barriers, and the high time cost make manufacturers less willing to expand production.

For example, Xingsen Technology began the construction of IC carrier board production line in 2012 and achieved small-scale mass production in the fourth quarter of 2015; the high-end high-density IC carrier board product manufacturing project of Wuxi Shennan Circuit started construction in January 2017 and was connected to trial production in June 2019, which lasted more than 30 months.

Domestic carrier board enterprises

Chinese mainland as a leader in 5G construction, and has a huge market in terms of global servers, PCs, and mobile terminals, which can be seen in the demand for ABF carrier boards. At present, IC carrier board companies are seeking land or increasing capital expenditure to support new capacity expansion plans.

Shennan Circuit, the largest PCB leader in China, was established in 1984 and has always had a development plan for IC carrier boards. It has previously been reported that the company will invest heavily in the ABF carrier board market.

Shennan Circuit's announced expansion projects include the construction project of Guangzhou production base and the manufacturing project of IC carrier board products for High-end Flip Chip in Wuxi Shennan, with a total investment of more than 8 billion yuan, and the expansion capacity includes FC-BGA and panel RF/FC-CSP carrier boards.

Xingsen Technology is one of the two major IC carrier board manufacturers in China, the company has invested in the memory chip IC carrier board for a long time, continued to make breakthroughs, and successfully obtained the Samsung storage customer certification in September 2018, becoming the only mainland manufacturer to enter the official supply system of Samsung IC carrier board.

In March and June 2021, Xingsen Technology announced the expansion of existing production lines and the establishment of a joint venture subsidiary to build a new plant in Guangzhou Science City, with an estimated total investment of more than 5 billion yuan and an additional annual production capacity of 480,000 square meters of IC carrier boards after the production is completed. Moreover, Xingsen Technology clearly stated that ABF carrier board is the future strategic direction and another key investment area for future plans.

On July 26 this year, Zhuhai Yueya signed an expansion agreement with Zhuhai Toyama Industrial Park for the expansion of Yueya Semiconductor's third plant, which is scheduled to be put into operation in July 2022, and its main products are SiP packaging carrier boards for high-end RF ICs and mid-to-high-end FCBGA packaging carrier boards for digital chips.

In terms of new players, Zhongjing Electronics set up Zhuhai Zhongjing Semiconductor in 2020, laying out the production of advanced packaging high-end IC carrier boards, and plans to use the infrastructure of Zhuhai Fushan factory to increase equipment investment in the construction of IC carrier board production lines, which is expected to be put into production at the end of 21 years; Dongshan Precision announced in July this year that it intends to invest 1.5 billion yuan to establish a wholly-owned subsidiary to engage in the research and development, design, production and sales of IC carrier boards.

It is not too much to describe semiconductor production as "pulling a hair and moving the whole body". Behind the shortage of GPUs and CPUs, it is only because of a small carrier board.

It is worth noting that overseas manufacturers are also intensively expanding production to cope with the shortage of IC carrier board production capacity.

The pain of ABF carrier plates may be alleviated in the future.