As memory manufacturers like Samsung Electronics and SK Hynix ramp up production to meet the surging demand for artificial intelligence (AI), competition for supply within the semiconductor supply chain is extending to the packaging substrate sector. 

The traditional practice of ordering substrates on an as-needed basis is increasingly giving way to long-term supply agreements (LTAs) that lock in supply volumes a year in advance.

As orders for raw materials and manufacturing equipment essential for PCB production surge, lead times are lengthening. While memory manufacturers accelerate capacity expansion, PCB makers are also ramping up their own production capabilities; this indicates that AI-driven investment is extending beyond PCBs to the entire downstream supply chain, including raw materials and equipment.

Industry insiders report a recent uptick in transactions involving semiconductor packaging substrate manufacturers, with customers placing advance orders to secure future supplies. This strategy aims to ensure capacity meets demand and to hedge against potential supply shortages.

A circuit board industry source noted, "In the past, customers simply placed orders based on immediate needs. Now, however, they are signing long-term agreements—such as reserving a full year's supply in advance—to guarantee availability."

This shift stems from the rapid rise in demand for substrates, driven by domestic memory manufacturers like Samsung Electronics and SK Hynix aggressively expanding production capacity. Rising demand for DRAM—including High Bandwidth Memory (HBM)—fueled by increased investment in AI servers is straining substrate manufacturers' capacity; simultaneously, the surface area and layer counts of packaging substrates used in high-performance computing semiconductors are increasing. In particular, the ramp-up in mass production of high-performance AI accelerators utilizing HBM4—such as NVIDIA's next-generation AI platform, "Vera Rubin"—is driving continuous growth in demand for advanced packaging substrates.

Market research firm Counterpoint Research forecasts that the supply gap for ABF substrates—primarily used in high-performance semiconductors—will reach approximately 20% by 2027 due to surging demand for AI semiconductors. The firm's analysis also indicates that a single AI semiconductor requires roughly ten times the amount of substrate material used in a standard PC semiconductor. Consequently, the combination of rising semiconductor shipment volumes and the trend toward larger, more complex (multi-layer) substrates is intensifying pressure on production capacity.

Companies are expanding capacity to meet this growing market demand. Daeduck Electronics is constructing a new Flip-Chip Chip Scale Package (FC-CSP) production line at its facility in Siheung, Gyeonggi Province. According to the company, this expansion is expected to boost production capacity by approximately 30% to 40%. The new line is scheduled for completion around next summer, with operations commencing in the second half of the year.

As demand for substrates rises, the raw material supply chain is also experiencing a surge in orders. Industry insiders explain that overall lead times are lengthening due to a sustained rise in orders for raw materials—such as core materials—required for packaging substrate production since last year. ABF, a material used for insulating circuit layers in advanced substrates, is consumed in increasing quantities as substrate sizes grow and layer counts rise. Furthermore, given the limited number of suppliers for these materials, substrate manufacturers must secure supplies to support their expanding production volumes.

"Overall lead times have increased significantly compared to last year due to a surge in demand," another industry insider explained, adding, "This situation applies not only to equipment but also to the raw materials used in circuit boards."

The supply of manufacturing equipment required for PCB production is also becoming increasingly tight. As PCB manufacturers continuously expand their production capacity, demand for equipment across the entire manufacturing process has risen. Although equipment suppliers are assessing demand and preparing for production in advance to align with their customers' investment plans, lead times continue to extend.

An industry source noted, "For new equipment such as lithography systems and substrate inspection and repair tools, delivery lead times are approaching two years. Even with efforts to shorten the schedule, it takes about a year and a half, with a minimum wait of 12 months."

Source: Compiled from Semiconductor Industry Watch

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