Why does the small ABF carrier board get stuck in the "neck" of the chip?

Source: The content is reprinted from the official account of Semiconductor Industry Observer (ID: icbank) China Electronics News , author: Zhang Xinyi , thank you.

IC substrate is an important material used to connect the chip and PCB motherboard in IC packaging. Its main functions include providing protection, fixed support and heat dissipation for the chip. From the perspective of packaging material cost, the cost of high-end flip chip IC substrate accounts for as much as 70% to 80%, and has become the material with the highest value in packaging technology.

Since the beginning of this year, the volume and price of IC substrates have increased, which has improved the revenue performance of PCB suppliers. The revenue and gross profit margin of Xinxing Electronics, the world's largest supplier of IC substrates, have increased for three consecutive quarters, and the cumulative gross profit from January to September increased by 58% compared with last year. In the first three quarters of 2021, IC substrates contributed 53% to Xinxing Electronics' business, an increase of 5 percentage points from the same period last year. Samsung Electro-Mechanics' revenue in the third quarter of 2021 increased by 21% year-on-year, of which the revenue of the substrate department increased by 28% year-on-year. The low-voltage CPU required for desktop computers has driven the continued growth in the use of substrates required for FC-BGA (flip chip ball grid array) packaging.

According to the classification of substrate materials, ABF substrates (substrates with Japanese Ajinomoto stacked film as the substrate) and BT substrates are the two major branches of IC substrates. Among them, ABF substrates are mainly used for high computing performance ICs such as CPUs, GPUs, FPGAs, and ASICs. The ABF substrate matches the advanced semiconductor process to meet its requirements for fine lines and fine line widths. At present, ABF substrates have become the standard for FC-BGA packaging. High-performance computing applications as well as PCs, processors and other chips all have demand for FC-BGA packaging. It is reported that Apple's self-developed M1 chip uses FC-BGA packaging, and its ABF substrate is supplied by Samsung Electro-Mechanics.

Benefiting from the demand for high-performance computing chips driven by applications such as 5G, AI cloud computing, and big data analysis, coupled with the doubling of the use of LSI chips such as CPUs and GPUs driven by scenarios such as the "stay-at-home economy" and remote work, the demand for FC-BGA substrates has increased significantly, and the ABF substrate market has risen. The Hong Kong Circuit Board Association stated that since the second half of 2020, the prices of ABF substrates and BT substrates have risen by 30%-50% and 20% respectively. Goldman Sachs Securities expects that the price of ABF substrates will increase by 15% in 2021 and another 10% in 2022.

The increasingly severe shortage of ABF substrates in this round has become a major "bottleneck" in the chip supply chain.

"The shortage of ABF substrates will drag down the packaging cycle of high-performance processor chips, increase the collection cycle of related upstream and downstream companies, and significantly increase the operating pressure of related companies." Zhang Binlei, senior analyst at Strategy Analytics, pointed out to China Electronics News.

From the supply side, the main reason for the shortage of ABF is the lack of ABF substrate, and the limited supply of ABF substrate is because its production capacity is almost concentrated in one company - Japan Ajinomoto. It is reported that Japan Ajinomoto Co., Ltd. launched the technical project of ABF in 1996, and it took only four months to complete the prototype and sample development, but it took about three years to seek marketization. It was not until 1999 that the ABF substrate was gradually promoted to be accepted by the chip manufacturing industry. In the three years when it could not find a market, Japan Ajinomoto Co., Ltd. was still optimistic about the market prospects of ABF, built an intellectual property protection system, and continuously improved technical barriers, so that Ajinomoto established a dominant position in the ABF industry and maintained it to this day. Some people in the industry chain said that Ajinomoto's ABF production capacity has not kept up with market demand, and its attitude towards expanding production is relatively cautious.

"The shortage of Ajinomoto's ABF substrate production capacity is the fundamental reason for the shortage of ABF carrier boards. In addition, there are only a few companies in the world that can mass-produce ABF carrier boards, which also limits the release of production capacity." Liu Xiang, deputy director of Kaiyuan Securities and chief analyst of the electronics industry, told China Electronics News.

Domestic IC substrate supplier Xinsen Technology stated at an investor relations event on March 12 that the IC substrate industry has always been a game for a few. Before 2019, due to the low prosperity of the PC and mobile phone industries, market demand did not really pick up. The main players in the industry were in poor operating conditions and did not implement production expansion, resulting in limited supply in the industry.

At the same time, accidental production stoppages caused by non-human factors such as the COVID-19 pandemic and fires in substrate factories have also exacerbated the shortage of ABF substrates.

In order to improve the supply capacity of ABF substrates, IC substrate suppliers in Japan, South Korea, and Taiwan have invested in expanding ABF substrate production capacity. First-tier manufacturers such as Xinxing Electronics and Kinsus in Taiwan are stepping up efforts to expand the production capacity of ABF substrates, building or renovating some BT substrate production lines, and striving to further bind major overseas customers. As for Korean manufacturers, Samsung Electro-Mechanics will invest 1 trillion won to improve the supply capacity of high-end semiconductor substrates and focus on ABF substrates. Daedeok Electronics will invest 400 billion won in ABF substrates. Ibiden and Shinko in Japan are also expanding ABF substrate production lines. At the same time, chip manufacturers such as Intel, AMD, and Nvidia are seeking to sign long-term supply contracts with IC substrate suppliers to avoid the production of next-generation CPUs, GPUs, and HPCs being affected by insufficient substrate supply.

At present, it seems that ABF's production capacity replenishment will not be implemented until at least around 2024.

"IC substrates span the traditional printed circuit board and semiconductor industries. Even if production is expanded smoothly, it will take more than two years to open up production capacity. Moreover, the delivery time of equipment has been greatly extended. Therefore, although many manufacturers are actively expanding production, it is difficult to say whether they can open up large-scale production capacity in 2024." Zhang Binlei said.

The technical difficulty of ABF lies in the manufacturing process of ABF substrate and fine line width. The technical threshold is relatively high. The key to expanding production lies in whether enough technical talents can be recruited.

"The key to ABF capacity construction is not capital, but talent, because in addition to the ABF substrate, the ABF substrate has extremely high requirements for high-layer and fine-pitch circuit technology. For example, high-end ABF substrates have as many as 20 layers, and the line width is 6-7um, which tests the manufacturer's technology research and development and talent reserve capabilities." Liu Xiang said.