High-end chip manufacturers seek long-term agreements for ABF substrates

Industry sources said ABF substrate makers are finding that more and more customers are eager to enter into long-term agreements to ensure adequate supply until 2025 or even longer, as supply tightness is expected to continue in the next few years and capacity expansion still cannot keep up with the pace of demand growth.

According to Electronic Times, citing the above-mentioned person, Intel, AMD, and Nvidia are the most active in signing long-term contracts with ABF substrate manufacturers in Taiwan, Japan, South Korea, and Austria, in the hope that the production and shipment of their next-generation CPUs, GPUs, and other HPC chips will not be interrupted by substrate shortages until at least 2025.

In addition, other chip manufacturers, including FPGA chip supplier Xilinx, are also in contact with substrate manufacturers to discuss capacity allocation for 2023-2025.

However, ABF substrate manufacturers are reluctant to sign long-term supply contracts with customers, partly because such agreements would limit their flexibility to adjust prices and capacity allocations, and partly because some customers may ultimately be unable to fulfill their contracts due to weak end-market demand.

However, sources said that since major customers have provided funds or equipment to support manufacturers' capacity expansion and provided capacity consumption commitments, the risks of such transactions have been greatly reduced, making manufacturers more willing to accept long-term transactions, and customers have also obtained dedicated production capacity.