IC substrate manufacturer Nandian Vice President Lv Lianrui: ABF is currently in short supply and the market demand will be very strong next year

On May 27, Nandian, a major IC substrate manufacturer, held a shareholders' meeting. Its senior vice president Lu Lianrui said that ABF is in short supply and there is no product to replace ABF so far. At least until 2023, the general direction has not changed and the demand is still very strong.

Regarding product applications, Lu Lianrui pointed out that the current proportion of network communications is high, and wireless communication applications including 5G/6G, Wi-Fi 6, and low-orbit satellites continue to be optimistic. As for general laptops and smart phones, there are signs of slowing demand, but the relevant proportion of Nanfang Dian is low and the impact is limited. Nanfang Dian's high-end computer and high-end laptop applications remain stable, and the consumer electronics market conditions still need to be observed in the second half of the year. As for the geopolitical risks of the war between Russia and Ukraine, they have little impact on Nanfang Dian.

Nandian has also been actively developing automotive chip substrates recently. It is estimated that the proportion of automotive electronics revenue will increase from 7-8% to 10% this year, and the shipment and proportion of high-performance computing (HPC) substrates will also increase.

Regarding the capacity expansion plan, Lu Lianrui said that the land used by Nanfang Electric's Jinxing Plant and Nan Ya Plant continues to open up ABF substrate production capacity. The first phase of ABF substrate production capacity at the Shulin Plant is accelerating the machine and product certification process, and is expected to enter initial mass production in the third or fourth quarter at the earliest, and can be put into mass production in the first quarter of next year; the second phase of new ABF production capacity in Kunshan will enter initial mass production in the third or fourth quarter at the earliest, and is also expected to be put into mass production in the first quarter of next year.

Lu Lianrui predicts that this year, the new production capacity of BT substrates and system-level packaging (SiP) at the Kunshan plant will increase by 20%, and the new production capacity of ABF substrates at the Shulin plant and Kunshan plant will increase by 20%, and will increase by another 10% in the first half of next year; this year, the overall new production capacity expansion of the group will be about 15% to 18%, mainly driven by data centers and high-end 2.5D/3D chip packaging substrates.

Lu Lianrui said that as new production capacity gradually comes into operation in the third quarter, Nandian's ABF performance is expected to grow quarter by quarter this year. After the addition of new ABF capacity, it is estimated that the proportion of IC substrate performance this year will increase from 85% to nearly 90%, and the proportion of printed circuit boards (PCBs) will drop from 15% to about 10%.

Talking about the impact of China's COVID-19 lockdown on the Kunshan plant, Lv Lianrui said that the Kunshan plant adopted closed-loop production from the end of March to early April, and 75% of employees were able to carry out production in the early stage. However, in the middle and late stages, due to obstructions in the supply chain logistics, there was a shortage of long materials, which affected the Kunshan plant's performance in April. Production has now resumed.

Looking ahead to the future market, Lu Lianrui said that with the resumption of work in factories, Nandian's performance in May and June is expected to make up for the previous gap. Despite the exchange rate and seasonal variables, the revenue in the second quarter and the second half of the year will still strive to grow quarter by quarter and work hard to move towards the goal of increasing the four rates quarter by quarter.