ChatGPT’s debut has sparked a thrilling spec upgrade in the server market, which has breathed new life into the supply chain and unlocked unparalleled business opportunities. Amidst all this, the big winners look set to be the suppliers of ABF (Ajinomoto Build-up Film) substrates, who are poised to reap enormous benefits.

In the previous article, “AI Sparks a Revolution Up In the Cloud,” we explored how the surge in data volumes is driving the spec of AI servers as well as the cost issue that comes with it. This time around, we’ll take a closer look at the crucial GPU and CPU platforms, focusing on how they can transform the ABF substrate market.

NVIDIA’s Dual-Track AI Server Chip Strategy Fuels ABF Consumption

In response to the vast data demands of fast-evolving AI servers, NVIDIA is leading the pack in defining the industry-standard specs.

This contrasts with standard GPU servers, where one CPU backs 2 to 6 GPUs. Instead, NVIDIA’s AI servers, geared towards DL(Deep Learning) and ML(Machine Learning), typically support 2 CPUs and 4 to 8 GPUs, thus doubling the ABF substrate usage compared to conventional GPU servers.

NVIDIA has devised a dual-track chip strategy, tailoring their offerings for international and Chinese markets. The primary chip for ChatGPT is NVIDIA’s A100. However, for China, in line with U.S. export regulations, they’ve introduced the A800 chip, reducing interconnect speeds from 600GBps (as on the A100) to 400GBps.

Their latest H100 GPU chip, manufactured at TSMC’s 4nm process, boasts an AI training performance 9 times greater than its A100 predecessor and inferencing power that’s 30 times higher. To match the new H100, H800 was also released with an interconnect speed capped at 300GBps. Notably, Baidu’s pioneering AI model, Wenxin, employs the A800 chip.

To stay competitive globally in AI, Chinese manufacturers are expected to aim for the computational prowess on par with the H100 and A100 by integrating more A800 and H800 chips. This move will boost the overall ABF substrate consumption.

With the ChatBot boom, it is predicted a 38.4% YoY increase in 2023’s AI server shipments and a robust CAGR of 22% from 2022 to 2026 – significantly outpacing the typical single-digit server growth, according to TrendForce’s prediction.

AMD, Intel Server Platforms Drive ABF Substrate Demand

Meanwhile, examining AMD and Intel’s high-end server platforms, we can observe how spec upgrades are propelling ABF substrate consumption forward.

• AMD Zen 4:

Since 2019, AMD’s EPYC Zen 2 server processors have used Chiplet multi-chip packaging, which due to its higher conductivity and cooling demands, has consistently bolstered ABF substrate demand.

• Intel Eagle Stream:

Intel’s advanced Eagle Stream Sapphire Rapids platform boasts 40-50% higher computation speed than its predecessor, the Whitley, and supports PCIe5, which triggers a 20% uptick in substrate layers. This platform employs Intel’s 2.5D EMIB tech and Silicon Bridge, integrating various chips to minimize signal transmission time.

The Sapphire Rapids lineup includes SPR XCC and the more advanced SPR HBM, with the latter’s ABF substrate area being 30% larger than the previous generation’s. The incorporation of EMIB’s Silicon Bridge within the ABF substrate increases lamination complexity and reduces overall yield. Simply put, for every 1% increase in Eagle Stream’s server market penetration, ABF substrate demand is projected to rise by 2%.

As the upgrades for server-grade ABF substrates continue to advance, production complexity, layer count, and area all increase correspondingly. This implies that the average yield rate might decrease from 60-70% to 40-50%. Therefore, the actual ABF substrate capacity required for future server CPU platforms will likely be more than double that of previous generations.

ABF Substrate Suppliers Riding the Tide

By our estimates, the global ABF substrate market size is set to grow from $9.3 billion in 2023 to $15 billion in 2026 – a CAGR of 17%, underscoring the tremendous growth and ongoing investment potential in the ABF supply chain.

Currently, Taiwanese and Japanese manufacturers cover about 80% of the global ABF substrate capacity. Major players like Japan’s Ibiden, Shinko and AT&S, along with Taiwan’s Unimicron, Nan Ya, and Kinsus all consider expanding their ABF substrate production capabilities as a long-term strategy.

As we analyzed in another piece, “Chiplet Design: A Real Game-Changer for Substrates,” despite the recent economic headwinds, capacity expansion of ABF substrate can still be seen as a solid trend, which is secured by the robust growth of high-end servers. Hence, the ability to precisely forecast capacity needs and simultaneously improve production yields will be the key to competitiveness for all substrate suppliers.

Read more:

• HBM Supply Leader SK Hynix’s Market Share to Exceed 50% in 2023 Due to Demand for AI Servers, Says TrendForce
• Shipments of AI Servers Will Climb at CAGR of 10.8% from 2022 to 2026, Says TrendForce

(Photo Credit: Google)

In the post-Moore’s Law era, chiplet design has been burgeoning as the mainstream architecture.

With the widespread adoption of EUV technology by foundries on process nodes of 5nm and below, the cost of semiconductor fabrication has skyrocketed. The cost of the 5nm process has grown by almost 1x compared to the 7nm process, and the 3nm process is expected to increase by almost 1x compared to the 5nm process.

To address this issue, IC design companies have started to split chip components or connect multiple chips and adopt advanced packaging such as 2.5D/3D IC to integrate multiple chips together.

Compared to traditional chip design methods, chiplet design has superior characteristics such as shorter upgrade cycles, lower costs, and higher yields, which is one of the reasons why chiplet technology is gaining popularity.

AMD’s chiplet design is a representative example. Through close collaboration with TSMC, AMD has fully transitioned its CPUs to chiplets since the 7nm process, with the Ryzen 7000 series CPU and Radeon RX 7000 series graphics cards released in 2022. The latter uses the RDNA 3 architecture and integrates the GCD and MCD produced by the 5nm and 6nm processes respectively, as a result improving overall performance, with a 54% increase in RDNA 3’s Performance per Watt.

Under the leadership of industry leaders such as AMD and Intel, chiplet design has had a significant impact on the entire semiconductor industry – substrates manufacturers in particular.

ABF Substrates Set to Soar

Aside from CPUs, developments in AMD and Intel’s server platforms indicate that the trend towards higher-layer-count and larger-area ABF substrates is expected to continue.

Given the server shipment volume is expected to remain stable and grow steadily in the mid to low single digits for the next 3-5 years, the growth momentum of ABF substrates mainly comes from the increase in layer count and area brought by 2.5D/3D packaging adoption in servers.

Starting in 2020, ABF substrates saw a surge in demand due to the pandemic. The supply-demand gap peaked in 2021, and in the first half of 2022, ABF substrate prices increased while volume increased and gross profit margins hit new highs.

Due to the impact of shortage in ABF substrates in 2020-2021, major substrate manufacturers have initiated large-scale expansion plans, with the expectation that demand for ABF substrates would continue to grow with the upcoming releases of new server platforms and the integration of 2.5D packaging for PC CPUs.

Growing demands with Some Hiccups

However, the moves have been put on hold for now. Since the second half of 2022, due to inventory correction in the overall semiconductor industry and the delayed production time of Intel’s new server platform, there’s been a supply glut in ABF substrates.

Therefore, Unimicron has taken the lead in adjusting its capital expenditure plans, reducing its planned capacity increase for 2023 from about 20% to only 3.5%. AT&S has also tentatively postponed the significant increase in capacity planned for the end of 2024. It is unclear when the expansion will resume or whether the expansion will be scaled back.

This indicates that current substrate manufacturers have not only lowered their demand projections for 2023, but also for 2025-2026. Further adjustments to the expansion plans of other manufacturers will also affect the future market supply-demands dynamics.

Back on Track for Major Growth in 2024

Looking into the future, things are looking up for the ABF substrate industry. In the second quarter of 2023, we can expect the release of new server platforms from AMD and Intel, as well as the completion of PC inventory adjustments.

With expansion plans in place, it’s predicted that global ABF substrate production capacity will only increase by 15-20% in the latter half of 2023, continuing to put pressure on substrate manufacturers, according to TrendForce.

Things are expected to pick up in 2024 with the release of AMD and Intel’s next-generation server platforms, Zen 5 and Birch Stream. Plus, the anticipated introduction of 2.5D packaging for PC CPUs will drive a new wave of demand for ABF substrates. All in all, we can expect a significant rebound for the ABF substrate industry in 2024.