AI Demand Drives Severe ABF Substrate Shortage as HSBC Raises Targets for Three Taiwanese Suppliers

Surging demand for AI servers and upgrades to chip specifications have created a severe shortage of ABF substrates used in high-end chips. As AI chips grow larger and advanced packaging becomes more widespread, ABF substrates have recorded the second-biggest price increase among electronic components, behind memory. Foreign brokerages estimate that the global ABF substrate supply shortfall could reach 51% in 2028. Competition for capacity is already underway, making the component critical to the stability of global semiconductor and AI supply chains.

Daiwa Capital Markets and Goldman Sachs raised their price targets for Taiwanese suppliers across the board in July 2026. Daiwa, bullish on Nan Ya PCB, lifted its target to NT$2,444, while Goldman raised its target to NT$2,310. Price targets for Unimicron and Kinsus were also increased to NT$1,140 and NT$1,120, respectively. Amid severe capacity constraints, major chipmakers began booking ABF substrate capacity for 2029 as early as the third quarter of 2026, with prices expected to rise 10% to 15% each quarter.

ABF substrates are critical materials used to package AI server processors and advanced chips, with specification upgrades increasing both consumption and supply pressure. Ajinomoto supplies the key material, making its pricing a major driver of substrate costs. If upstream price increases take effect, Taiwanese manufacturers including Unimicron, Kinsus and Nan Ya PCB are expected to raise their quotations, affecting costs and profits across the semiconductor supply chain.

Ajinomoto recently confirmed that ABF material price increases had begun, while market reports said it planned to raise prices by about 30%. Foreign investors therefore maintained positive views on Unimicron and Nan Ya PCB. Demand and expectations of higher prices were already reflected in their operations, with Unimicron, Kinsus and Nan Ya PCB all reporting strong, record-high April revenue and emerging as major beneficiaries of rising AI server demand.

ABF substrates are critical components in advanced chip packaging. As AI and high-performance computing chips become larger and more computationally dense, substrates must also increase in size and layer count. Unimicron Technology has advanced ABF substrate capacity, making utilization rates and its ability to pass on costs key to earnings and its share-price valuation.

As of July 20, 2026, the report did not identify the local institution it cited or disclose when its research was published. The institution said the shift toward larger ABF substrates with more layers remained intact, while utilization of Unimicron’s advanced capacity stayed high and the company had passed costs on to customers. It therefore maintained a “buy” rating and raised its target price to NT$965.

Unimicron Technology is a major global manufacturer of IC substrates, specializing in ABF and BT substrates as well as printed circuit boards. Upgrades to AI servers and high-performance computing (HPC) chips are increasing both the volume and specifications of advanced substrates, providing key momentum for higher capacity utilization, a better product mix and stronger profitability.

Unimicron’s March earnings beat market expectations, prompting foreign institutional investors to conclude that the company has entered the early stages of an AI demand-driven upcycle. The latest report maintained an “overweight” rating and set a price target of NT$550 per share. Investors will next watch whether growth in demand and orders for ABF and BT substrates can be sustained.