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ABF Substrate Market Analysis: Bernstein Research Summary

Date: June 4, 2025

Overview

Bernstein Research analyzes the ABF (Build Up Layer) substrate market, noting surplus capacity but increasing demand from AI servers and GPUs. Financials for major suppliers show positive trends with improved margins and revenue growth. Key players include Ibiden, Unimicron, and Ajinomoto. Despite oversupply concerns

Demand Projections

• 2025/26 demand growth revised to 12% and 9% respectively due to faster-than-expected ramp-ups of Rubin GPU substrate.
• AI server substrates are projected to grow at ~130% in 2025/2026, accounting for 23% of total ABF volumes by 2026.

Key Companies

Ibiden

• Market Position: Strong in the premium market; sole supplier for Nvidia's initial GPU ramp-ups.
• Financials: Revenues projected to grow, with Target Price (TP) raised to JPY 5,880 based on 18× forward EPS.
• Projections: AI server substrate market share expected at 80% (FY26/3) and 70% (FY27/3). Operational leverage improving, driven by higher ASPs and reduced depreciation.

Unimicron

• Market Position: Gains 25% market share in Blackwell ABF, benefiting from AI demand.
• Financials: Target Price lowered to NT$,155 due to 2H25 FX headwinds. Pro forma gross margin expected to reach 20% by end-2025.
• Projections: Rpresents growth driven by AI ABF and HDI applications. 2Q25 revenue growth expected at high-single digits, despite FX losses.

Ajinomoto

• Financials: Target Price raised to JPY 4,700, reflecting healthy growth potential.
• Demand: ABF revenue growth of 22%/21% (FY3/26/27), with increased divisional profit growth.
• Specfics: c. 95% ABF market share allows for pricing power, supported by spec upgrades and higher ASPs for AI server applications.

Investment Implications

• Ibiden: Market-Perform rating, TP increase, remains vulnerable to tariff and oversupply risks.
• Unimicron: Outperform rating, strong AI ABF potential partially offsets lower-end ABF challenges.
• Ajinomoto: Outperform rating, increased TP, positive for ABF volumes and ASPs.

Overall Market Outlook

• Oversupply remains for the next three years, but demand growth (10%) outpaces capacity supply (5%).
• AI applications increasingly significant; competitive dynamics tied to technological advancements and expansion strategies.

Financial Highlights

• Improved Margins: Ibiden's profit and operational leverage expected to rise, with near-term margin recovery.
• Capex & Utilization: Slower investment consolidates capacity, influenced by demand pressures.
• Strong AI Catalysts: Across suppliers, AI server demand drives ASP increases and GM expansion.

Bottom Line

While oversupply continues, AI-fueled demand sustains growth for ABF substrate manufacturers, with Ibiden, Unimicron, and Ajinomoto positioned to capture premium market segments, albeit under FX risks and oversupply constraints.