ABF Remains a Critical Failure Point for IC Packaging Supply Chain

The semiconductor industry is facing a growing challenge in its supply chain, and today we’re not talking about the chips themselves. Ajinomoto Build-up Film (ABF), a critical component in advanced IC packaging, has become a potential bottleneck in the production of high-performance processors. As demand for cutting-edge electronics continues to surge, the ABF substrate market is struggling to keep pace, creating a precarious situation for chip manufacturers and their customers.

The Importance of ABF in Semiconductor Manufacturing

As the most common material used in IC substrates, ABF is a vital link between integrated circuits and printed circuit boards, providing electrical insulation, heat dissipation, and signal distribution. First introduced in 1999 by Ajinomoto, ABF quickly became the material of choice for packaging high-performance processors due to its unique properties. The film, composed of epoxy resin and inorganic fillers, offers exceptional dimensional stability and facilitates the creation of microscale circuits through advanced manufacturing techniques.

The importance of ABF in modern electronics cannot be overstated. It's the go-to material for packaging CPUs, GPUs, SoCs and other advanced components that power our smartphones, computers, data centers and increasingly, our vehicles. The material's ability to support fine line widths and its compatibility with additive processes have made it indispensable in producing high-density interconnect (HDI) and ultra-HDI PCBs.

Rising ABF Demand and Market Growth

The ABF market has seen remarkable growth over the past few years. According to Thornburg Investment Management, it will grow from $832.5 million in 2020 to an expected $3.01 billion in 2028, reflecting a Compound Annual Growth Rate (CAGR) of approximately 17.43%. This rapid growth of ABF usage is largely driven by the semiconductor industry, although ultra-high density interconnect (UHDI) PCBs will also be a growth driver.

5 Drivers of Increased ABF Demand

Several forces are driving the growth in ABF demand:

1. Miniaturization: The relentless push for smaller, more powerful devices is a key driver for ABF demand. As components shrink, the need for advanced packaging solutions that can handle higher densities and finer pitches increases. Modern smartphones, for example, pack more computing power than early supercomputers into a pocket-sized device. This level of miniaturization is only possible with advanced packaging materials like ABF, which allow for the intricate interconnections required in such compact designs. 
2. 5G Technology: 5G requires advanced semiconductors capable of processing massive amounts of data at high speeds. ABF substrates are critical in packaging these chips, enabling the ultra-fast, low-latency communication that 5G promises. ABF's excellent electrical properties make it well-suited for 5G applications, where signal integrity is crucial. As 5G-enabled devices and infrastructure continue to roll out, the demand for ABF in these applications is expected to grow significantly.
3. Sustainability: ABF is considered a more environmentally friendly option compared to traditional materials due to its ability to support more efficient designs and reduce overall material usage. ABF substrates also contribute to sustainability by enabling more efficient chip designs that consume less power. This extends the battery life of portable devices and reduces the overall energy consumption of data centers and other large-scale computing installations.
4. Electric Vehicles (EVs): Modern EVs rely on a multitude of sensors and processors to manage everything from battery performance to autonomous driving. The high-performance chips required for these applications often depend on ABF substrates for their packaging. Advanced driver assistance systems (ADAS) and autonomous driving technologies require sophisticated processors. ABF's ability to support these complex, high-power chips makes it a crucial enabler of EV technology advancement. 
5. Artificial Intelligence: The explosion of AI is another powerful force driving the growing demand for ABF. AI accelerators and specialized machine-learning processors push the boundaries of chip design, requiring advanced packaging solutions to manage heat dissipation and signal integrity. ABF substrates are often the material of choice for these cutting-edge applications, further fueling demand for the material.

Challenges Facing the ABF Industry

With ABF’s critical role in modern chip production and growing demand driven by multiple trends, ABF manufacturers face several challenges that threaten their ability to produce all the ABF the industry will be demanding. These challenges include:

Fluctuating Raw Material Prices: The ABF industry relies on raw materials such as polyimide and copper foil. The prices of these materials can be volatile, making it difficult for manufacturers to predict costs and maintain profit margins.

Intense Competition: The global ABF substrates market is dominated by a handful of players from Japan, Taiwan, China and South Korea. Major manufacturers include Unimicron, Ibieen, Nanya PCB, Shinko Electric Industries, Kinsus, AT&S, Semco and Kyocera, with the top eight players accounting for more than 85% market share globally. This dominance by a handful of large players makes it challenging for new entrants to gain a foothold in the market.

Stringent Regulatory Requirements: Manufacturers must comply with strict regulatory requirements, particularly in the areas of safety and environmental impact. Regulations like RoHS and REACH restrict the use of certain chemicals and materials, increasing costs and complicating compliance for smaller manufacturers. Significant investment in testing and certification is necessary to meet these regulatory standards.

Technical Complexity: Producing ABF is a complex process requiring advanced equipment and highly skilled personnel. This complexity can be a barrier for smaller manufacturers who lack the necessary resources or expertise. Additionally, developing new ABF products with improved properties – such as thermal conductivity and flexibility – requires substantial investment in research and development.

Future Outlook

As the future unfolds, the ABF industry must navigate a complex landscape of growing demand, technical challenges and supply chain risks. Expanding capacity and developing new production technologies will be crucial to meeting the chip industry’s ongoing needs. Collaboration among ABF producers, chip manufacturers and end-user customers will be essential for aligning production with future demand.

ABF substrates remain vital for advancing semiconductor technology. As we push the boundaries of computing power and device miniaturization, the importance of this often-overlooked film only grows. Addressing the supply chain challenges in ABF production will be key to enabling the next generation of electronic innovations.