Ibiden Co., a key player in supplying substrates for Nvidia Corp.’s advanced semiconductors, might have to crank up its production capabilities to keep up with soaring demand. This demand, as per CEO Koji Kawashima, is predicted to remain strong well into next year, with customers snapping up all available AI-specific substrates that the company produces.
The company is in the process of constructing a new substrate manufacturing plant in Gifu Prefecture, central Japan. This facility is set to begin operations at 25% capacity towards late 2025 and is projected to reach 50% by March 2026. However, Kawashima acknowledges that this ramp-up might not be adequate and discussions are underway regarding when to activate the remaining 50% capacity.
In a recent interview, Kawashima noted, “Our customers have concerns. They’re already inquiring about our next investment and future capacity expansions.”
Reflecting optimism, Ibiden’s stock surged by up to 5.5% in Tokyo on Monday, marking its most significant intraday jump in over a month.
Among Ibiden’s notable clients are tech giants like Intel Corp., Advanced Micro Devices Inc., Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co., and Nvidia. These companies collaborate with Ibiden early in their product development cycles. The substrates they produce are essential in transmitting signals from semiconductors to circuit boards, and they must endure the high temperatures generated by Nvidia GPUs to create a robust AI chip package complete with components like memory.
Ibiden’s journey into the semiconductor realm began with a foundational partnership with Intel in the 1990s. Kawashima’s strategic move of seeking feedback from Intel engineers outside their Santa Clara headquarters was pivotal. At one point, Intel accounted for a significant chunk of Ibiden’s revenue, about 70% to 80%. However, by the fiscal year ending in March, this dependency had decreased to around 30% as Intel underwent internal restructuring, leading to the departure of CEO Pat Gelsinger.
This reliance on Intel has impacted Ibiden’s stock, which has fallen by about 40% this year. In October, Ibiden had to lower its profit expectations due to lackluster component demand for general-purpose servers, which overshadowed growth in AI server-related areas. Nonetheless, Kawashima remains optimistic about Intel’s resurgence, emphasizing the importance of broadening partnerships beyond the American tech giant.
“Intel’s overall technology is very sophisticated,” Kawashima remarked. “Intel paved the way for us, and although our network has expanded, they remain a valued customer.”
With reluctance among some foreign chipmakers to advance their tech transfers to the U.S., Intel is poised to play a crucial role in Washington’s semiconductor production strategy. As it stands, Ibiden doesn’t operate any manufacturing hubs in the U.S. due to high labor and logistic costs, despite plans by then-President-Elect Donald Trump to impose new tariffs.
Nvidia currently employs Ibiden’s substrates for all its AI semiconductors. Though there’s growing interest from Taiwanese competitors like Unimicron Technology Corp., it won’t be easy to eclipse Ibiden’s leading position, says Toyo Securities analyst Hideki Yasuda. “Nvidia’s AI chips require sophisticated substrates, and Ibiden is the sole provider capable of mass production with a high yield rate,” he explained.
AI semiconductors contribute over 15% to Ibiden’s sales, which hover around ¥370 billion ($2.3 billion), with expectations of a further increase. Nvidia recently announced it has kicked off full-scale production of its next-gen Blackwell chips following some initial hurdles.
Looking ahead, Nvidia might face challenges from application-specific chips crafted by Marvell Technology Inc. and Broadcom Inc., alongside custom designs from Google and Microsoft. Nonetheless, Kawashima believes Ibiden is well-equipped to serve these evolving needs, given that the designs and material needs for AI chip packages will probably mirror those of Nvidia.
This development is part of a larger movement as businesses continue to strategize amidst the evolving landscape of the tech and semiconductor sectors.
