Asia Technology ABF Substrate Market Outlook

Goldman Sachs upgrades outlook for the ABF substrate market, citing a structural 62% growth CAGR (2025-2028E) driven by AI servers. Suppliers are expected to see significant margin expansion due to a widening supply-demand shortage and aggressive price hikes.

Key Takeaways

• 1.ABF substrate demand is growing significantly faster than anticipated, with a 62% 2025-28E CAGR expected, driven by AI server and CPU requirements.
• 2.ABF substrate supply is constrained, with lead times reaching 12 months, leading to a structural shortage and sustained spot price increases.
• 3.Taiwanese ABF substrate players (NYPCB, Kinsus, Unimicron, ZDT) are seeing upward earnings revisions due to pricing power and margin expansion.

Table of Contents

• ABF price hikes to outpace our estimates, with solid GM expansion from 2Q26; revise up TPs for all our TW ABF substrate players by 81% to 112%
• ABF substrates could become a key bottleneck for the overall AI/server industry, supporting a solid price hike outlook
• AI ASIC servers and general server CPUs are the key drivers of stronger than expected demand growth
• 2Q26 preview and 3Q26 outlook: Spot price player to strongly outperform with a significant jump in GM/OPM
• ABF substrate supply/demand gap to widen to 14%/34%/51% in 2H26/2027/2028, with a much stronger pricing outlook
• Demand update: AI servers and server CPUs are the key drivers the ABF substrate demand
• Supply update: We expect ABF suppliers will start to announce more CAPEX plans in coming quarters, although new capacity will likely only come online after 2H28
• Earnings revisions
• Valuation
• Investment thesis, PT methodology and risks

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