Ibiden, a leading manufacturer of chip package substrates essential for Nvidia’s advanced semiconductors, may need to accelerate its production scale to meet increasing demand, according to CEO Koji Kawashima.
Demand for the company’s substrates, which are crucial for artificial intelligence applications, remains strong. Kawashima noted that clients are purchasing all available products and expects this demand to persist at least until the end of next year.
The company is currently constructing a new substrate plant in Gifu prefecture, central Japan, which is anticipated to commence operations at 25 percent production capacity by the end of 2025 and reach 50 percent production capability by March 2026. However, Kawashima expressed concerns that this capacity may not suffice to meet future needs, stating that discussions are ongoing regarding the timing of increasing production further.
“Our customers have concerns,” he elaborated in a recent interview. “We’re already being asked about our next investment and potential capacity expansions.”
On Monday, Ibiden’s stock experienced a notable increase, climbing as much as 5.5 percent in Tokyo, marking its largest intraday rise in over a month.
The company’s clientele includes major tech firms such as Intel, Advanced Micro Devices, Samsung Electronics, Taiwan Semiconductor Manufacturing, and Nvidia. Many of these companies collaborate with Ibiden early in the product development phase to ensure that the substrates are customized for each specific chip, as they play a key role in conveying signals from semiconductors to circuit boards. These substrates must be designed to endure the heat generated by Nvidia’s graphics processing units, crucial for assembling AI chip packages that include components like memory.
Founded in 1912 as a power utility provider, Ibiden has developed its semiconductor capabilities through a long-standing partnership with Intel. Kawashima, who was instrumental in nurturing this relationship, would regularly wait in front of Intel’s offices in Santa Clara in the early 1990s to engage with engineers and executives for feedback on products. At one point, Intel accounted for 70 to 80 percent of Ibiden’s revenue from chip package substrates, but this figure dropped to approximately 30 percent in the fiscal year ending in March as Intel struggled to implement a successful turnaround, leading to the recent departure of CEO Pat Gelsinger.
This dependence on Intel has negatively impacted Ibiden’s stock, which has declined roughly 40 percent this year. In October, the company lowered its profit forecast due to weaker demand for components used in general-purpose servers overshadowing growth in AI server-related segments. Despite acknowledging the need to diversify its business with other chipmakers, Kawashima expressed confidence that Intel will eventually recover.
“Intel’s overall technology is very sophisticated,” he remarked. “Intel elevated our business and opened many doors for us. Our relationship with Intel will always be valuable, and they will continue to be an important customer.”
Kawashima noted that with many international chip manufacturers hesitant to share their latest technologies with U.S. companies, Intel’s role will be crucial in advancing the domestic production of cutting-edge semiconductors, a goal supported by Washington. However, Ibiden currently has no manufacturing facilities in the U.S. and has no intentions of establishing any due to high labor and logistics costs, irrespective of potential tariffs that may be imposed by the new U.S. administration.
All of Nvidia’s AI semiconductors utilize Ibiden’s substrates, although Taiwanese competitors like Unimicron Technology are targeting this sector. Breaking Ibiden’s market dominance will be a significant challenge, according to Toyo Securities analyst Hideki Yasuda.
“Nvidia’s AI chips require advanced substrates, and Ibiden is the sole company capable of mass producing them with a favorable yield,” he commented, adding that Taiwanese rivals are unlikely to significantly erode Ibiden’s market share.
Sales from AI semiconductors contribute over 15 percent of Ibiden’s overall revenue, which stands at approximately ¥370 billion ($2.3 billion or about Rs. 19,673 crore), with that portion expected to increase. Nvidia has recently commenced full production of its next-generation Blackwell chips following some initial technical hurdles.
In the longer term, Nvidia may confront intensifying competition from application-specific chips produced by firms like Marvell Technology Inc. and Broadcom Inc., as well as in-house silicon developed by Alphabet’s Google and Microsoft. However, Kawashima believes Ibiden will be capable of accommodating these demands, as the design and material requirements for AI chip packages are likely to remain consistent across these products.
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