The semiconductor industry is witnessing an unprecedented surge in demand, primarily driven by advancements in artificial intelligence (AI). One of the noteworthy players in this sector is Ibiden Co., Ltd., a Japanese company that has established itself as a key supplier of advanced chip packaging substrates, especially for AI applicationsThe CEO of Ibiden, Koji Kawashima, recently indicated that the company may need to hasten its capacity expansion to keep pace with escalating market demands.

With a legacy spanning 112 years, Ibiden has found itself at the forefront of the AI revolutionKawashima remarked on the robust sales of AI substrates, revealing that these products are being snapped up entirely by clientsHe further emphasized the likelihood that this intense demand would persist at least through the next year, underscoring the essential role that such technology plays in modern semiconductor applications.

To meet this rising tide of demand, Ibiden is in the process of constructing a new substrate factory in Gifu Prefecture, Japan

This facility is expected to commence operations in the fourth quarter of 2025, with an initial production capacity projected at 25%. By March 2026, the aim is to ramp up production to 50%. Yet, Kawashima has acknowledged that these expansions might fall short of addressing the full extent of the existing demand, prompting discussions around activating the remaining 50% production capacity sooner rather than later.

"Our customers are concerned," Kawashima stated during a recent interview"They have already inquired about our future investments and capacity expansion plans." This reflection brings to light the pressing nature of the semiconductor supply chain, which has been strained by the explosive growth of AI technologies.

Among Ibiden's esteemed clientele are industry giants including Intel, AMD, Samsung Electronics, Taiwan Semiconductor Manufacturing Company, and NVIDIA

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Many of these companies have engaged Ibiden early in their product development stages, relying on the expertise of the Japanese firm to customize substrates tailored to the unique specifications of each chipThe substrates must be adept at dissipating the heat generated by NVIDIA’s graphics processing units (GPUs), which is crucial for creating AI chip packages that incorporate memory and other essential components.

Historically, Intel has been a significant contributor to Ibiden’s revenue, accounting for around 70% to 80% of its chip packaging substrate incomeHowever, as the American semiconductor company struggles to return to profitability under the chaotic leadership of recently ousted CEO Pat Gelsinger, Intel's share of Ibiden's revenue dwindled to approximately 30% for the fiscal year ending in MarchThis dependency on Intel recently raised concerns within Ibiden, leading to a notable downturn in stock prices, which have plummeted by nearly 40% this year.

In October, Ibiden revised its profit expectations, attributing the downturn to sluggish demand for general-purpose server components, which has countered growth related to AI servers

Kawashima noted the critical importance of broadening their portfolio beyond Intel, yet he maintains a bullish outlook on Intel’s potential recovery"Intel's overall technology is very sophisticated," he explained"Intel has opened many doors for us, and our relationship with them will always be our assetIntel will forever remain an important customer." This enduring allegiance illustrates the complexities of client-supplier relationships within the competitive landscape of the semiconductor industry.

Despite these revelations, Ibiden faces unique challenges as many foreign chip manufacturers are hesitant to transfer advanced technology to the United StatesKawashima confirmed that Ibiden has no plans to establish manufacturing facilities in the U.S., despite impending tariffs that may impact various productsThe decision stems from the associated labor and logistics costs, which make such a venture less viable for the company.

Currently, NVIDIA relies entirely on Ibiden’s substrates for its AI semiconductors, although competitors in Taiwan, such as Unimicron Technology Corp., are casting their eyes on this lucrative space

Yet, according to Hideki Yasuda, an analyst at Daiwa Securities, dethroning Ibiden as the primary supplier would not be an easy task"NVIDIA's AI chips require highly precise substrates, and Ibiden is the only company that can mass-produce these chips at a high output," he asserted"Taiwanese competitors cannot snatch away Ibiden's market share." This market assessment reinforces Ibiden's strategic position within the semiconductor ecosystem.

As the semiconductor market flourishes, AI semiconductors have emerged as a critical driver of revenue growth for Ibiden, contributing significantly to its sales figuresThe company has reported approximately 370 billion yen (around $2.3 billion) in sales, with AI substrates now accounting for over 15% of this total and poised to increase as demand deepens.

Meanwhile, NVIDIA continues its own advancements, having finally overcome initial technical challenges and announcing the full-scale production rollout of its next-generation Blackwell chips

Looking ahead, while NVIDIA commands a formidable presence in the semiconductor landscape, its path is fraught with challengesSignificant competitors like Marvell and Broadcom are gearing up for battle in the specialized application chip arena, utilizing their unique technological advantages and years of industry experience to vie for market shareSimultaneously, tech behemoths like Google and Microsoft have embarked on their own endeavors to create proprietary chips for internal use, enhancing efficiency and optimization that could pose a challenge to NVIDIA's dominance.

Nevertheless, Kawashima remains optimistic about Ibiden’s role within the supply chainHe pointed out that theoretically, as a key link in the industry supply chain, Ibiden should be equipped with sufficient compatibility and adaptability to support all these chips from various sourcesConsidering the current landscape, the packaging design architecture and materials used for AI chips are likely to remain substantially similar to NVIDIA's existing products, thereby providing Ibiden with critical opportunities to integrate resources and fortify its market position.