Nvidia's AI Boom Forces Ibiden to Boost Production

Ibiden Co., the leading supplier of chip package substrates for Nvidia's advanced semiconductors, may need to significantly accelerate its production capacity expansion to keep pace with soaring demand, according to comments from CEO Koji Kawashima to Bloomberg.

Kawashima highlighted the robust sales of Ibiden's AI-focused substrates, stating that the company is currently selling everything it produces. He anticipates this strong demand to persist at least through next year.

Ibiden is constructing a new substrate factory in Gifu, Japan, but the initial production capacity of 25% by the last quarter of 2025 and 50% by March 2026 may prove insufficient. Kawashima revealed that Ibiden is in discussions to expedite the ramp-up of the remaining 50% of the factory's capacity.

"Our customers have concerns," Kawashima said. "We’re already being asked about our next investment and the next capacity expansion."

Ibiden's clientele includes major semiconductor players such as Intel, Advanced Micro Devices (AMD), Samsung Electronics, Taiwan Semiconductor Manufacturing Co. (TSMC), and Nvidia. The company's substrates, crucial for transmitting signals between semiconductors and circuit boards, are tailored for each specific chip. This close collaboration often involves early engagement in the product development process.

Kawashima emphasized the importance of Ibiden's long-standing relationship with Intel, despite the recent struggles of the US chipmaker. While Intel's share of Ibiden's revenue has declined from 70-80% to around 30% in the fiscal year ended March, Kawashima expressed confidence in Intel's future.

"Intel’s overall technology is very sophisticated," Kawashima stated. "Intel raised us up and opened so many doors. Our relationship with Intel will always be our treasure, and Intel will forever be an important customer."

Ibiden's lack of manufacturing facilities in the US, coupled with the potential impact of tariffs, presents challenges. However, Kawashima suggested that the company's existing global footprint, including its significant presence in China, will enable it to navigate these complexities.

Nvidia's complete reliance on Ibiden's substrates for its AI chips underscores the Japanese company's dominant position in this market. While Taiwanese competitors like Unimicron Technology Corp. are aiming to enter the space, Toyo Securities analyst Hideki Yasuda believes it will be difficult to unseat Ibiden.

"Nvidia’s AI chips need sophisticated substrates, and Ibiden is the only one that can mass produce them at a good production yield," Yasuda said. "Taiwanese competitors won’t be able to take Ibiden’s share away by much."

Ibiden's AI semiconductor business is a significant revenue driver, generating over 15% of its roughly ¥370 billion ($2.3 billion) in sales. This segment is expected to grow further. Nvidia has recently announced the full-scale production of its next-generation Blackwell chips, following some initial technical hurdles.