Equity research
2026.07.08 03:56

Morgan Stanley: ABF Substrate

> Stronger & Earlier Cycle: The substrate pricing cycle is proving much stronger and arriving earlier than originally expected. Driven by capacity tightening and robust demand, gross margins are expanding across the industry.

> Widening Supply Deficit: Updated bottom-up supply/demand modeling points to a 25% undersupply gap by 2030 (up from the previous estimate of ~22%), which increases confidence in long-term pricing and margin tailwinds.

> Key Risk Factors: Main downside risks include weaker demand for PCs/servers, unexpected capacity expansion plans, constraints on T-glass, and the potential displacement of ABF substrates by CoWoP.

> The Decline of PCs: Personal computers dominated the market in 2015, accounting for ~70% of global ABF substrate value. By 2025, that share shrank to ~23% and is forecasted to drop below 10% by 2030.

> The Rise of AI & Infrastructure: Servers, AI GPUs, AI ASICs, and networking applications have risen from a combined ~10% market share in 2015 to ~60% in 2025. They are projected to command more than 80% of total market value by 2030.

> ASIC Demand Trajectory: Hyperscalers are driving massive volume. Revised forecasts reflect steeper production curves for Amazon’s Trainium processors (2027–2030), Google’s TPU portfolio over the next 5 years, and a 36% higher Total Addressable Market (TAM) for China AI chips by 2030.

> 2Q26 Price Surges: Supply chain checks indicate that during 2Q26, Nan Ya PCB (NYPCB) saw BT substrate pricing jump by ~20–30%, while ABF substrate pricing grew by roughly 10%.

> Future Projections: Cost inflation and structural shortages are expected to push ABF substrate pricing up by 20–25% year-over-year (y/y) in CY26, 25%+ y/y in CY27, and up to 25–40% y/y in CY28 depending on the customer profile.

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