Nvidia Supplier Ibiden Considers Accelerating Expansion to Meet Surging AI Chip Demand

Nvidia Supplier Ibiden Weighs Faster Expansion for AI Demand

Ibiden, the dominant supplier of chip package substrates used in Nvidia's cutting-edge semiconductors, may need to dial up the pace of production capacity increases to keep up with demand, according to its chief executive officer. Sales of the 112-year-old company's AI-use substrates are robust with customers buying up all that Ibiden has, CEO Koji Kawashima said, adding that that demand is likely to last at least through next year. Ibiden is building a new substrate factory in Gifu prefecture, central Japan, expected to go online at 25 percent production capacity around the last quarter of 2025 before reaching 50 percent by March 2026. But that may not be enough, Kawashima said. The company is in talks about when to get the remaining 50 percent capacity online. "Our customers have concerns," he said in an interview. "We're already being asked about our next investment and the next capacity expansion." Ibiden's shares rose as much as 5.5 percent in Tokyo on Monday, their biggest intraday gain in more than a month. Ibiden's clients include Intel, Advanced Micro Devices, Samsung Electronics, and Taiwan Semiconductor Manufacturing, as well as Nvidia, according to data compiled by Bloomberg. Many of them consult with the Japanese company early in product development, because the substrates -- which help transmit signals from semiconductors to the circuit board -- need to be tailored for each chip. Substrates must be made to withstand the heat of an Nvidia graphics processing unit to form an AI chip package complete with components such as memory. Founded as a power utility company in 1912, Ibiden developed semiconductor expertise through a partnership with Intel that Kawashima cultivated by waiting every day in front of the Santa Clara company to stop engineers and executives for product feedback in the early 1990s. At one point, Intel comprised around 70 percent to 80 percent of Ibiden's revenue from chip package substrates. That fell to around 30 percent in the fiscal year ended March as the US chipmaker struggled to execute a turnaround that recently saw the ousting of CEO Pat Gelsinger. Reliance on Intel has hurt Ibiden's stock, down around 40 percent this year. In October, Ibiden revised down its profit outlook after sluggish demand for components used in general purpose servers outweighed AI server-related growth. But while noting it was important to expand business with chipmakers other than Intel, Kawashima said he was confident Intel will bounce back. "Intel's overall technology is very sophisticated," the 61-year-old said. "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." With many foreign chipmakers unwilling to transfer their latest technology to the US, Intel is likely to play a key role in Washington's goal to boost cutting-edge semiconductor production capabilities at home, Kawashima said. Ibiden itself has no manufacturing facilities in the US. It has no plans to build any due to the cost of labor and logistics, Kawashima said, irrespective of US president-elect Donald Trump's plans to impose tariffs on a wide range of products. All of Nvidia's AI semiconductors now use Ibiden's substrates, although Taiwanese rivals such as Unimicron Technology are eyeing the field. But it won't be easy to break Ibiden's position as dominant supplier, according to Toyo Securities analyst Hideki Yasuda. "Nvidia's AI chips need sophisticated substrates, and Ibiden is the only one that can mass produce them at a good production yield," he said. "Taiwanese competitors won't be able to take Ibiden's share away by much." AI semiconductors earn more than 15 percent of Ibiden's sales of around ¥370 billion ($2.3 billion or roughly Rs. 19,673 crore), with that percentage expected to rise further. Nvidia's said it's begun full production of its next-generation Blackwell chips after encountering some initial technical challenges. Over the long term, Nvidia may face growing competition from application-specific chips by Marvell Technology Inc. and Broadcom Inc. as well as in-house silicon from Alphabet's Google and Microsoft. In theory, Ibiden should be able to accommodate them all, as AI chip package design and material will likely remain similar to Nvidia's, according to Kawashima. © 2024 Bloomberg LP

Nvidia Supplier Ibiden Weighs Faster Expansion to Meet AI Demand

Ibiden Co., the dominant supplier of chip package substrates used in Nvidia Corp.'s cutting-edge semiconductors, may need to dial up the pace of production capacity increases to keep up with demand, according to its chief executive officer. Sales of the 112-year-old company's AI-use substrates are robust with customers buying up all that Ibiden has, CEO Koji Kawashima said, adding that that demand is likely to last at least through next year.

Days After Key Nvidia Supplier Warned Of AI Spending Slowdown, Another NVDA Partner Considers Accelerating Expansion To Meet Growing Demand - Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD)

Amid a surge in demand for AI chip package substrates, Ibiden Co., a significant supplier for Nvidia Corp. NVDA, is evaluating the possibility of hastening its production capacity expansion. This move comes as the company aims to keep pace with the growing needs of the AI industry. What Happened: CEO Koji Kawashima of Ibiden revealed that the demand for AI-use substrates remains robust, with all available stock being snapped up by customers. This trend is anticipated to continue into the next year. Currently, Ibiden is in the process of building a new substrate factory in Gifu, Japan, which is slated to commence operations at 25% capacity by late 2025, eventually reaching 50% by March 2026. See Also: OpenAI's For-Profit Transition, Trump's AI Advisor, And Google's Code Red: This Week In AI Nevertheless, Kawashima noted that even this planned capacity might fall short, prompting discussions on when to activate the remaining 50% capacity. Ibiden's clientele includes industry giants such as Intel Corp. INTC, Advanced Micro Devices Inc. AMD, Samsung Electronics Co. SSNLF, and Taiwan Semiconductor Manufacturing Co. TSM, alongside Nvidia. Despite facing challenges, Kawashima expressed optimism about Intel's recovery, underscoring the importance of their partnership. Meanwhile, Taiwanese competitors are eyeing the AI substrate market, but Ibiden's stronghold remains intact, as highlighted by Toyo Securities analyst Hideki Yasuda. Why It Matters: The potential acceleration of Ibiden's expansion comes amid broader industry concerns and opportunities. Recently, Doug Lefever, CEO of Advantest, another key supplier of Nvidia, warned of a possible slowdown in AI spending by major U.S. tech companies, which could disrupt the semiconductor supply chain. Lefever described the potential downturn as possibly "vicious" due to cyclical market dynamics. This cautionary note contrasts with the optimism expressed by Broadcom Inc. AVGO CEO Hock Tan, who foresees a decade-long AI chip boom fueled by investments from tech giants like Alphabet Inc., Meta Platforms Inc., and ByteDance. As Ibiden considers ramping up its production, it navigates a complex landscape of potential risks and opportunities within the AI sector. Read Next: Apple's AI-Driven Growth, AirTag 2, AirPods' Health Features, And iPhone 17 Pro: This Week In Appleverse Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image via Shutterstock AMDAdvanced Micro Devices Inc$124.86-0.26%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewAVGOBroadcom Inc$240.30-0.60%INTCIntel Corp$20.29-0.05%NVDANVIDIA Corp$136.62-0.28%SSNLFSamsung Electronics Co Ltd$42.48-13.8%TSMTaiwan Semiconductor Manufacturing Co Ltd$201.60-0.01%Market News and Data brought to you by Benzinga APIs