Increased production of AI chips instigates shortage of BT substrate materials - Massive TSMC demand leads to interruptions in NAND flash controller and SSD supply.
A Looming Crisis: TSMC's CoWoS Tech Squeezes BT Substrate Market
The demand for materials used in TSMC's CoWoS advanced packaging technology has become so enormous that it's causing a crunch in the memory market. Mitsubishi Gas Chemical has revealed to clients that shipments of raw materials for BT substrate production will face significant delays due to the low supply.
As the leading global supplier of BT substrate raw materials, MGC's delays could trigger long-term shortages in the substrate supply chain, worsening existing issues and cost hikes in the memory production segment, particularly NAND flash controllers. Big players such as Phison, with existing NAND controller stock, are expected to benefit from the ensuing period of scarcity.
TSMC's CoWoS technology, a hit with high-end clients like Nvidia and AMD for use in top-tier enterprise GPUs like Blackwell, has been cited as the root of this materials shortage. The chip-on-wafer-on-substrate packaging technology has been a game-changer for TSMC, and the company has been consistently ramping up CoWoS production since its introduction.
The CoWoS technology relies on ABF substrates, which share production materials with BT substrates. TSMC's dominance in the industry puts pressure on BT substrate producers, leaving them with the short end of the stick. And with TSMC eyeing the production of 1000W processors on massive 120x150mm CoWoS substrates, the squeeze is expected to tighten.
MGC's delays are attributed to shortages of low-CTE glass cloth, copper-clad laminates (CCL), and prepreg (PPG) materials. The glass cloth, also used in packaging and motherboard printing of enterprise servers and consumer smartphones, often neglects BT substrate suppliers in the priority line.
To prevent a market shock and end supply, companies at all points in the BT substrate supply chain are coordinating orders and materials. Lower consumer electronics demand and market hesitancy, fueled by the volatile barrage of tariff announcements and removals by the U.S. government, are playing their part in keeping demand for materials under control, averting a true shortage.
In these tumultuous times, companies like Phison and Silicon Motion, premier suppliers of NAND flash controllers and eMMC cards made with BT substrate, stand to gain the most. Phison has already begun securing additional production capacity from TSMC to boost NAND flash controller sales, which it considers its primary growth engine. The market for NAND flash controllers may see a price hike as the squeeze persists.
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The gold rush triggered by the AI boom continues to fuel hardware development around the globe. The incredible showcase at this year's Computex illustrates the impact, with TSMC reaping massive benefits as the shovel salesman. Despite the current malaise in the consumer electronics sector, this supply squeeze could prove beneficial as a sudden consumer rush could exacerbate the situation.
The gold rush in the AI boom also extends to the technology sector, impacting data-and-cloud-computing and finance, as evidenced by TSMC's predominance in the industry. The scarcity of materials, particularly low-CTE glass cloth, copper-clad laminates, and prepreg, used in BT substrate production, is affecting data-and-energy-intensive operations like data centers and high-performance computing. This squeeze, caused by TSMC's CoWoS technology, may lead to an increase in the cost of technology solutions like NAND flash controllers and eMMC cards in the finance sector.
