AMD and Intel to invest in substrate production to meet the chip shortages

One of the significant causes of ongoing computer component shortage is the lack of availability of materials called ABF substrates. According to the latest news, it seems big techs like AMD and Intel are handling the problem seriously. They are investing in packaging facilities and the production of ABF substrates. 

A variety of chips starting from inexpensive entry-level processors to complex high-end CPUs for servers use laminated packaging. Generally, chips that use laminated packaging also use IC substrates called Ajinomoto build-up films (ABF). Unfortunately, ABF is made by only one company, Ajinomoto Fine-Techno Co. There is only one supplier which supplies the material to a dozen of companies that package chips.

Earlier this year, top-notch packaging houses promised to raise their production capacities to meet the increasing demand but for particularly large companies, a tangible capacity increase is not that easy because vendors can’t raise output overnight. Fortunately, second-tier OSAT (outsourced assembly and test) houses like ASE Technology have now announced plans to expand their capacity. DigiTimes reported that Kinsus has planned to raise its ABF substrate capacity by 30% by this year.  

AMD and Intel to invest in substrate production to meet the chip shortages
AMD and Intel to invest in substrate production to meet the chip shortages

SeekingAlpha reported that Lisa Su, chief executive of AMD said at this week’s conference call, “I would say overall, the demand if we look at coming into this year, the demand has been sort of higher than our expectations. There is sort of industry-wide types of things that are going on. We work very closely with our supply chain partners. So, whether it’s wafers or back-end assembly test, capacity or substrate capacity, we work it on a product line by product line level.” 

Previously, AMD used to own assembly, test, mark, and pack facilities, but it sold the avenues in 2016 when it was in need of money. Now, AMD wants to invest in OSAT and substrate partners to gain capacity so that it can solve the problem of chip shortages.

Lisa Su further said “We continue — on the substrate side, in particular, I think, there has been underinvestment in the industry,” said Su. “So, we have taken the opportunity to invest in some substrate capacity dedicated to AMD, and that’ll be something that we continue to do going forward.” 

Intel, on the other hand, has its own chip production as well as test and assembly facilities in multiple countries but the capacities are not enough. Moreover, the company increased its chip output capacities in the recent year following shortages it faced in 2018 – 2019 so there is a misbalance of demand and supply. In order to meet the demand for its products, Intel decided to work with third-party substrate partners. 

Recently, Pat Gelsinger, CEO of Intel said, “By partnering closely with our suppliers, we are creatively utilizing our internal assembly factory network to remove a major constraint in our substrate supply. Coming online in Q2, this capability will increase the availability of millions of units in 2021. It is a great example where the IDM model gives us the flexibility to address the dynamic market.” 

AMD suffered the most due to the chip production crisis. In the second half of 2020, AMD had to supply its partners from Microsoft and Sony with over 10 million SoCs for Xbox Series X, Xbox Series S, and PlayStation 5. Around that time, AMDitslf launched its Ryzen 5000 series CPUs which are based on the Zen 3 microarchitecture. AMD also launched Radeon RX 6000 series GPUs at that time which were based on the RDNA2 architecture.

At that time, AMD admitted that it could not meet the demand for its products because its OSAT partners didn’t have enough capacity.

Michael Turner
Michael Turner is an environmental activist with broad, deep experience in print and online writing, publication and site management, news coverage, and editorial team management.