Ajinomoto has announced a significant 30% price increase for its ABF build-up film, a critical material for AI chips, set to take effect in the third quarter of 2026.
This move sends ripples through the entire semiconductor industry. Why? Because Ajinomoto holds a near-monopoly, controlling over 95% of the global supply of ABF film. This film acts as an essential insulator in the high-performance substrates used for AI processors from companies like Nvidia. Essentially, if you're making a high-end AI chip, you almost certainly need Ajinomoto's product.
So, what led to this decision? There are three main drivers. First is the relentless demand from the AI super-cycle. Companies like TSMC are running their factories at full tilt to produce chips for AI, which require larger and more complex substrates, consuming more ABF film. Second, there's a cost-push factor. The prices of other key materials, like copper and laminates, have been soaring. This squeezed the profit margins of substrate manufacturers, making it easier for them to accept and pass on Ajinomoto's price hike. Third, a crucial catalyst was pressure from an activist investor, Palliser Capital. The fund publicly argued that Ajinomoto should leverage its “monopoly-grade” position to raise prices, giving the company a strong justification for the move.
Ajinomoto isn't just raising prices; it's also playing the long game. The company recently acquired land for a new factory scheduled to begin production in 2032. This signals confidence that high demand for ABF film is not a short-term trend but a structural shift that will last for years. This long-term investment assures customers of future supply, making the immediate price hike more palatable.
The immediate effect will be higher costs for substrate makers. Given the tight supply and urgent demand for AI chips, this cost increase is very likely to be passed on, leading to a 3-6% rise in substrate prices and potentially affecting the final cost of AI accelerators.
- ABF (Ajinomoto Build-up Film): A specialized insulating film essential for manufacturing high-performance semiconductor packages, particularly for CPUs and GPUs used in AI.
- FC-BGA (Flip Chip Ball Grid Array): An advanced type of semiconductor packaging that allows for more connection points, higher performance, and better heat dissipation, commonly used for AI chips.
- Substrate: The base layer on which semiconductor chips are mounted, providing electrical connections between the chip and the circuit board.