AI Chip Costs to Rise After 30% Price Hike on Key Material

The cost to produce high-performance AI processors is set to climb as Japan's Ajinomoto, the near-monopolist supplier of a critical substrate material, plans to increase prices for its build-up film by 30%. The price hike, which substrate makers confirm will take effect in the third quarter of 2026, reflects surging demand from AI chip designers like Nvidia and Google that require increasingly large and complex packaging.

Taiwanese IC substrate manufacturers, the primary customers for the material, confirmed they have received the official notice from Ajinomoto. While final pricing is still under negotiation, industry sources said the 30% increase was within a "reasonable range" given the intense demand and the fact that the last major price adjustment occurred in early 2025.

The move follows a series of cost increases across the semiconductor supply chain. In April, Japanese firms Resonac and Mitsubishi Gas Chemical (MGC) raised prices for copper-clad laminate (CCL) materials, another key substrate component, by 30%. For substrate makers like Unimicron, Kinsus, and Nan Ya PCB, the rising cost of Ajinomoto Build-up Film, or ABF, adds another layer of cost pressure that will likely be passed on to their chipmaking customers.

This price hike solidifies the intense demand cycle for advanced semiconductors, driven almost entirely by the AI buildout. With Ajinomoto controlling over 95% of the global ABF market, the company holds significant pricing power. The cost increase will ripple through the profits of substrate producers and could either squeeze margins for AI chipmakers or lead to higher prices for the graphics processing units (GPUs) and custom accelerators used in data centers.

An 11-Fold Surge in AI Wafer Demand

The backdrop for Ajinomoto's price hike is a market struggling to keep up with exponential demand. According to data from TSMC, the world's largest contract chipmaker, demand for AI accelerator wafers is projected to grow 11-fold between 2022 and 2026. In a recent presentation, TSMC revised its forecast for the entire semiconductor market, projecting it to exceed $1.5 trillion by 2030, with AI and high-performance computing accounting for 55% of that total.

This explosive growth is particularly evident in the advanced packaging technologies required to build AI chips. TSMC forecasts a compounded annual growth rate of over 80% for its Chip on Wafer on Substrate (CoWoS) packaging capacity between 2022 and 2027. Because each of these advanced packages requires more ABF material to accommodate more layers and larger chip sizes, the demand for the film is growing faster than the overall chip market.

A Super-Expansion Cycle for Substrates

In response, the entire supply chain is entering what industry insiders call a "super-expansion cycle." Ajinomoto itself is investing ¥1.2 billion ($7.6 million) to acquire land for a third ABF factory in Gifu, Japan, which is slated to begin construction in 2028 and enter mass production by 2032. The company anticipates demand will continue to grow as chip designs evolve from current 3+3 layer packages to 11+11 layers, and eventually to 13+13 layers after 2030.

Downstream, major substrate suppliers are also boosting their capital expenditures. Unimicron and Kinsus, key suppliers for Nvidia, have both raised their 2026 capex to expand high-end ABF capacity. However, supply remains constrained not just by ABF availability but also by shortages in other necessary materials like glass fiber and copper foil, suggesting the supply-demand gap for advanced substrates could widen through 2027 and 2028, supporting higher prices for the foreseeable future.

This article is for informational purposes only and does not constitute investment advice.