Samsung Electronics is reportedly facing difficulties securing large-format FC-BGA package substrates for custom AI chips, as suppliers seek purchase guarantees, advance payments or direct procurement by end customers before allocating capacity.
Samsung's System LSI division recently approached leading substrate manufacturers in South Korea and overseas about supplying large FC-BGA substrates for AI and data center chips, Greened reported, citing industry sources. Ibiden reportedly requested a purchase-volume guarantee exceeding KRW1 trillion, while Samsung Electro-Mechanics reportedly sought at least KRW100 billion in advance payments or direct procurement by Samsung's end customer. LG Innotek and Daeduck Electronics reportedly did not respond positively to the request.
The negotiations and proposed commercial terms have not been publicly confirmed by the companies.
Illustration comparing a standard FC-BGA package substrate with a larger server FC-BGA substrate. Credit: Samsung Electro-Mechanics
Large substrates tighten available supply
The tougher conditions reflect growing supplier leverage as demand for advanced AI package substrates outpaces available supply.
AI and data center processors are increasing in size as chipmakers seek greater computing performance. The substrates carrying those chips are also becoming larger and more complex.
Larger substrates reduce the number of units that can be cut from a fixed-size manufacturing panel. They also make it more difficult to control heat-related warpage during production. As product sizes increase, the same production line can therefore yield fewer substrates.
Only a limited group of companies is considered capable of stable mass production of large-format FC-BGA substrates. They include Ibiden and other Japanese suppliers, along with Samsung Electro-Mechanics, LG Innotek and Daeduck Electronics.
Producing substrates with more than 20 layers while maintaining flatness remains a major technical barrier for new suppliers. Companies that need large substrates are therefore prioritizing stable supply over price and using long-term contracts or advance payments to reserve capacity.
The reported terms presented to Samsung illustrate how suppliers are seeking stronger commitments before reserving capacity for new projects.
Ibiden links expansion to customer plans
Ibiden is investing heavily to meet rising demand while tying additional spending more closely to customer production plans.
Nikkei reported that Ibiden's electronics business accounts for about 60% of consolidated revenue and estimated that roughly half of the unit's business is linked to Nvidia demand, about one-quarter to Intel and most of the remainder to AMD. Nvidia's share increased rapidly as AI semiconductor demand accelerated from around 2023. Ibiden previously expanded capacity in response to Intel demand, but some facilities later went unused after demand weakened.
An Ibiden representative said the company believes the risk can be managed as long as the AI market and technological innovation continue. Close customer ties and shared development roadmaps also help it identify technology and demand trends early.
In a separate official disclosure, Ibiden said it plans to invest approximately JPY500 billion in its electronics business from fiscal 2026 through fiscal 2028, mainly to expand production capacity for high-performance IC package substrates used in AI and high-performance servers.
The investment will center on its Gama and Ono plants. Additional spending at Gama will proceed based on alignment with customers over the general direction toward mass production. The company plans to begin bringing the new capacity online sequentially from fiscal 2027 and is considering further expansion at Ono to meet strong demand.
The disclosure does not identify the customers involved or say whether the agreements include advance payments, minimum purchase commitments or the terms reportedly presented to Samsung.
Substrate access adds risk for Samsung
Samsung has been strengthening sales efforts across its System LSI and foundry businesses as it pursues custom AI SoC orders from major global technology companies.
Internal concerns have reportedly emerged that winning chip-design and foundry orders may not be enough to ensure smooth production and delivery unless package substrate capacity is secured in advance.
A prolonged shortage could complicate mass production schedules because completed chips cannot be delivered as finished products without the substrates needed for packaging. Access to large FC-BGA capacity is therefore becoming a more important part of competition for custom AI chip orders.
The report did not identify any lost orders, product delays or production disruptions. Samsung Electronics, Ibiden and Samsung Electro-Mechanics have not publicly confirmed the negotiations or the commercial terms.
Article edited by Joseph Chen
