The world has been suffering from the impact of the COVID-19 pandemic since 2020, and countries have locked down or suspended work temporarily due to different levels of the pandemic; this has led to insufficient production capacities. Fortunately, new post- pandemic lifestyles and the continuous development of 5G have brought new momentum for the growth of industries. Among the various PCB products, the strength and stamina for the growth of substrate excelled the most; not only related terminal application products continue to be popular, the top four technology countries in Asia (Taiwan, China, Japan and South Korea) also joined the substrate battle field one after another. All indications show no reason why people shouldn’t be optimistic towards substrate, and also show the trend of the PCB industry developing towards high-end levels. 

Substrate trend skyrockets and continues to be in short supply 
　　The global PCB output value for 2020 was approximately USD $69.7 billion (including the output value of back-end mounting in PCB plants), in which the output value of substrate was approximately USD $11.08 billion, making up about 15.9% of global PCB products, and grew 26.8% compared to 2019; growth rate is number one among main PCB products. As the COVID-19 pandemic sped up digital transformation, not only are there powerful demands for stay-at-home economy, it also made the demand for AI and high-speed computing increase significantly, and this led to a vast increase in the demand for CPU and GPU. As a result, there is a serious shortage of ABF, which have high connectivity with semiconductors; whether delivery can be made smoothly has become the production bottleneck of many foundries and wafer fabs. Judging from current trends of global chip markets, the chip shortage is mainly on 8-inch wafer products such as driving IC, power management IC, audio encoder and MCU (microcontrollers) used for automotive electronics. Even though semiconductor manufacturers around the world are currently increasing their output for 8-inch wafers continually, the estimated timeline for the supply and demand of chips to reach a balance might fall somewhere in 2023, which is about the same for the supply and demand of ABF. 

Three major applications of substrate  Smartphones, HPC and Electric Vehicles 
　　The three major market trends for substrate applications include smartphones (the largest application market), HPC (rapidly growing application market) and electric vehicles (future potential market), in which the main substrate applied in smartphones is BT. Since SiP, AiP and RF modules have been added to 5G mobile phones in recent years, they continually drive the usage of BT, and as 5G commercialization continues to accelerate, 5G smartphone is expected to become the new driver to push to growth of smartphones in the future. HPC platforms includes PCs, tablets, gaming consoles, servers and base stations, etc.; ABF are mainly used for chip packaging in HPC products. Many factors will drive the demand of the HPC market in the future including the continual increase in demands for the deployment of 5G base stations, data centers and AI servers, and the increase in sales of the new generation of gaming consoles. For a long time, automobiles have always been an important application market for chips. The shortage for automotive chips began in the second half of last year, and there is still no sign of relief so far; this has forced many international vehicle manufacturers to reduce or even stop production. The importance of chips to the automotive industry can be clearly seen from this. With the international promotion of the carbon neutral movement, governments of various countries have set timetables to eliminate traditional fuel vehicles, and this will inevitably drive vehicle manufacturers to accelerate the development of electric vehicles. 

Substrate has become mainstream  Taiwan, China, Japan and South Korea have all started adjusting layouts
Looking at the development trends of major global PCB manufacturers’ substrate markets, the global substrate output value for the first half of 2021 was approximately USD $6.37 billion; based on the type of manufacturers’ fund, it is estimated that manufacturers in Taiwan, Japan and South Korea covered almost 90% of the global substrate market in the first half of 2021. Since South Korea focused on the development of substrate strategies, its overall substrate output value had increased significantly in the first half of 2021, especially on BT substrate. Also, since the results of the investments that the PCB industry in Japan made on substrate started to show in recent years, whether it is on ABF or BT, the overall industry output value has also bounced back. In Taiwan, substrate is its fourth major PCB product in 2020; and if further categorized by production location, substrate is the largest product developed by Taiwanese companies in Taiwan, in which major substrate manufacturers in Taiwan have all increased their capital expenditures and invested in the expansion of factories to increase production, especially on the investment on ABF. As for manufacturers in China, even though they only have a small market share on substrate, they are optimistic about the future of their substrate; manufacturers in China have also started to actively invest in the development of substrate, even though the output value of substrate is less than 5% in China’s overall PCB output value, and most of them are MEMS and other elementary-level products. However, with the support of the country’s policies and semiconductor industry, the development of substrate in China is expected to accelerate. 

The ABF market is particularly important among substrate
    The market shares of the world’s major substrate manufacturers in the ABF market for 2021, based on the type of manufacturers’ fund, Taiwan is the number one ABF supplier, with a market share of approximately 43%, and Japan is the second, with a market share of approximately 34%; Taiwan and Japan account for almost 80% of the ABF production capacity. Due to the increasing performance requirements of end products, the design of IC chips started shifting towards multi-layers, large sizes and finer gate length, and this caused challenges to the production processes and yields of ABF; the evolution of various advanced packaging technologies (such as CoWos, EMIB and Chiplet) in the future will also further increase the area requirement of ABF. However, the expansion rate of substrate manufacturers that currently mainly manufacture ABF is still not fast enough to meet market demands. According to the surveys of research institutions, the growth rate for the demand of ABF from the market in 2021 is 27%, and the growth rate for the supply is only 16%, the gap between supply and demand is 11%; therefore, the estimated time for shortage in supply might continue through 2023, and a balance between supply and demand is expected to be reached in 2024. The problem between supply and demand also caused a rising trend for the average price of ABF. 

How can Taiwan use its strength in PCB to become the most powerful support for semiconductors
    The markets for the three main substrate forces, smartphones, HPC and electric vehicles, and future potential applications are clear; as traditional rigid boards have become red ocean markets, this pushed the four top PCB countries in Asia to gradually shifted towards the development of high-end substrate. Even though Taiwan’s strength in the manufacturing of substrate is to be reckoned with, according to the PCB high-end technology gap and development blueprint that was just published by the Taiwan Printed Circuit Association (TPCA), the level of autonomy for substrate is the lowest, and Taiwan needs to rely on foreign companies for approximately 70% of the key materials and equipment, in which most of them are technologies from Japan. This shows that Taiwan’s PCB has not yet achieved the corresponding performance in terms of autonomy for key materials and equipment. Currently, Taiwan’s PCB ranks number one overall by accounting for 33.9% of the global market share; it is also the heart of the semiconductor industry. Although Taiwan still has manufacturing scale and geographic advantages; however, when faced with the challenges of the rapid development of next-generation products and global zero carbon emission, how to connect Taiwan’s advantages together to become the industrial hub of global high-end PCB is something that’s worth the collective brainstorming and efforts of the industry, government and academia. If the government can support the establishment of related policy plans for “building Taiwan into a global PCB zero carbon-emission high-end industry cluster”, and establish systematic industry promotion policies, it can definitely help Taiwan’s PCB industry in realizing the goals of green sustainability, smart manufacturing, and autonomy for high-end materials and equipment, and build the high-end manufacturing hard power of Taiwan’s PCB industry.

Part of this article’s content was extracted from the monthly evaluation report of TPCA-Scanning and development trends of global substrate industries. The full report will be published on the official website of the TPCA.