Ajinomoto reportedly cuts ABF supply to China by 30% amid global demand increase

Reported Supply Reduction to China

Ajinomoto, a Japanese chemical manufacturer, has reportedly notified its customers in mainland China of a 30% reduction in the supply of ABF (Ajinomoto Build-up Film). ABF is an insulating film used in nearly all high-end processor packages. This information comes from a report by Chinese outlet JW Insights, citing unnamed supply chain sources.

Impact on Chinese Manufacturers

If confirmed, this supply cut would affect Chinese customers such as Shennan Circuits, Xingsen Technology, and Shenghong Electronics. These companies depend on Ajinomoto, which reportedly holds a 95% global market share for ABF, while China's self-sufficiency rate is estimated to be below 5%. JW Insights suggests the reduction is due to Ajinomoto prioritizing Japanese and other core overseas accounts that supply FC-BGA substrates for accelerators from Nvidia, AMD, and Intel.

Confirmed Price Increase and Market Dynamics

While the volume cut is not yet fully confirmed, Ajinomoto did notify substrate makers in May of a confirmed 30% price increase for ABF, effective this quarter. This price hike follows activist investor Palliser Capital's public demand for a price increase. ABF material constitutes approximately 30% of a substrate's bill of materials, meaning the price increase directly affects the cost of FC-BGA packages. Ajinomoto's ABF sales grew 25% in the fiscal year ending March 31, with margins exceeding 50%. The share of its film used in servers and networking silicon has increased to 70% from 40% in fiscal 2017.

Capacity Expansion and Supply-Demand Gap

Ajinomoto's ABF production reached approximately 2 million square meters per month at full utilization in the second quarter. The company has invested ¥25 billion (around $156 million USD) since 2023 to expand capacity by about 50% by 2030, with a new plant in Kani City, Gifu Prefecture, expected to come online around 2032. Goldman Sachs projects that the gap between ABF substrate supply and demand will widen from about 10% in late 2026 to 21% in 2027 and 42% in 2028, indicating a continued shortage.