Ibiden, a Japanese firm that supplies AI-use substrates to US companies, has announced something strange: Companies are asking it to increase its production and lay its future capacity expansion plans so they can manage their future supply chains effectively. Since Ibiden is a supplier for most of the major semiconductor companies in the US, this gives us some insight into the future AI spending expected from Big Tech.
Ibiden is a global player in the semiconductor and electronics industry and produces package substrates and printed circuit boards (PCBs) for many high-density and high-speed semiconductor applications. The AI boom has catapulted this part of its business to new heights, with companies increasingly inquiring about the firm’s future expansion plans. At the moment, Ibiden is setting up a new substrate factory in Gifu, which should start production by the end of 2025. This factory should start operating at 50% capacity by the first quarter of 2026. However, customers are asking questions about the timeline for the remaining capacity coming online.
These customers aren’t any small companies. The main customer here is Nvidia, which wants the company to ramp up its production so it can continue to develop its GPUs. The reason this is important for Nvidia is because it is the only player in the industry that provides GPUs that are many times more powerful than the nearest competitor. Nvidia has a unique problem in that its suppliers are challenged to keep up with the pace of its innovation. More often than not, Nvidia isn’t constrained by its own R&D. Rather, it has to ensure the supporting equipment for its GPUs is ready before it can sell it to customers. Ibiden has a similar role to play in supporting Nvidia’s GPUs. These GPUs release so much heat that substrates need to withstand the high temperatures. So Nvidia can’t just buy these from anyone and has to trust its existing suppliers to come up with the best tech in enough quantities to support its production.
Apart from Nvidia, Intel is also a big customer. It is plausible that the company continues to generate 30% of its revenue from Intel, which at one point accounted for over 70% of the company’s sales. AMD, Samsung, and Taiwan Semiconductor Manufacturing are among other notable customers.
Ibiden also needs to accommodate custom chip makers like Google, Broadcom, and Marvell among others. What this tells us is that AI spending isn’t slowing down anytime soon. If US companies want a key supplier to increase production capacity, it can only mean they want to continue spending. 2025 could well be the year of AI and with this news coming out of Japan, we can expect many more billions to be poured into AI during the year. We believe Nvidia is again going to be the biggest beneficiary of this spending, even with competition from custom chip makers like Broadcom (AVGO) and Marvell (MRVL).
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Disclosure: None. This article was originally published at Insider Monkey.