Ajinomoto Confirms ABF Price Hike, Tightening Supply for Key AI Chip Material

2026-05-12

In May, Japanese materials conglomerate Ajinomoto has confirmed that it will initiate a process to raise prices for its core semiconductor insulating material—Ajinomoto Build-up Film (ABF). This price increase will be implemented on a case-by-case, client-by-client basis, with adjustments made according to the specific circumstances of each customer. This decision will directly impact the packaging costs and supply chain for high-end chips worldwide, particularly AI chips.

Understanding ABF

Ajinomoto Confirms ABF Price Hike, Tightening Supply for Key AI Chip Material

Ajinomoto Build-up Film (ABF) is a high-performance insulating film used in advanced chip packaging substrates. It is responsible for isolating signal layers to prevent interference between high-frequency signals, making it an indispensable core material for achieving high-density, high-performance packaging. Leveraging nearly three decades of technological accumulation, Ajinomoto has established a near-monopoly position in this niche sector, commanding a market share of over 95%. Its only significant competitor, SEKISUI Chemical, holds a market share of only about 5%.

Shareholder Pressure and Supply-Demand Imbalance

The immediate catalyst for this price hike comes from the capital markets. In late March 2026, Palliser Capital, a major shareholder and a UK-based investment fund, publicly urged the company to increase ABF prices by more than 30%. The more fundamental reason lies in a severe supply-demand imbalance. As AI accelerators like NVIDIA's Blackwell and Rubin undergo iterations, chip packaging complexity has surged dramatically. The number of required ABF layers has increased from 4-6 layers for typical PC chips to 8-16 layers or even more. This has led to exponential growth in ABF demand. Market forecasts predict that the supply-demand gap for ABF substrates will reach 10% in the second half of 2026, potentially widening to 21% in 2027 and 42% in 2028.

Production Capacity Outlook

To address the soaring demand, Ajinomoto plans to invest at least 250 billion yen by 2030 to increase its ABF production capacity by 50%. The company recently also announced plans to build a third ABF plant in Gifu Prefecture, Japan, scheduled to begin operations in 2032. However, given the double-digit annual growth in AI computing power, it remains a significant uncertainty whether a 50% increase in production capacity can adequately match the pace of demand growth.

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