Riding a boom driven by the growth of the artificial intelligence (AI) industry, the semiconductor substrate sector is accelerating capacity expansion on the back of bold investments. In particular, mid-sized companies are moving away from conservative management stances—reviewing their no-debt principles, for instance—amid expectations of long-term growth in the AI chip market. The plan is to rapidly expand the share of high value-added AI substrates over low-cost substrates used in smartphones.
According to industry sources on the 21st, Daeduck Electronics disclosed the previous day that it will invest 497 billion won by 2027 to expand production facilities for semiconductor packaging substrates. This comes just two months after it announced in May a 213 billion won investment in production equipment for flip-chip chip-scale packages (FC-CSP), a high value-added substrate. With this, the company has unveiled a large-scale investment plan totaling 710 billion won this year alone. A company official said, "We decided to invest not simply because of a demand recovery, but because we expect supply to fall dramatically short," adding, "We plan to invest across our overall semiconductor packaging substrate facilities." He continued, "We view AI substrate fields such as FC-CSP and flip-chip ball grid array (FC-BGA) as a new growth engine."
Package substrates for AI servers are high value-added products requiring more advanced technology than substrates for PCs or smartphones, and are considered a key component that determines the performance and stability of AI chips such as graphics processing units (GPUs). For this reason, substrates are drawing attention as the field set to benefit most in the AI era after memory, which is led by Samsung Electronics, SK hynix, and Micron. As AI chip development advances toward stacking multiple chips, demand for substrates—which serve to electrically connect chips—continues to grow. Analysts in the securities sector suggest that as AI accelerators become more advanced and substrates grow larger and more multi-layered, a mid- to long-term supply shortage could emerge.
This is prompting the semiconductor substrate industry to break from its conservative management stance. Daeduck Electronics is reviewing external borrowing in connection with this facility investment. As of the end of the first quarter this year, its cash holdings (including short-term financial instruments) stood at 215.8 billion won, only about a third of the investment amount. However, with borrowings at just 9.5 billion won—effectively a debt-free operation—analysts say this is an opportune time to raise external funds. Its debt ratio is only 30%, far below the appropriate level for manufacturing (100%), so its financial soundness is unlikely to be significantly affected by increased borrowing. A Daeduck Electronics official said, "Since our stance of minimizing borrowings remains the same, we plan to fund the investment ourselves and borrow only for the shortfall," adding, "As big tech firms are leading the way in investment, we are considering funding within that trend and are keeping external borrowing open as an option."
Mid-sized firm Simmtech (222800) is also pushing to expand package substrate capacity for next-generation memory chips, investing a total of 40 billion won. To this end, it secured approval for a 20 billion won low-interest loan through the National Growth Fund. Isu Petasys is likewise significantly increasing its production capacity from the second half of this year. According to DB Securities, monthly output of multi-layer substrates, a high value-added product, is expected to more than 2.5-fold from 3,000 square meters in the first half of this year to 8,000 square meters in the second half.
These companies' earnings are expected to improve significantly at least through next year. According to FnGuide, the combined operating profit of Daeduck Electronics (353200), Simmtech, and Isu Petasys (007660) is projected to surge about 48%, from 768.2 billion won this year to 1.135 trillion won next year.
However, intensifying competition for substrate capacity expansion in East Asian semiconductor markets such as China and Taiwan is a source of concern for the domestic industry. In China alone, more than 20 printed circuit board (PCB) manufacturers announced expansion plans in the first half of this year. Taiwan's Unimicron, considered a leader in high-spec substrates for AI servers, expanded its facility investment plan for this year by 75% from the original figure, while Japan's Ibiden, the world's top semiconductor substrate maker, plans to invest 500 billion yen (about 4.5368 trillion won) by 2028. An official in the semiconductor materials, parts, and equipment industry said, "Taiwan and Japan have long solidified their market dominance in substrates, and now China is aggressively expanding its investments," adding, "Multifaceted support is needed so that domestic substrate companies can leap into global players."
