ABF substrate S/D gap is expected to become progressively worse year over year, reaching a S/D gap of 46% in 2028. Up from just 1% in 2026. Hello ABF substrate department? Yes, please send us more ABF we need it desperately!

ABF substrate supply is tight, and key suppliers are looking to expand capacity globally. One interesting read through is MEC ($4971.TYO), a Japanese specialty chemicals company with an effective monopoly on the CZ series adhesion promotion chemistry used in ABF substrate manufacturing. The chemistry is critical. It enables copper circuitry to bond to the build up film and is applied at every layer of the substrate. MEC’s latest disclosures show sales to China growing far faster than to any other region. This looks like an important signal that Chinese substrate makers are investing aggressively to build the technical expertise and capacity needed to compete in ABF. Some of the increase may come from non Chinese suppliers manufacturing in China, such as AT&S and Zhen Ding. But it is hard to see that alone explaining the magnitude of the increase. The takeaway: China’s push into ABF substrates looks increasingly real, and MEC’s chemistry sales may be one of the better ways to track it.

An underappreciated #ABFsubstrate# name is the Japanese company Toppan ($7911.TYO). The real profitability story here is somewhat masked (pun intended) by the photomask business they recently spun off. And this comment from $AVGO yesterday is definitely a positive sign.