Goldman Sachs sharply raised target prices for Taiwan ABF substrate manufacturers, with core logic that AI-server and CPU demand is lifting supply-demand gaps and the price recovery cycle
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Goldman Sachs sharply raised target prices for Taiwan ABF substrate manufacturers, with core logic that AI-server and CPU demand is lifting supply-demand gaps and the price recovery cycle
The report expects ABF substrate TAM to compound at 62% in 2025-2028E, with supply shortages expanding to 34%/51% in 2027/2028, supporting continued rises in LTA and spot prices and gross margin expansion.
- ABF substrate TAM is expected to rise from US$7.7bn in 2025 to US$33bn in 2028E, with 2025-2028E CAGR raised from 33% to 62%.
- The supply-demand gap is expected to reach 14%/34%/51% in 2H26/2027/2028, higher than prior expectations, and the shortage is expected to continue through 2028 and potentially longer.
- Goldman Sachs expects ABF LTA prices to rise 10-15% QoQ from 3Q26 to at least end-2027, and spot prices to rise more than 20% QoQ.
- AI servers and general-server CPUs are the key drivers of demand exceeding expectations, expected to account for 45% and 17% of ABF demand in 2028E, respectively.
- Goldman Sachs raised NYPCB/Kinsus/Unimicron/ZDT target prices to NT$2,310/1,120/1,140/824, maintains Buy on NYPCB, Kinsus, and ZDT, and Unimicron remains Neutral.
Report interpretation
Overview
This Goldman Sachs Asia technology industry company research report focuses on the Taiwan ABF substrate supply chain. The report believes that demand for ABF area, layer count, and specifications is increasing for AI ASIC servers, Nvidia-related AI chip platforms, general-server CPUs, and high-end networking switch chips, while major suppliers’ capacity expansion is constrained by equipment lead times and technology upgrades, pushing the industry into a new upturn cycle. Goldman Sachs therefore significantly revised up ABF industry TAM, supply-demand gaps, prices, and earnings forecasts, and raised target prices for NYPCB, Kinsus, Unimicron, and ZDT.
Core views
The core view is that ABF substrate shortages are emerging earlier and lasting longer than previously expected. Goldman Sachs had previously expected shortages to begin in 2H26, but spot price increases appeared in April 2026, with 2Q26 spot prices rising 40-60%, and lead times extending from 3-4 months at the start of the year to over 12 months. The report expects major ABF manufacturers to maintain high utilization from 2H26 through at least 2028, and with an expanding supply-demand gap, spot prices are expected to rise 60-80% year-on-year in 2027 and 2028, driving upward revisions to margins and operating margins for Taiwan ABF firms.
Analysis framework
The report uses a top-down industry supply-demand model combined with bottom-up company earnings forecasts: it first breaks down ABF demand by application such as AI servers, general-server CPUs, and switching chips, then estimates supply constraints from supplier capex, declining yield efficiency, and equipment lead times, and maps assumptions on prices, shipments, and gross margins into 2026-2029E earnings and target prices for NYPCB, Kinsus, Unimicron, and ZDT.
Methodology notes
Supply-demand gap and price elasticity
The report assesses ABF shortage severity using demand CAGR, supply CAGR, utilization, lead times, and customers’ long-term capacity needs, and derives upward pressure on LTA and spot prices from the shortage rate.
Revenue, gross margin, operating margin, and EPS normalization
Goldman Sachs incorporates higher ABF prices, stronger AI and server CPU demand, short-term material shortages, and mix improvement into each company’s 2026-2029E revenue, gross margin, and EPS forecasts.
Deriving target prices from 2028E EPS and valuation multiples in the upcycle
NYPCB target price is based on 2028E EPS at 21.0x P/E, while Kinsus target price is based on 2028E EPS at 16.5x P/E, reflecting the ABF upcycle and upward revisions in earnings.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- NYPCBCore beneficiary of Taiwan ABF spot price recovery, rating Buy on CL
- Strengths
- 1Q26 spot price market exposure is around 80%. NYPCB’s gross margin in 2Q26 is expected to rise from below 16% to above 26%, and target price was raised to NT$2,310.
- Weaknesses
- Due to material shortages, 2026E revenue was revised down and shipments may be constrained by supply limits.
- Comparison
- Compared with peers with lower LTA exposure, NYPCB has the greatest sensitivity to spot price increases.
- Risks
- If ABF shortages ease, spot price rises are weaker than expected, or material shortages constrain shipments, the upward earnings revisions may not materialize.
- KinsusBeneficiary of AI server CPU, NVSwitch, and general-server CPU ABF demand, rating Buy
- Strengths
- Expected to gain share in the Nvidia supply chain, with AI-related revenue contribution rising from 2% in 2025E to 15%/18%/27% in 2026/2027/2028E; target price raised to NT$1,120.
- Weaknesses
- 2026E net profit was revised down modestly due to a conservative IC substrate margin assumption.
- Comparison
- Compared with other Taiwan ABF manufacturers, Kinsus benefits more from the rise in general-server CPU and Nvidia-related shares.
- Risks
- If share gains in the AI supply chain fall short of expectations, price pass-through is weaker than expected, or capacity expansion lags.
- UnimicronImportant ABF supplier for AI servers, rating Neutral
- Strengths
- Together with Ibiden, still accounted for 74% of AI server share in 2026, benefiting from AI server demand expansion and product mix improvement.
- Weaknesses
- Compared with Buy-rated peers, valuation and earnings leverage are relatively weaker, so the rating is maintained at Neutral.
- Comparison
- It benefits from AI server demand, but the report prefers NYPCB for higher spot-price sensitivity and Kinsus for more visible share gains.
- Risks
- AI server demand, margin improvement, or price increases fall short of expectations.
- ZDTTaiwan ABF substrate supplier, rating Buy
- Strengths
- Raised 2027/2028E gross margins and EPS, with target price raised to NT$824; also raised 2026 capex plan from NT$50bn to NT$80bn.
- Weaknesses
- 2026E revenue and EPS were revised down due to material shortages and weaker shipments.
- Comparison
- It benefits from industry price increases, but is more visibly affected by short-term material shortages.
- Risks
- Persistent material shortages, slower-than-expected conversion of capex into capacity, or weaker-than-expected ABF pricing.
Key data
- ABF TAMUS$7.7bn in 2025 to US$33bn in 2028ECorresponds to a 2025-2028E CAGR of 62%, above the prior 33% expectation.
- ABF supply shortage rate14%/34%/51% in 2H26/2027/2028The previous shortage expectations for 2026/2027/2028 were 5%/21%/42%.
- Price assumptionsLTA +10-15% QoQ; spot +20%+ QoQ from 3Q26 to end-2027Spot prices already rose 40-60% in 2Q26 due to shortages.
- Lead times12+ monthsAt the start of the year it was 3-4 months, and it has now lengthened noticeably.
- AI server ABF demand101% 2025-2028E CAGR; 45% of 2028E ABF demandRepresented 13% in 2025.
- General server CPU ABF demand47% 2025-2028E CAGR; 17% of 2028E ABF demandUnder the push of agentic AI, it represented 12% in 2025.
- Target price revisionsNYPCB NT$2,310; Kinsus NT$1,120; Unimicron NT$1,140; ZDT NT$824This is revised up from prior target prices of NT$1,115/555/630/388.
- 2Q26 earnings previewEarnings of the four Taiwan ABF companies are expected to beat BBG consensus by 4-38%Mostly driven by stronger shipments and higher ASP/pricing.
Impact & implications
The investment implication is that ABF substrates may become a bottleneck in the AI server and server CPU supply chain, limiting the pace of overall AI server deployment while giving Taiwan suppliers with spot-price exposure and high-end customer reach stronger earnings resilience. The report is most constructive on NYPCB as the primary beneficiary of spot price exposure, and also favors Kinsus on expected share gains in the Nvidia supply chain, AI server CPU, and NVSwitch IC; Unimicron benefits from AI server demand but the rating remains Neutral.
Risks
- AI server, ASIC, or general server CPU demand is weaker than expected, leading to lower ABF demand growth than Goldman Sachs forecasts.
- Major ABF suppliers expand capacity faster than expected, or customer demand is deferred, resulting in smaller-than-expected shortage and price increases.
- Material shortages, equipment lead times, and yield issues may limit shipments, suppressing near-term revenue realization.
- LTA customer price pass-through is weaker than spot price pass-through, causing margin improvement to fall short for some suppliers.
- If the AI server supply-chain bottleneck shifts to another stage, ABF substrates’ pricing power and earnings sensitivity may decline.
What to watch
- Actual gross margins, operating margins, and deviations from BBG consensus for Taiwan ABF firms in 2Q26 and 3Q26.
- Whether ABF substrate lead times continue to rise from 12 months toward 18-30 months.
- Whether quarterly LTA price increases of 10-15% and spot price increases above 20% after 3Q26 can be delivered.
- Shipment pace of AI ASIC, Nvidia GPU/CPU, NVSwitch, and general server CPUs.
- ZDT, Unimicron, and other suppliers’ new CAPEX plans, equipment arrival schedules, and capacity release after 2028.
- Changes in Kinsus’ share in the Nvidia supply chain and AI ABF market.