Taiwan ABF substrate sector Report Interpretation

Overview

This Taiwan ABF sector update draws on a management meeting with Eternal Precision, a major ABF vacuum-laminator supplier. Goldman Sachs sees its extended order book and customer behavior as evidence that substrate demand is tightening and moving toward higher-end products, supporting its positive view on the sector and its Buy ratings on NYPCB and Kinsus.

Core views

Eternal Precision, which management describes as holding about 95% share of the mid-to-high-end ABF vacuum-laminator market, reported that order lead times now extend to 2031, versus 2028/29 previously. New orders are concentrated in 90-ton, three-stage high-end laminators as major ABF suppliers prepare capacity for next-generation substrates. Goldman Sachs estimates that fully utilizing Eternal Precision’s Japan and China capacity through 2027-31 would imply about 1,500 mid-to-high-end equipment orders, compared with roughly 600 total units shipped during 2022-25. The institution interprets this as demand that is stronger than the 2020-22 upcycle and increasingly oriented toward premium equipment. Customer behavior reinforces that conclusion. Some customers, mainly in China, are offering premiums to shorten lead times and secure equipment—something management did not observe in the prior upcycle. However, Eternal Precision prioritizes larger and longer-standing customers, particularly those with secured ABF-film supply. Goldman Sachs therefore sees limited risk that Chinese ABF capacity expansion will materially ease the shortage, given constrained access to both new equipment and ABF film. It forecasts ABF substrate shortage ratios of 14% in 2H26, 34% in 2027 and 51% in 2028, while noting that end customers are requesting capacity beyond 2029. The equipment supplier’s operating indicators also point to sustained demand. August revenue reached its second-highest historical level at NT$360mn, up 91% month on month and 101% year on year. Contract liabilities—where customers generally prepay 10-30% of order value—fell only slightly despite the revenue surge, and management said they had continued to rise to about NT$800mn. Management expects a higher-end product mix in 2H26 than in 2025, when high-end laminators accounted for 59% of revenue. It expects a 3:7 revenue split between 1H26 and 2H26, implying more than 50% revenue growth in 2026E. Capacity is planned to rise from 264 to 396 units per year by mid-2027, with potential further expansion if demand remains strong; management also believes gross margin could exceed 50%, versus 41.5% in 1H26, as next-generation products reach mass production. On technology, Eternal Precision plans initial shipments of EMIB-T substrate laminators to Japanese ABF customers in 1H27 because those customers currently show leading yields. Unimicron is targeting a 50% yield for this technology. Glass-core commercialization is less immediate: management considers 2027/28 unlikely, while Goldman Sachs expects commercialization beyond 2029. The report nevertheless views advanced packaging substrates as a long-term revenue and margin driver because they typically generate gross margins above 60% at mass production, compared with Kinsus and Unimicron gross margins of 26.1% and 24.8%, respectively, in 2Q26. For NYPCB, Goldman Sachs maintains Buy, citing more than 70% revenue exposure to BT substrates and non-LTA ABF substrates, where it expects substantial margin expansion as pricing improves. It forecasts operating margin rising from breakeven in 1H25 to 27% in 2026E and 41% in 2027E. Although high-end ABF was below 20% of revenue in 1H25, Goldman Sachs expects its share to exceed 40% by 2027E as ASIC AI-server and high-end switch-IC demand grows. The report projects a 122% earnings CAGR for 2026-28E and values NYPCB at 21x 2028E P/E, producing an unchanged 12-month target price of NT$2,500. Goldman Sachs also maintains Buy on Kinsus. It highlights Kinsus’s roughly 10% global ABF/BT market share in 2024, rising high-end ABF share, and favorable exposure to BT substrates and non-LTA ABF customers. BT accounted for about 36% of 2025 revenue, and non-LTA customers represented 30% of ABF revenue. The institution expects approximately 106% earnings CAGR for 2026-29E, supported by better BT and non-LTA ABF pricing, product upgrading and capacity expansion. Its unchanged NT$1,125 target is based on 16.5x 2028E P/E. Unimicron remains Neutral despite Goldman Sachs’s favorable long-term profitability view. More than 70% of its ABF shipments are under long-term agreements, limiting near-term price flexibility; weaker execution, slower capacity expansion and less favorable yields are also expected to constrain its ability to capture incremental AI demand. AI ABF represents 10% of revenue, but the report expects growth to trail peers as market share is lost. Goldman Sachs retains a NT$1,220 target based on 17.4x 2028E P/E and sees limited upside absent ASIC AI-server strength.

Analysis framework

Goldman Sachs uses Eternal Precision’s order backlog, customer prepayments, equipment allocation and capacity plans as leading indicators for ABF substrate supply and demand. It then links expected shortages and pricing to the product mix, margins, earnings outlook and valuation of NYPCB, Kinsus and Unimicron, using 2028E P/E target multiples.

Methodology notes

• Industry AnalysisSupply-demand framework

  ABF equipment availability and supplier capacity are used to assess future substrate shortages and pricing.

  The report treats extended equipment lead times, constrained ABF-film access and supplier expansion plans as evidence that demand will exceed supply, supporting higher substrate pricing and margins.

• Valuation methodsP/E and PEG Valuation

  Forward P/E target-price valuation.

  Goldman Sachs derives 12-month targets using 2028E P/E multiples of 21x for NYPCB, 16.5x for Kinsus and 17.4x for Unimicron, each compared with its historical upcycle average.

• Industry AnalysisVolume-price decomposition

  Product mix, pricing and capacity are linked to revenue and margin outcomes.

  The analysis distinguishes high-end versus other substrate and equipment exposure, connecting mix upgrades and pricing strength to gross and operating-margin expansion.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NYPCB (8046.TW)

  A Buy-rated beneficiary of improving BT and non-LTA ABF substrate pricing and rising high-end ABF exposure.

  Strengths

  More than 70% revenue exposure to BT and non-LTA ABF substrates; high-end ABF revenue exposure is projected to exceed 40% by 2027E.

  Weaknesses

  High-end ABF exposure was below 20% of total revenue in 1H25.

  Comparison

  Expected to be a key beneficiary of the pricing uptrend because of its focus on BT and non-LTA ABF.

  Risks

  Slower PC demand recovery, slower ABF pricing improvement, or delayed qualification of new high-end capacity.

• Kinsus (3189.TW)

  A Buy-rated beneficiary of high-end ABF market-share gains and favorable BT and non-LTA ABF pricing.

  Strengths

  About 10% global ABF/BT market share in 2024; clear capacity-expansion plan and product-upgrade opportunity.

  Weaknesses

  The report notes unfavorable demand conditions before 2H26.

  Comparison

  Goldman Sachs expects performance to improve relative to high-end ABF peers as high-end ABF share increases.

  Risks

  Slower PC recovery, slower ABF pricing improvement, or slower-than-expected AI-server orders from 2H26.

• Unimicron Technology (3037.TW)

  A Neutral-rated ABF supplier with long-term advanced-substrate potential but more limited near-term upside.

  Strengths

  25% ABF market share in 2025 and progress toward EMIB-T substrates, with a 50% yield target.

  Weaknesses

  More than 70% of ABF shipments are under LTAs; weaker execution, slower capacity expansion and less favorable yields constrain AI-demand capture.

  Comparison

  Goldman Sachs expects growth to be slower than peers as the company continues to lose market share.

  Risks

  PC-demand recovery, ABF substrate upgrading pace, and the pace of AI-server PCB market-share loss may differ from expectations.

Key data

• Eternal Precision order lead time2031Extended from 2028/29 previously for ABF vacuum laminators.
• Estimated mid-to-high-end equipment orders~1,500 unitsEstimated for 2027-31, versus ~600 total equipment units shipped in 2022-25.
• ABF substrate shortage ratio14% / 34% / 51%Goldman Sachs forecast for 2H26 / 2027 / 2028.
• Eternal Precision August revenueNT$360mnSecond historical high; +91% MoM and +101% YoY.
• Contract liabilities~NT$800mnManagement said they continued to increase; customer prepayments are a leading revenue indicator.
• Eternal Precision capacity396 units/yearTarget by mid-2027, up 50% from 264 units/year currently.
• NYPCB 2026-28E earnings CAGR122%Goldman Sachs estimate.
• Kinsus 2026-29E earnings CAGR~106%Goldman Sachs estimate.

Impact & implications

Goldman Sachs believes sustained equipment scarcity should preserve ABF substrate tightness and pricing power, particularly for suppliers with access to high-end equipment and ABF film. It sees NYPCB and Kinsus as better positioned to benefit through BT, non-LTA ABF and higher-end substrate exposure, whereas Unimicron’s LTAs, execution and capacity position constrain its near-term upside.

Risks

• For NYPCB, slower PC recovery, weaker-than-expected ABF pricing improvement and delayed high-end capacity qualification are downside risks.
• For Kinsus, slower PC recovery, weaker ABF pricing improvement and weaker AI-server orders from 2H26 are downside risks.
• For Unimicron, PC recovery, ABF upgrading and AI-server PCB market-share loss could develop faster or slower than expected.

What to watch

• Whether ABF suppliers continue expanding capacity from 2027 through at least 2031.
• The trajectory of Eternal Precision’s contract liabilities and high-end equipment shipments.
• Customer yields and initial EMIB-T laminator shipments in 1H27.
• Progress toward glass-core substrate commercialization, which Goldman Sachs expects beyond 2029.
• ABF and BT substrate pricing, PC-demand recovery and AI-server order momentum.