Advanced ABF substrate supply chain: AT&S–Marvell agreement reinforces Morgan Stanley's positive view on advanced ABF substrates

Overview

This industry update examines AT&S's expanded IC-substrate agreement with Marvell and what it signals for advanced ABF substrate demand. Morgan Stanley concludes that the announcement validates strategic demand from AI and cloud infrastructure and is supportive of Taiwanese ABF suppliers Unimicron and Nan Ya PCB.

Core views

AT&S's expanded collaboration with Marvell is interpreted as evidence of strong demand for advanced ABF substrates. Morgan Stanley views the announcement chiefly as customer identification and confirmation of the strategic relationship underlying AT&S's June Kulim project, rather than a further capacity expansion on top of the previously announced €1.5–2.0 billion plan. The agreement identifies Marvell as the previously unnamed anchor customer for the Kulim expansion, alongside AMD. The planned build-out covers the Plant 2 fit-out as well as a new substrate-core and advanced-packaging facility, with long-term customer commitments providing support. In Morgan Stanley's view, Marvell is seeking priority access to the portion of the AI supply chain most likely to constrain its shipments. This supply-security logic underpins Morgan Stanley's positive view of the ABF segment. The firm believes AI and cloud-infrastructure demand is supporting the need for advanced substrates and sees favorable implications for Unimicron and Nan Ya PCB, both rated Overweight. The report also identifies demand shortfalls, substrate-bypassing technology, competition, and manufacturing ramp execution as material downside risks for the ABF suppliers.

Analysis framework

Morgan Stanley uses the AT&S–Marvell announcement to identify the customer behind the Kulim project, distinguish customer confirmation from incremental capex, and assess the implications for advanced-ABF supply constraints and Taiwanese suppliers. Its company valuation disclosures use residual-income models that incorporate cost of equity and growth assumptions.

Methodology notes

• Industry AnalysisSupply-demand framework

  Assessment of advanced ABF substrate demand and supply-chain capacity constraints

  The report interprets Marvell's long-term commitment and priority-access needs as evidence that advanced ABF capacity could constrain AI-related shipments.

• Valuation methodsRIM (Residual Income Model)

  Residual income valuation model

  For the covered Taiwanese suppliers, Morgan Stanley states that it uses residual-income valuation, incorporating cost of equity and medium-term and terminal growth assumptions.

Asset mapping & comparison

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

• Unimicron (3037.TW)

  A covered ABF-substrate supplier that Morgan Stanley sees as benefiting from strong advanced-ABF demand.

  Strengths

  Positive exposure to advanced ABF substrate demand.

  Comparison

  Rated Overweight, alongside Nan Ya PCB.

  Risks

  Demand shortfall, substrate-bypassing technology, intensifying competition, and yield or production issues during capacity ramps.

• Nan Ya PCB (8046.TW)

  A covered PCB and substrate supplier that Morgan Stanley sees as benefiting from the positive ABF demand outlook.

  Strengths

  Potential support from stronger ABF and BT demand, AI and 5G demand, and ASP increases.

  Comparison

  Rated Overweight, alongside Unimicron.

  Risks

  A sudden demand shortfall could pressure ABF substrate demand and pricing.

• Marvell (MRVL.O)

  AT&S's identified anchor customer for the Kulim expansion and a customer seeking priority access to advanced ABF capacity.

  Strengths

  Long-term collaboration supports access to constrained supply-chain capacity.

  Comparison

  Identified alongside AMD as an anchor customer for the expansion.

Key data

• AT&S June expansion plan€1.5–2.0bnMorgan Stanley says the Marvell announcement confirms the customer relationship behind this plan rather than adding another expansion.
• Unimicron valuation cost of equity9.2%Based on a 1% risk-free rate, 8.7% equity risk premium, and beta of 1.0.
• Unimicron growth assumptions15% medium-term; 3% terminalResidual-income valuation assumptions.
• Nan Ya PCB valuation cost of equity9.3%Based on a 1% risk-free rate, 8.7% equity risk premium, and beta of 1.0.
• Nan Ya PCB growth assumptions17% medium-term; 3% terminalResidual-income valuation assumptions.

Impact & implications

The report argues that Marvell's commitment strengthens the case that advanced ABF substrates are a strategic bottleneck for AI and cloud infrastructure. Morgan Stanley therefore sees the development as supportive of the ABF segment and of Unimicron and Nan Ya PCB.

Risks

• A sudden demand shortfall could weaken ABF substrate demand and pricing.
• Technological change that reduces the need for ABF substrates could undermine demand.
• Intensifying competition could pressure ABF suppliers.
• Yield issues or production hiccups while ramping new capacity could impair execution.