Japanese chemical manufacturer Ajinomoto has reportedly reduced its supply of ABF substrate film to mainland China customers by 30%, citing qualification races for domestic alternatives.

Japanese chemical maker Ajinomoto has reportedly informed customers in mainland China that it will reduce supply of ABF, the insulating build-up film used in nearly every high-end processor package, by 30%. According to a report from Chinese outlet JW Insights citing unnamed supply chain sources, the move would significantly impact Chinese customers such as Shennan Circuits, Xingsen Technology, and Shenghong Electronics, which rely on Ajinomoto’s reported 95% global market share of the film. In contrast, China’s domestic self-sufficiency rate remains below 5%.

JW Insights attributes the reduction to Ajinomoto prioritizing Japanese customers and core overseas accounts that supply FC-BGA substrates for Nvidia, AMD, and Intel accelerators over mainland buyers. Whether the 30% volume figure holds, the supply squeeze is well documented, and Beijing’s response was already underway. At full utilization, Ajinomoto’s ABF production ran at approximately 2 million square meters per month in the second quarter. Since 2023, the company has committed ¥25 billion (roughly $156 million USD) to expand capacity by about 50% by 2030, with land purchased in Kani City, Gifu Prefecture, hosting a third plant not expected to come online until around 2032. For the fiscal year ended March 31, Ajinomoto reported that ABF sales grew 25% with margins exceeding 50%, while the portion of its film directed toward servers and networking silicon reached 70%, up from 40% in fiscal 2017. Goldman Sachs forecasts that the gap between ABF substrate supply and demand will widen from approximately 10% in the second half of 2026 to 21% in 2027 and 42% in 2028.

Ajinomoto notified substrate makers in May of a roughly 30% price hike taking effect this quarter, two months after UK activist fund Palliser Capital disclosed a top-25 shareholding on March 31 and publicly demanded the company raise ABF prices by more than 30%. While the volume cut remains unconfirmed, the price increase is verified. Because ABF material accounts for approximately 30% of a substrate’s bill of materials, the hike flows directly into the cost of every FC-BGA package built upon it. Industry observers have tracked ABF bottlenecks since the shortage that constrained GPU production in 2021 and 2022, noting that the current cycle extends a pattern already affecting BT resin substrates and T-glass cloth, where single Japanese suppliers similarly dominate.

China’s homegrown alternatives are advancing across three primary tracks. Huazheng New Material’s CBF, developed alongside the Shenzhen Institute of Advanced Electronic Materials, utilizes a modified epoxy resin with spherical silica filler to circumvent Ajinomoto’s intellectual property rather than replicate it. Chinese media reports indicate its mass-production yield exceeds 85%, with reliability testing reportedly passing inside Huawei Ascend systems and validation currently underway at Xingsen and Shennan Circuits. Huazheng’s first production line, capable of 3 million square meters annually, is operating at full utilization, while a second line doubling that capacity is scheduled to launch by the end of 2026. Meanwhile, Lotus Holdings—best known in China as a producer of MSG—acquired a 51% stake in Shenzhen Newface, developer of NBF, in April for roughly ¥103 million. Newface has reportedly qualified all products below nine build-up layers, with nine- to 11-layer films in development and undergoing validation at Taiwanese substrate makers. Ajinomoto itself originated as a food and seasonings company that derived ABF technology from its amino acid chemistry in the 1990s. Additionally, Hongchang Electronics’ GBF, co-developed with Taiwan’s Jinghua Technology, has been validated at a leading domestic OSAT and entered small-volume trial production, with scale-up targeted for the fourth quarter.

All three domestic films face identical downstream hurdles: reliability qualification requires one to three years of thermal cycling, damp-heat aging, and electrical testing, frequently extending beyond the initial R&D phase. Furthermore, the highest layer-count films required for flagship AI accelerators remain unmatched domestically, and critical upstream inputs, including specialty resins and spherical silica filler, remain partially import-dependent. Architecturally, however, Huawei’s Ascend 910C reportedly connects two compute dies on separate silicon interposers through an organic substrate—a design SemiAnalysis has characterized as trading die-to-die bandwidth for improved yield and cost efficiency compared to Nvidia’s CoWoS. This architecture reduces Huawei’s dependence on the high layer-count ABF-based FC-BGA substrates utilized by Nvidia’s B200 and GB200, AMD’s MI300X, and Intel’s accelerators. Consequently, Chinese industry reporting positions the Ascend platform as the anchor qualification target for both CBF and GBF. Conversely, domestic chipmakers such as Cambricon, Biren, Moore Threads, and Alibaba’s T-Head, which package their chips on conventional FC-BGA, remain directly exposed to any mainland ABF supply disruptions.

In parallel regulatory and market developments, analysts project China’s homegrown AI accelerators will supply 90% of the domestic market, while the FCC has proposed an import ban on Chinese optical transceivers. Shanghai Aishengna has also been identified as the manufacturer of China’s first domestic immersion DUV chipmaking tools. As the U.S. recalibrates chip sanction policies and China advances its independent semiconductor supply chain, industry observers note a Lumentum CEO warning of an impending bottleneck in materials critical for silicon photonics, alongside reports that Google has contracted Intel to package over 3 million TPUs in 2028.

The timing of Ajinomoto’s reported supply adjustment carries obvious retaliatory optics, arriving eight months after China banned exports of dual-use items to Japanese military-linked end users in January via Ministry of Commerce Announcement No. 1, following Prime Minister Sanae Takaichi’s November remarks regarding a Taiwan contingency. Measurable fallout followed: Chinese exports of restricted rare earths to Japan fell approximately 51% year-over-year in the first half of 2026, according to Nikkei Asia, while Japan imported just 13 tons of dysprosium during the period, down 82% from two years earlier per TrendForce. Nevertheless, every account of the alleged ABF cut attributes it to capacity allocation driven by surging AI demand rather than direct retaliation. China’s rare-earth controls have thus far targeted materials where Beijing holds market leverage, whereas ABF represents a sector where it currently holds none.

Looking ahead, China continues to pursue alternative packaging pathways. In May, BOE signed a three-year glass substrate agreement with Corning, and in July designated glass-core packaging a strategic business initiative. That same month, Lens Technology announced a through-glass-via collaboration with Intel, extending China’s broader push into glass substrates as a long-term workaround for Japanese film dependency. However, a glass core merely replaces the substrate’s middle layer; the chip package still requires insulating film built up on either side, meaning glass technology does not eliminate the need for ABF or its domestic substitutes. Moreover, none of China’s glass substrate projects has reached mass production. Until those initiatives mature, China’s resilience against the reported supply cut ultimately hinges on whether Shennan, Xingsen, and Shenghong can successfully qualify their domestic films.