The wave of artificial intelligence sweeping across Asia is extending deeper into the supply chain. Investors are beginning to take a closer look at the AI supply ecosystem, as even the most powerful processors cannot function without the support of less well-known components. This shift in perception, combined with rising demand and prices, is driving a rebound for a new group of companies.
These companies primarily fall into three categories: multilayer ceramic capacitors (MLCCs), used to regulate power within electronic systems; advanced chip substrates, which connect semiconductors to other hardware; and thermal compression bonding (TCB), a precision process that fuses various components together. Kieron Poon, Director of Asian Equity Investment at Aberdeen Standard Investments, offers an illustrative explanation: “Imagine the printed circuit board as a dining table. The plates on the table can be called substrates, and the food on the plates is the chips.”
Within this group, substrate manufacturers Unimicron Technology and ASE Technology Holding have seen their shares surge approximately 770% and 530%, respectively, over the past 12 months. MLCC producers Samsung Electro-Mechanics and Murata Manufacturing have also climbed to record highs this month, as has TCB specialist Hanmi Semiconductor. The majority of this supply chain is concentrated in South Korea, Taiwan, Japan, and mainland China.
Driving this trend is the intensity of AI infrastructure construction. AI servers consume significantly more electricity than traditional servers, and higher power levels require more components to manage and stabilize it. Young Jae Lee, Senior Investment Manager at Pictet Asset Management, notes that a single AI server can use 10 to 15 times the number of MLCCs compared to a standard server, and roughly 30 times that of a smartphone.
The surge in demand is leading to tighter supply and higher prices. Samsung Electro-Mechanics indicated this week that it is considering raising prices on its MLCC products by up to 10%. Takayuki Naito, an analyst at Citigroup Inc., emphasizes growing market expectations for price increases on components such as MLCCs, aluminum electrolytic capacitors, and packaging substrates. Naito believes this could provide support for Japanese manufacturers like Murata Manufacturing and Taiyo Yuden. Last week, analysts at JPMorgan Chase & Co. raised their target prices for Murata and Taiyo Yuden, anticipating a prolonged tightness in supply-demand dynamics.
According to Aberdeen Standard Investments’ Poon, the supply of capacitors, substrates, and TCB remains concentrated, and the customer base these companies serve is expanding rapidly. As a result, bargaining power “definitely still lies with the suppliers.”
