Ibiden's Growth Strategy in the Next-Generation Semiconductor Landscape

Title: "Ibiden's Growth Strategy in the Next-Generation Semiconductor Landscape"

The semiconductor industry is evolving rapidly, with a particular focus on Integrated Circuit (IC) packaging. This essay delves into the growth strategy of Ibiden, a top player in the IC packaging sector, emphasizing its historical journey and current market positioning.

IC packaging plays a crucial role in safeguarding and integrating semiconductor chips while managing external connections. The performance of IC packages is pivotal, influenced by factors such as heat dissipation and compatibility with printed circuit boards. As semiconductor chip miniaturization poses challenges, the spotlight is now on enhancing IC package performance for high-speed processing of the growing volume of digital data. Ibiden, holding over 50% market share globally, concentrates its managerial resources on accelerating the development of key technologies and production techniques, strategically aligning itself for the future (Editor-in-chief, Tetsuya Murakuni).

Ibiden's history is a narrative of challenges and paradigm shifts. Founded in 1912 through hydroelectric power generation, the company transitioned its business focus to carbides, carbon products, ceramics, building materials, and construction. In the 1970s, leveraging technology from melamine decorative boards, Ibiden entered the Printed Wiring Board (PWB) market. The 1980s saw its foray into the IC packaging sector.

The landscape of the electronic industry has undergone significant transformations. In the fiscal year 2014, PWBs for smartphones accounted for over 20% of Ibiden's electronic business revenue, with IC packages mainly serving PCs, smartphones, and tablets. However, by March 2023, Ibiden withdrew from PWBs, becoming exclusively dedicated to IC package production. Notably, the revenue from server-related IC packages has approached that of PC-related ones.

Recent years have witnessed substantial investments in server-related facilities. By fiscal year 2021, Ibiden had allocated approximately 130 billion yen to expand the Ogaki Chuo Plant (Ogaki City, Gifu Prefecture). The Kawamura Plant (same location), initially focused on the production of ultra-compact type (CSP) IC packages, completed its transformation for server use by December 2023. The initial investment estimate, including facilities, was 180 billion yen. In December 2022, construction began for the new Ono Plant (Ono Town, Gifu Prefecture).

However, global downturns in the IT market prompted Ibiden to delay the operational start of the Kawamura Plant from the planned fiscal year 2024 to fiscal year 2026. President Takeshi Aoki explained that the anticipated recovery in demand might extend from the latter half of fiscal year 2024, initially projected in early fiscal year 2023, to the latter half of fiscal year 2025. Ibiden assessed that the products originally planned for production in Kawamura could be covered by the production surplus in facilities such as the Ogaki Chuo Plant for the time being. The company applied the brakes to its plan to double the overall IC package production capacity to 2.1 times that of fiscal year 2019 by fiscal year 2025.

President Aoki, however, remains optimistic. Despite the sluggish performance of general-purpose servers, the market for Artificial Intelligence (AI) servers is expanding. President Aoki revealed, "We have almost a 100% monopoly on IC packages for high-end AI servers."

Therefore, the Ono Plant, designed to produce a variety of IC packages, is expected to commence operations as planned in fiscal year 2025. Boasting a land area of 150,000 square meters, it surpasses all seven of the company's existing factories, making it the largest domestically. Multiple dedicated lines for AI server IC packages will be introduced to further strengthen the foundation. Some facilities common to both Kawamura and Ono will be introduced first at Ono, having been originally intended for Kawamura.
Ibiden foresees a 40% expansion in the PC and server sectors, where the company supplies IC packages, by fiscal year 2027 compared to fiscal year 2022. In fiscal year 2023, the company plans a facility investment of 190 billion yen against an estimated consolidated revenue of 3.8 trillion yen.

Competitors are also ramping up production. New Koden Electric Industry, boasting approximately 17% global share in Flip-Chip (FC) packages for high-performance PCs and servers (estimated by Nikkan Kogyo Shimbun), plans to start operations at its Chikuma Plant (Chikuma City, Nagano Prefecture) in the latter half of fiscal year 2024. With an investment of 140 billion yen, the plant will produce self-developed IC packages that integrate ultra-fine wiring layers and build-up substrates. Austria's AT&S is constructing a new plant in Malaysia at a cost of about 266 billion yen to produce high-performance IC packages, scheduled to commence operations in December 2024.

The server market is undergoing changes, demanding flexible and speedy responses. Ibiden predicts a 40% growth in related fields by fiscal year 2027, with a slight decrease in PC usage but a roughly 30% increase in general-purpose server usage. Driving this growth is the demand for AI servers. Although almost non-existent in 2022, Ibiden anticipates rapid expansion, reaching nearly 30% of the overall server market by 2027.

Ibiden's global share in AI server IC packages exceeds 50%, and President Aoki states that the basic manufacturing process for AI server IC packages is "technically the same" as that for general-purpose servers. However, AI server semiconductor chips require increased computational capacity. Ibiden is strengthening its development of related technologies for the next generation of IC packages.

One key theme is the adaptation to 3D packaging. This involves stacking multiple semiconductor chips, such as Central Processing Units (CPUs), memory, and peripheral devices, in a single package in the third dimension for high-density integration. Ibiden has joined an alliance led by Taiwan Semiconductor Manufacturing Company (TSMC), aiming to automate wiring and set a goal of tenfold increased productivity.

The semiconductor chip industry's landscape is also undergoing seismic shifts. Intel, a dominant force in semiconductor chips for general-purpose servers, faces competition in AI servers where Graphics Processing Units (GPUs) excel due to the extensive calculations required for machine learning. NVIDIA, specializing in GPUs, dominates the AI server market.

TSMC, a manufacturer for NVIDIA, plays a crucial role in this ecosystem. Both Intel and AMD are striving to regain momentum in the AI server market. The adaptability of IC package manufacturers, including Ibiden, to the requirements of semiconductor companies is a critical factor in this competitive scenario.

In conclusion, Ibiden's growth strategy in the ever-evolving semiconductor landscape involves a focused approach to AI server IC packages, significant investments, and continuous technological advancements. The company's ability to adapt to market changes, particularly in the burgeoning AI sector, positions it as a key player in shaping the future of semiconductor packaging.