Ajinomoto slashes chip packaging film supply to China by 30% — Beijing's rare earth curbs backfire

Japanese chemical maker Ajinomoto has reportedly informed customers in mainland China that it will cut supplies of ABF (Ajinomoto Build-up Film), the insulating material used in nearly every high-end processor package, by 30%, according to Chinese outlet JW Insights, citing unnamed supply chain sources.

Ajinomoto holds over 95% of the global ABF market, while China's self-sufficiency rate is estimated at below 5%. The restriction hits Chinese substrate manufacturers such as Shennan Circuits, Xingsen Technology, and Shenghong Electronics, which rely heavily on Japanese imports for the FC-BGA substrates used in accelerators from NVIDIA, AMD, and Intel.

JW Insights attributes the move to Ajinomoto prioritizing Japanese customers and core overseas accounts over mainland buyers. The cut comes as a response to Beijing's recent export restrictions on rare earth elements, though the report does not specify a direct link.

Ajinomoto's ABF production ran at roughly 2 million square meters per month at full utilization in the second quarter. The company has committed ¥25 billion (around $156 million) since 2023 to expand capacity by about 50% by 2030, with a third plant in Kani City, Gifu Prefecture, not expected to come online until around 2032.

In the fiscal year ended March 31, Ajinomoto reported growth in ABF sales, though exact figures were not disclosed. Chinese manufacturers have been attempting to develop domestic ABF substitutes for years, but progress has been slow, with no commercially viable alternatives yet qualified at scale.

The 30% reduction, if confirmed, would significantly pressure China's semiconductor packaging ecosystem, which is already grappling with US-led export controls on advanced chipmaking equipment. Analysts suggest the move could accelerate Beijing's push for self-sufficiency in advanced packaging materials, though the timeline for domestic alternatives remains uncertain.