The current global shortage of chips makes a component called 'substrate' on the rise. This component was previously ignored, even though it has a big role in chip production.
The substrate is the component that connects the chip to the circuit board that allows it to be installed in PCs, cell phones, or other devices. The substrate is actually relatively simple, but very vital to the operation of the chip.
The problem is that the substrate is a component whose production profit margin is small, so not many are interested in producing it, and the investment in this sector is also relatively small.
This problem makes substrate supply one of the causes of global chip shortages. Because only a few companies produce this component.
There are very few suppliers of substrates used in advanced chipmakers, with limited supply. Even a number of specialists in this industry say the supply for years (before the pandemic) is already limited.
"Right now, you just say (the company) produces substrates, and you get the business, it's crazy," said Nicholas Stukan, chief business development officer at Zhuhai Access Semiconductor, a Chinese substrate maker.
According to Stukan, chipmakers are currently begging his company for substrate supplies and even paying higher than normal prices to fulfill customer orders.
What is a substrate?
The substrate is a component made of thin copper wires and is stacked with resin. This component helps transfer instructions from the user to the chip and sends the answer back.
This component is necessary because the very thin wires in the chip cannot be soldered directly to the circuit board. So a substrate is needed to bridge the communication between the two.
Interestingly, in contrast to the super-sophisticated technology required to produce chips with the latest technology, substrate production requires tools that are not too sophisticated and the production process is also not too difficult.
That's why many chipmakers outsource substrate production and focus on more complex and difficult chip manufacturing processes. They also do this to keep the price of the substrate low.
Unfortunately, this also discourages substrate producers from increasing their production capacity, as they are constantly pressured to charge lower prices.
In addition, substrate producers have had bad experiences with increasing production capacity. In 2010, the PC market is estimated to grow by 20%, which will then encourage substrate manufacturers to increase their production capacity.
But when devices like mobile phones and tablets are on the rise, the PC market is down. From 2012 to 2018, the PC market continued to decline, which left a lot of substrate production capacity idle and increased costs for substrate producers.
