AMD and Intel have a plan to combat chip shortage

There are numerous causes that have led to the continuing shortage of computer components, one of which is the lack of materials called ABF substrates. Major industry companies such as AMD and Intel are taking this seriously and investing in substrate manufacturing and packaging facilities.

A wide variety of chips, from affordable entry-level processors to complex high-end CPUs for servers, use laminated packages. Usually, the chips also use IC substrates with Ajinomoto build-up film (ABF), which are produced by a single company, Ajinomoto Fine-Techno Co. This, however, is not the only bottleneck, but OSAT (outsourced assembly and test) companies, such as ASE Technology, are too.

Earlier this year, several major companies had promised to increase their production capabilities. For large companies, achieving a tangible increase in capacity is complicated, as equipment suppliers cannot simply increase their production overnight. But now the OSAT companies have also already announced their plans to expand their capacity. For example, Kinsus expects to improve its ability to make ABF substrates by 30% this year, according to DigiTimes.

Lisa Su, CEO of AMD, as reported by SeekingAlpha, at a recent event stated:

Overall, I would say the demand has been a bit higher than our expectations. However, several things are happening in the industry and we continue to work closely with our supply chain partners. So whether it's wafer or back-end assembly, capacity or substrate capability testing, we work across a multi-tier product line.

AMD owned assembly, testing and packaging facilities, but sold them in 2016 when it was in dire need of money. Apparently, AMD wants to address its chip shortage by investing in OSAT and substrate partners for dedicated benefits.

"From the substrate list point, in particular, I believe there has been insufficient investment in the industry" - said Su - "So we took the opportunity to invest in a dedicated substrate capacity for AMD and this will be something we will continue to do in the future."

Intel has its own foundries, test and assembly facilities in multiple countries. But apparently the internal packaging capabilities are not enough for Intel, which has significantly increased the production of its chips in the last year following the shortcomings it faced in 2018-2019. In an effort to meet demand for its products, Intel is working with its third-party substrate partner.

Intel CEO Pat Gelsinger said recently:

Thanks to the close collaboration with our suppliers, we are creatively using our network of factories to remove a major constraint in our substrate supply. By becoming fully operational in the second quarter, this additional capacity will increase availability by millions of units in 2021. It is a prime example where the IDM model gives us the flexibility to face the market dynamically.

AMD is possibly among the companies that have suffered the most from this crisis. In the second half of 2020, the company had to provide its partners Microsoft and Sony with over 10 million SoCs for the Xbox Series X, Xbox Series S and PlayStation 5. Around the same time, AMD introduced its Ryzen series CPUs. 5000 based on Zen 3 microarchitecture and Radeon RX 6000 series GPUs based on RDNA2 architecture.

Ultimately, AMD admitted that it could not meet the demand for its products because it could not source enough chips from its partners and because its OSAT partners did not have enough capacity to test and package its chips as well.

Ryzen 5 5600X, a very balanced CPU with very satisfactory gaming performance, is currently available on Amazon .