The Zhitong Finance App learned that Morgan Stanley pointed out in the latest research report released on October 14 that although the world's major semiconductor carrier board suppliers are speeding up capital expenditure, demand for artificial intelligence (AI) continues to grow and the complexity of advanced chip packaging continues to increase, and it is expected that the ABF carrier board market will continue to be in short supply starting in 2027. The bank expects the price of ABF carrier boards to rise by more than 25% in 2027 and rise further in 2028, thereby driving the profit margins of related manufacturers to continue to expand. As a result, Morgan Stanley raised profit forecasts and target prices for Xinxing Electronics and NTC, and maintained the “gain” ratings of the two companies.
ABF carrier boards are an important packaging material for high-performance processors, and are widely used in server CPUs, GPUs, AI accelerators, and network chips. As the size of AI chips expands, the number of packaging layers increases, and the manufacturing process becomes more complex, the demand and production difficulty of ABF carrier boards have increased significantly.
Morgan Stanley pointed out that although suppliers have recently announced a number of production expansion plans, most of the additional production capacity will need to be gradually put into operation from the second half of 2028 to 2030 or even later, making it difficult to ease the tight supply situation in the short term.
According to the latest supply and demand model, Morgan Stanley expects the global ABF carrier board market as a whole to maintain a general balance between supply and demand in 2026, but the supply gap will widen significantly in 2027 and 2028. Specifically, the bank expects demand for ABF carrier boards to exceed the available supply by 9.3% in 2027, and the gap will further widen to 13.7% in 2028, higher than the previous forecast of 6.2% and 9.4%, respectively.
Morgan Stanley believes that the key factors driving the widening supply gap are not only the increase in AI chip shipments, but also the increase in carrier board size, the increase in the number of layers, and the complexity of manufacturing processes. These changes will limit the actual effective output of suppliers.
In terms of price, the bank expects the ABF carrier board price to increase by more than 25% in 2027, but it is still lower than the price increase expected by some buyer investors of about 50%. Morgan Stanley pointed out that the increase in ABF carrier board prices in 2026 is mainly driven by the transfer of raw material costs, and the driving force for the 2027 price increase will come more from the tightening relationship between supply and demand.
As supply constraints intensify, carrier board manufacturers' product price increases are expected to exceed cost increases, thus driving an accelerated improvement in profit margins. However, the exact price increase and implementation time still depend on negotiations between suppliers and customers.
The increase in demand for AI chips in China is one of the important reasons why Morgan Stanley raised its ABF carrier board demand forecast. The report points out that with the accelerated development of AI application-specific integrated circuit (ASIC) suppliers in China and other regions, demand for advanced encapsulated boards for related chips is growing rapidly.
Morgan Stanley raised the 2027 shipment forecast for the “Other ASIC” category, which includes Chinese AI chips, from 4.6 million units to 6.4 million units, and the 2028 forecast was raised from 6.2 million to 8.7 million units. This category includes ASIC chips from Microsoft and other US technology companies, as well as AI chips from Chinese manufacturers such as Huawei, Cambrian, Haiguang Information, and Pingtou.
The bank expects that by 2030, chip shipments in this category will reach about 13.4 million, higher than the previous forecast of 11.7 million chips. In contrast, Morgan Stanley's shipment forecasts for Nvidia GPUs and server CPUs remained essentially unchanged, while lowering the shipment volume expectations for some AMD GPU products. This means that the growth in demand for ABF carrier boards is gradually spreading from a few large AI chip platforms to more diversified ASIC suppliers.
In the long run, Morgan Stanley expects the global ABF carrier board market to grow from US$9.5 billion in 2026 to US$20.9 billion in 2030, with a compound annual growth rate of 22.2% from 2025 to 2030.
At the same time, the downstream demand structure for ABF carrier boards is also undergoing fundamental changes.
In 2015, PC-related applications accounted for about 70% of the global ABF carrier board market, but this ratio has dropped to about 23% in 2025, and is expected to drop further below 10% by 2030. In contrast, the total market share of servers, AI GPUs, AI ASICs, and network applications has increased from about 10% in 2015 to about 60% in 2025, and is expected to exceed 80% by 2030.
Morgan Stanley believes that as AI applications spread from model training to the field of inference, servers, AI accelerators, and network infrastructure will be the main driving forces for the growth of the ABF carrier board market in the next five years.
In the face of increasing demand, global ABF carrier board manufacturers are setting off a new wave of production expansion.
According to Morgan Stanley statistics, major ABF carrier board suppliers have announced capital investment plans of about US$14.3 billion since this year, which is significantly higher than the industry's annual capital expenditure level in recent years. However, these investments will be gradually implemented over the next few years. Among them, Samsung Electric announced that it will invest about 5 billion US dollars in South Korea's Sejong and Vietnam to expand semiconductor carrier board production capacity; Japan's Ibi Electric plans to invest about 3.2 billion US dollars; Austria's AT&S plans to invest about 2 billion US dollars; and the related investment scales of Xinxing Electronics and NPC are about 1.7 billion US dollars and 1.5 billion US dollars, respectively.
The bank estimates that every dollar invested in capital expenditure can support annual revenue of about 0.50 to 0.60 US dollars after production capacity is fully released. According to this ratio, the announced investment of 14.3 billion US dollars is expected to bring in additional annual revenue of about 7.2 billion to 8.6 billion US dollars, while the bank predicts that the additional revenue required by the industry is about 11.4 billion US dollars by 2030. This means that even considering the currently announced plans to expand production, the ABF carrier board industry may still require further investment in the next few years to meet the growing market demand.
In terms of individual stocks, Morgan Stanley is more optimistic about Xinxing Electronics, mainly because its production capacity is expected to grow faster than NTC in 2027. According to the report, Xinxing Electronics Guangfu Plant 2 is expected to be gradually put into operation in 2027, which is expected to boost the company's production capacity by 10% to 15% in that year. In contrast, in 2027, NTC will mainly improve bottleneck processes through existing production lines, and production capacity is expected to increase by about 5% to 10%.
Morgan Stanley believes that in an environment where supply is tight, manufacturers that can release additional production capacity sooner will have a better chance of benefiting from product price increases and shipment volume increases at the same time. The bank raised the target price of Xinxing Electronics from NT$1,465 to NT$1,755. Based on the October 12 closing price of NT$1,255 used in the above research report, there is a potential increase of about 41%.
Meanwhile, the bank raised Xinxing Electronics' earnings per share forecast for 2026 to 2028 by 62%, 30%, and 28%, respectively, reflecting an optimistic judgment on the prospects for improving its profit margins.
For NTD, the bank raised the target price from NT$1,550 to NT$2,000. Compared with the closing price of NT$1,440 on October 12, there is a potential increase of about 39%. The bank also raised NTC's earnings per share forecast for 2026 to 2028 by 20%, 46%, and 43%, respectively.
Morgan Stanley said that although NTC's production capacity expansion in 2027 is relatively slow, its business layout in the field of network chips and AMD CPU carrier boards, as well as active product pricing strategies, will still provide support for future profit growth.
However, the bank warned that the ABF carrier board industry still faces many potential risks, including lower than expected demand for personal computers, general-purpose servers and AI servers, production expansion in the industry exceeding forecasts, shortages in the supply of T-glass fiberglass materials, and advanced packaging technologies such as CoBOP that may replace the demand for traditional ABF carrier boards.