Morgan Stanley upgraded Unimicron Technology Corp and Nan Ya PCB to Overweight, citing an AI-led up-cycle in ABF substrates that will drive growth through 2030. The brokerage expects AI applications like GPUs and networking chips to account for 75% of the ABF substrate market by 2030, up from 10% in 2015.

ABF substrates, the de facto standard for high-performance semiconductor manufacturing, are experiencing a structural demand shift. Morgan Stanley forecasts the ABF substrate market to grow at a 16.1% compound annual rate through 2030, compared to 9% in the previous five years. The firm projects earnings to expand sharply, with 105% CAGR for Unimicron and 113% for Nan Ya PCB between 2025 and 2028.

Morgan Stanley raised its price target on Unimicron to NT$500 from NT$120.75 and on Nan Ya PCB to NT$515 from NT$165, implying 36% and 24% upside respectively. The brokerage maintains Overweight ratings on Samsung Electro-Mechanics while keeping an Underweight on Ibiden. Unlike past PC-driven cycles, Morgan Stanley argues that AI-related demand provides longer visibility and could support multiple expansion, with current valuations not fully pricing in AI-driven volume growth and tighter supply from 2027.