Shortages of crucial chip packaging material threatens AI accelerator supply chains — Nittobo's Fukushima plant is tripling capacity, but it'll take years before market

The AI revolution has exposed our overreliance on a handful of companies that keep the tech world humming and society running smoothly. Nvidia’s dominant role in the supply of GPUs has propelled it to record valuations and boosted the stock market — and caused consternation over its control of the chips vital to AI advancement. And TSMC’s role as a dominant, leading-edge foundry has sparked geopolitical spats as the company's importance to the AI revolution becomes clear.

But beyond the headlines, there’s another overreliance issue to AI’s future hovering on the horizon — and it’s in a technology and component most people haven’t even heard of.

A Japanese company called Nittobo controls roughly 90% of the global supply of specialist glass-fiber cloth (T-glass), which sits inside every advanced AI chip package — and demand is now so high and supply so squeezed that it’s causing issues.

What is T-glass?

T-glass is a low-CTE (coefficient of thermal expansion) glass cloth used in the organic core of IC substrates — the interconnect layer that sits between a chip and its printed circuit board. It helps keep large, high-heat chip packages dimensionally stable as packaging gets denser and more complex, something that is becoming more important as AI processors grow bigger and run hotter. The physics of keeping AI processors flat and functional depends on T-glass.

Nittobo dominates that market, and neither it nor any other company can spin up a new T-glass production line overnight. The material requires specialized electric melting furnaces operating at temperatures between 1,600 and 1,700°C, and the manufacturing process takes years of investment and expertise to scale. That’s because it involves melting raw silica-rich glass, then spinning it into yarn and weaving it into an ultrathin cloth.

Another type of glass fiber used in semiconductor packaging is named E-glass, whichs is used much in the same manner. While E-glass is low-cost, it is mainly used in lower-end chips like microcontrollers and older mobile processors. Where T-glass slips in is in its thermal strength. For higher-powered chips, specifically for massive 2.5D and 3D packaging, and therefore advanced AI accelerators, T-glass is the preferred option.

Nittobo is tripling capacity at its Fukushima plant in Japan, but the new supply from the plant won’t arrive on the market until mid-2027. That squeezed supply means prices have risen between 20 and 30%, while lead times for downstream materials like copper-clad laminates have stretched from their normal 8 to 10 weeks to beyond 20.

“With T-glass supply even more constrained now, suppliers are no longer providing lead times,” said Bill Ho, analyst at Yuanta.

An irreplaceable option?

“It is not easy to replace the T-glass,” explained Bilal Hachemi, an analyst at Yole Group who tracks the IC substrate supply chain, in an interview with Tom’s Hardware Premium. The reason, he says, is that T-glass “has specific dielectric and CTE values that work better for the AI chips, especially for the organic core.” Hachemi points out that the IC substrate industry has historically operated on thin margins, which means even modest demand surges can trigger shortages. “Any increase in demand for build-up materials, ABF material, or T-glass can cause potential shortage, because it’s against the basics of this industry,” he said.

What makes the current crunch particularly acute is who is driving it. Hyperscalers are building or ordering ever-larger chip packages that require more T-glass per unit. Each subsequent generation of a given AI accelerator uses a bigger interposer and more complex substrate, which translates directly into greater material consumption. According to data from Nvidia, interposer sizes have grown from 814mm² for the Hopper architecture to 1,700mm² for Blackwell — a 109% increase — with the forthcoming Rubin and Feynman generations scaling further still.

Bank of America estimates that Nittobo’s electronic materials segment will see sales nearly double from ¥40.9 billion ($266 million) in 2025 to ¥87.7 billion by March 2028, with operating margins approaching 48%. “Demand for T-glass cloth seems likely to grow more than originally expected,” said Takashi Enomoto, research analyst at Bank of America. “The focus has been on growth in demand for thick T-glass for use in GPU and CPU semi packages, but now ultra-thin T-glass demand is likely to rise on a shift from E-glass to ultra-thin T-glass in leading-edge devices.”

With that in mind, the scramble for allocation has begun in earnest. Hachemi says that Nvidia reaching out directly to an upstream material supplier like Nittobo is unprecedented. “For the first time, we are seeing Nvidia, the end customer, reaching out to the upstream material suppliers to secure the capacity and make sure they will get it,” he explained, saying it was the first time he’d seen this happen in that particular area of the supply chain. The worry is that once Nvidia locks down its share, rival chip buyers will be left fighting over whatever remains.

Unlocking the blocks

Nittobo is investing heavily to try and ensure there’s plenty of demand for those who need it. Beyond the capacity increase at its Fukushima plant, Nittobo is doubling capacity of the raw yarn at its Taiwan plant and importing yarn back to Japan for cloth manufacturing. It has also struck a collaboration deal with Nanya Plastics to outsource some weaving.

That deal is an indication of how tight the market is: Nittobo is partnering with one of its biggest competitors to ease the bottleneck. By 2027, roughly 20% of Nittobo’s glass cloth is expected to be woven by Nanya, the company disclosed in a recent letter to shareholders.

Despite those efforts, relief from the tight market doesn’t look likely any time soon. Hachemi estimates the supply-demand imbalance won’t be resolved until the second half of 2027 at the earliest. And he warns that the same pattern could repeat with other critical materials in the IC substrate stack, pinpointing copper foil layers, solder mask, and copper-clad laminates as potential chokepoints.

“If you want to secure all the supply chain capacity regarding IC substrate, you need to look also for other important materials,” he said.

Just as with other physical elements of AI infrastructure, the T-glass shortage isn’t just affecting GPU packages. JPMorgan noted in a recent research note that demand for ultra-thin T-glass — which is used in smartphone memory and system-in-package applications — is also rising sharply, driven by a shift away from conventional E-glass in leading-edge devices. In recent years, Nittobo has prioritized thick T-glass expansion for the AI market, but now faces growing demand for ultra-thin variants as well.

Given the dominance of Nittobo, other companies have been reticent to try and move into the space. But new entrants are starting to try and spin up their own T-glass supplies, given such high demand. Taiwan Glass, Grace Fabric, and several Chinese manufacturers have been trying to produce comparable materials, but yields remain low enough to deter meaningful market entry. Nittobo’s advantage remains key because it has both proprietary glass composition and its direct-melting production method, a more cost-effective but technically demanding process that competitors have struggled to replicate.

Whether that changes by 2027 and the market begins to unlock, alongside Nittobo’s new capacity, is difficult to forecast. But even if it can, Hachemi has a warning for those thinking T-glass is the end of the problem. “A similar phenomena can happen to other materials, too,” he said.

As for Nittobo's customers, Nvidia's Jensen Huang has spoken on-record about enjoying the ongoing constraints: "I've got all the packaging, I've got all the systems, I've got all the connectors, I got all the cables. Everything from copper to multilayer ceramic capacitors, everything is secured." Huang said at a recent press conference, and T-Glass is just one crucial component in the ongoing AI build out.