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Tech: AT&S’ deal with AMD to help elevate Malaysia’s E&E value chain

Tech: AT&S’ deal with AMD to help elevate Malaysia’s E&E value chain

07 Feb 2024

VIENNA-listed AT&S Austria Technologie & Systemtechnik AG is poised to start producing high-end integrated circuit (IC) substrates at its new facility in Kulim Hi-Tech Park, Kedah, by the end of this year.

For a start, the serial production of the cutting-edge IC substrates will cater almost exclusively to US semiconductor giant Advanced Micro Devices Inc (AMD) for incorporation into its high-performance and energy-efficient data centre processors.

In an exclusive interview with The Edge — a day before the official opening ceremony of the AT&S Campus, which houses its manufacturing facility and office building in Kulim, on Jan 24 — AT&S CEO Andreas Gerstenmayer emphasises the importance of IC substrates, highlighting their often underestimated role in microprocessors, as well as the intricacies of the production process.

The 59-year-old German says AT&S introduced front-end technology in the area of IC substrate manufacturing to Malaysia. This is expected to complement the nation’s strength in back-end assembly over the past five decades and elevate its standing in the electrical and electronics (E&E) value chain.

“Malaysia has been very strong in the area of back-end semiconductor assembly. You get all the components in, from silicon to substrates, you package them and you ship them.

“But with AT&S coming to Kulim, we will be producing IC substrates here. So, this is something quite different for Malaysia because your country will now be involved in not just the back-end packaging, but also the production of substrates for packaging,” Gerstenmayer states.

While some companies had produced substrates in Malaysia in the past, he believes their products were not as sophisticated as the ones to be made by AT&S.

“What we are making are really high-end IC substrates for big names like AMD. About 10 years ago, AT&S was the first company to bring such technology to China. And today, we are the first ones to do it in Malaysia. So, we know how to do it.

“AMD is a very important client of ours. The IC substrates that we craft for AMD in Kulim will be sent to the outsourced semiconductor assembly and test (Osat) providers and they will do the back-end activities,” he explains.

Founded in 1987, the Leoben-headquartered AT&S is the world’s second-largest high-end printed circuit board (PCB) producer and fifth-largest IC substrates manufacturer. It serves industries such as consumer electronics, computers, communications, semiconductors, automotive, aviation, industrial and medical.

In addition to the state-of-the-art facility it is building in Kulim, AT&S also has a presence in Nanjangud, India; Chongqing and Shanghai in China; and Ansan, South Korea. The planned investment under Phase 1 of the Kulim project is €1.7 billion (about RM8.7 billion) and to date, AT&S has invested over €1 billion.

Notably, the Kulim plant is the group’s largest investment thus far in terms of initial investment for a single project. It is also the biggest single investment ever made by an Austrian company in Malaysia.

Gerstenmayer says following the completion of AT&S’ new Malaysian headquarters and Plant 1 in Kulim, which will focus on the production of IC substrates, there will be a lot of synergy and spillover effects that will complete Malaysia’s E&E ecosystem.

“We have heard from others that some corporations are planning to bring up their front-end factories in Malaysia. By having a more complete supply chain in your country, there will be material suppliers and maintenance service providers coming here,” he elaborates.

Gerstenmayer says AT&S has been very happy with its investments in Kulim so far.

“Our strategic decision in 2021 to choose Malaysia for our first facility in Southeast Asia was absolutely correct. Back then, we realised that AT&S already had a strong footprint in China. As a group, we knew it was not wise to put all our eggs in one basket. So, if we were to make another major investment, it would be somewhere else. And that somewhere else is now in Malaysia.

“Today, our office building and Plant 1 are open. In Plant 1, AT&S will produce technology for AMD. Plant 2 is wind and water tight; as soon as the market environment for one of our main customers has improved, we will bring the second plant online,” he says.

Construction work on the plant started in November 2021 and commercial operations are targeted to come onstream before the end of this year.

The first phase of the Kulim project is expected to create 6,000 jobs, including for 4,500 blue-collar workers. The group, which operates seven plants in Europe and Asia, currently has 14,000 employees worldwide.

Together with the plants in Chongqing and a new research and production (R&D) centre in Leoben, which will also open by year end, AT&S’ Kulim plant is expected to secure global growth for the group, as well as raise the importance of its sites in Austria.

IC substrates provide connections between silicon dies and PCBs. They are composed of several layers and a supporting core in the middle, and contain drill holes and conductor paths that exceed the density of conventional PCBs. They are used for cloud edge computing, data centres and server farms as well as for consumer devices.

Last November, AT&S announced that the group would be providing IC substrates to AMD. The substrates produced by AT&S are an integral part of AMD’s data centre processors that power digital experiences such as artificial intelligence and virtual reality.

Gerstenmayer says IC substrates are “probably one of the most underestimated components” in microprocessors. AT&S is a leader in embedding microchips and components that regulate the associated power and information flows into monolithic systems that make sure that the pathways stay as short as possible, so information can travel at maximum speed without any significant losses.

“Without IC substrates, the interconnectivity won’t work. Today, in a digital society, all of us are using electronic devices and the internet, so we generate a lot of data every day. We need to manage, transmit and store the data.

“Data and microelectronics are crucial in digitalising our whole society, and AT&S is part of that ecosystem because our products are embedded into the semiconductor chips. We are really proud to have customers like AMD in our client portfolio and we appreciate its trust,” he says.

Gerstenmayer says AT&S is in the midst of bringing in more equipment to Kulim as production lines are being installed.

“This is a very intense process because the production of IC substrates involves more than 200 process steps. All of them interact with and impact each other. If we want to achieve a really good level of quality and yield, all the core equipment that we are bringing in from Japan, South Korea, Germany and the US need to fit together and harmonise nicely.”

AMD: We can be a demanding customer

In a pre-recorded video message played during the opening ceremony of AT&S Campus, AMD chair and CEO Lisa Su Tzwu-Fang says the Austrian firm has built “an incredible factory” in Kulim.

She adds that AT&S’ operation in Malaysia has the potential to become “a key location” for AMD’s manufacturing and development.

“We are excited that Malaysia will now play an important role within AMD’s supply chain as the new AT&S Campus provides industry-need IC substrates for our most advanced products.

“At AMD, we are all about enabling high-performance data computing to solve the world’s most important challenges. The IC substrates to be produced by AT&S here (in Kulim) will enable AMD to achieve our vision. The substantial investments that AT&S is making also ensure that the future remains bright for our partnership,” she states.

Meanwhile, AMD corporate vice-president for manufacturing Scott Aylor says he is convinced that AT&S will be the perfect additional source of high-quality IC substrates for its data centres.

“AT&S is an Austrian company with a global scale. It could serve our needs in Europe and China. And obviously, we were very excited to hear that it is expanding into Malaysia.

“To be honest, AMD can be a very challenging and demanding customer, but AT&S has steadfastly kept its commitment to us, and punctually delivered a plant that fully met our expectations,” he adds.

AT&S’ top and bottom line have been growing steadily over the past three financial years.

The group’s revenue grew from €1 billion in the financial year ended March 31, 2020 (FY2020) to €1.2 billion in FY2021, before increasing further to €1.6 billion in FY2022 and hitting a new record high of €1.8 billion (RM9.3 billion) in FY2023.

Its earnings also jumped from €19.8 million in FY2020 to €47.4 million in FY2021, before gaining further to €103.3 million in FY2022 and €136.6 million in FY2023.

Despite the challenging global economic situation and volatility in the market, Gerstenmayer says the progress of the production capacity expansion in Kulim and the expansion of the site in Leoben remain positive.

As such, he says, the group’s revenue guidance of about €3.5 billion by FY2027 “is still intact”.

Dörflinger Private Foundation and Androsch Private Foundation are AT&S’ two largest shareholders, with an 18% and 17.5% stake respectively.

Over the past 12 months, shares of AT&S have declined by 29% to €23.30 at the time of writing last Thursday, giving it a market capitalisation of €905.2 million.

Gerstenmayer believes the global semiconductor industry has seen the bottom of the downcycle.

“The slowdown started in 2022, and it has been quite a while already. As far as AT&S is concerned, we continue to observe the supply chain situation. The expectation now is that the industry should recover by the second half of 2024. We are ready to go. We will have everything in place,” he concludes. 

Source: The Edge Malaysia