Ibiden Co, the leading supplier of chip package substrates critical to Nvidia Corp’s advanced semiconductors, is evaluating plans to accelerate its production expansion to keep pace with surging demand for AI chips.

The company’s CEO, Koji Kawashima, revealed that customers have already secured all available substrate supplies, with demand expected to remain strong through 2025.

The 112-year-old Japanese company is constructing a new substrate factory in Gifu prefecture, central Japan. The facility is scheduled to commence operations at 25% capacity in the last quarter of 2025, ramping up to 50% by March 2026.

However, Kawashima acknowledged that even this planned capacity might fall short of demand, prompting discussions on advancing the timeline for the remaining 50% capacity.

“Our customers have concerns,” Kawashima stated. “We’re already being asked about our next investment and the next capacity expansion.”

Ibiden’s shares surged by 5.5% in Tokyo on Monday, marking the company’s largest intraday gain in over a month. The rise reflects investor optimism about Ibiden’s dominant position in the AI substrate market, where it serves major clients like Nvidia, Intel Corp., Advanced Micro Devices Inc., Samsung Electronics Co., and Taiwan Semiconductor Manufacturing Co. (TSMC).

Many of these clients collaborate with Ibiden early in product development to customize substrates that transmit signals from semiconductors to circuit boards and withstand the heat generated by Nvidia’s graphics processing units.

Founded in 1912 as a power utility company, Ibiden developed its semiconductor expertise through a partnership with Intel in the 1990s. Kawashima personally cultivated the relationship by seeking feedback from Intel engineers and executives. Intel once contributed 70% to 80% of Ibiden’s revenue from chip package substrates, though this dropped to 30% by the fiscal year ending March 2023 as Intel struggled with its turnaround efforts. Despite this decline, Kawashima expressed confidence in Intel’s recovery, calling the company an essential and “treasured” customer.

Ibiden has faced challenges this year, including a 40% drop in its stock value due to its reliance on Intel and weaker demand for general-purpose server components. In October, the company revised its profit outlook downward, citing these factors.

However, AI server-related growth has bolstered Ibiden’s outlook, with AI semiconductors now contributing more than 15% of its ¥370 billion ($2.3 billion) sales—a percentage expected to rise further.

While rivals like Taiwan’s Unimicron Technology Corp. are eyeing the AI substrate market, analysts believe Ibiden’s dominance will remain intact. Toyo Securities analyst Hideki Yasuda noted that Ibiden’s ability to mass-produce sophisticated substrates with high production yields makes it difficult for competitors to capture significant market share.

Nvidia, which exclusively uses Ibiden’s substrates for its AI chips, has begun full production of its next-generation Blackwell semiconductors following initial technical challenges.

Over the long term, Nvidia could face competition from application-specific chips developed by Marvell Technology Inc. and Broadcom Inc., as well as custom silicon from Google and Microsoft. Kawashima indicated that Ibiden is well-positioned to serve all these potential clients, as their substrate requirements are likely to remain similar to Nvidia’s.

Despite the growing demand for AI substrates, Ibiden has no plans to build manufacturing facilities in the United States, citing high labor and logistics costs. Kawashima noted that Intel’s role in boosting domestic semiconductor production aligns with Washington’s goals, and the company will maintain its focus on supporting Intel and other clients from its existing locations.