Key Takeaways
A bottleneck in the supply of a critical material for artificial intelligence servers is set to create a structural shortage for the next three years, shifting pricing power to a handful of specialized suppliers, according to Goldman Sachs.
"The effective supply gap will reach 39% by 2027, creating a structural 'new normal' of shortages," the bank said in a new research report. The analysis predicts that surging demand for high-end, very low-profile (HVLP) copper foil, essential for the complex circuit boards in AI systems, will far outstrip the industry's ability to produce it.
The report points to the rapid pace of AI server and high-speed networking upgrades as the primary driver. The market for the most advanced copper foils (HVLP3 and higher) is forecast to grow more than tenfold, from $216 million in 2025 to $2.4 billion by 2028. This will push the business model for this segment from one based on cost to one driven by value and scarcity.
This supply-demand imbalance is expected to provide a sustained window for price increases for the few firms capable of mass production. Gross margins for high-end HVLP foil already stand between 40% and 60%, compared to just 0% to 10% for traditional copper foil used in less demanding electronics.
The core of the demand explosion comes from the increasingly stringent signal integrity requirements of AI servers from companies like Nvidia and Amazon's AWS, alongside next-generation Ethernet switches.
Goldman projects demand for HVLP3+ foil will climb from 679 tons per month in 2025 to 5,206 tons per month by 2028, a 97% compound annual growth rate. The report notes that upcoming systems, like Nvidia's VR200 platform, will require M9-grade laminates—a type of circuit board material—using the even more advanced HVLP4 foil. Similarly, Amazon's Trainium 3 accelerators are expected to adopt higher-spec boards with HVLP4.
This rapid migration means HVLP4's share of the high-end market is set to jump from 24% in 2025 to 46% by 2028, becoming the mainstream for top-tier AI hardware.
While manufacturers are expanding nominal production capacity, actual output is severely constrained by production challenges. Goldman's research indicates that yields for HVLP3+ foil are stuck at 70% to 80%, with further 10% to 20% capacity losses occurring when production lines are switched to newer foil types.
As a result, the effective supply will grow at a slower 67% compound annual rate compared to the 97% growth in demand. Even industry leader Mitsui Kinzoku of Japan, which receives priority orders from customers, will not have enough capacity to meet all demand, creating a structural opening for a second supplier.
By 2028, Goldman estimates that even with combined capacity, the top two suppliers will only be able to satisfy 50% to 60% of the total industry demand for the highest-grade foils.
The acute, multi-year shortage fundamentally alters the investment landscape for this niche part of the semiconductor supply chain. In this context, Goldman Sachs initiated coverage on Taiwanese copper foil manufacturer Jin-Zhu Development, giving it a "Buy" rating and a 12-month price target of NT$900—an upside of approximately 110% from its current price.
The bank identifies Jin-Zhu as the primary beneficiary of this trend, being the second supplier certified by customers for HVLP4 foil. Goldman forecasts Jin-Zhu's market share in the HVLP3+ supply chain will rocket from just 5% in 2025 to 53% by 2028, with these high-margin products contributing 77% of the company's gross profit by then.
This article is for informational purposes only and does not constitute investment advice.
