#AIBoomDrivesTungstenShortage 🧐

AI Boom Hits Tungsten Market: Towards a Critical Material Crisis

The boom in artificial intelligence and semiconductor manufacturing has led to a severe bottleneck in the global tungsten supply. Two major Japanese producers of tungsten hexafluoride (WF₆), Kanto Denka and Central Glass, halted production as of July 1st due to a lack of raw material supplies. These two companies accounted for approximately a quarter of the world's WF₆ supply.

WF₆: The "Blood" of Chips

WF₆ is a critical gas used to create tungsten linkages in the production of advanced memory chips. As the number of layers in 3D NAND flash memory increases and its use becomes more widespread in advanced technologies like HBM (high-bandwidth memory), demand for this material is growing exponentially. AI chips consume approximately three times more WF₆ than ordinary logic chips. Global WF₆ demand, which exceeded 4,500 tons in 2020, is projected to surge to approximately 9,000 tons by 2025.

Fragility in the Supply Chain

At the heart of the crisis lies China's restrictions on tungsten raw material exports. More than 80% of the world's tungsten metal comes from China. With China tightening exports of tungsten powder and compounds from 2025 onwards, Japanese producers are finding it difficult to obtain raw materials.

Even the US strategic reserves have been affected by this supply crisis. The strategic reserve considered purchasing tungsten from the market this year, but this initiative did not proceed due to tightness and price increases in the spot market. Western access to non-Chinese tungsten resources is limited, and much of it is already tied up in long-term contracts.

Industry Impacts and Price Outlook

South Korean memory giants Samsung and SK Hynix sourced approximately 80% of their WF₆ supplies from Japan. Following the disruption, they are working hard to find new suppliers, but supplier certification for semiconductor materials normally takes 18-24 months. SK Hynix, having previously undertaken diversification efforts, turned to South Korean suppliers. Samsung, however, was more severely affected by the sudden disruption.

The market expects WF₆ prices to increase by 70% to 90% in the second half of 2026. This increase will be reflected as cost pressure on AI memory prices.

However, the crisis is also triggering new investments. According to a TrendForce report, Chinese company Peric Special Gases is one of the world's largest WF₆ producers and has plans to increase its production capacity. One Chinese company announced it will add 1,000 tons of WF₆ capacity annually.

Industry Impacts and Price Outlook

South Korean memory giants Samsung and SK Hynix sourced approximately 80% of their WF₆ supplies from Japan. For Gate Users

Gate launched 10 A-Share contracts on August 7th, including China Tungsten and Hightech Materials (000657.SZ). This provides a direct access point for those seeking to capitalize on developments in the tungsten market. A potential 70-90% jump in WF₆ prices suggests this critical material in the semiconductor supply chain should be closely monitored in the coming months.

DYOR 🔎