Semiconductors are the “brain” of modern electronic devices, from smartphones and data centers to electric vehicles, artificial intelligence, and even defense and military industries. Almost all high value-added and high growth tracks are built on chips the size of a fingernail, yet integrated with billions of transistors. However, when the global attention is focused on breakthroughs in EUV lithography machines, 3nm processes, GAA (surround gate) transistors, and other “tower top” technologies, few people realize that what may truly suffocate the trillion dollar semiconductor industry is not cutting-edge equipment, but those seemingly “inconspicuous” raw materials – high-purity silicon, gallium, indium, germanium, tungsten, rare gases, specialty chemicals… They are like air and water, with no one cheering on them on weekdays. Once “supply is cut off”, even the most advanced wafer fabs will become “silent beasts” in an instant.
With the continuous upgrading of technological games, geopolitical conflicts, and exponential demand for AI computing power, a group of “black swans” for semiconductor raw materials have arrived: gallium prices have skyrocketed, germanium has broken its 14 year price record, indium phosphide is “hard to find”, tungsten hexafluoride (WF6) is about to rise in price, and the supply of key fiberglass cloth for ABF carrier boards is in short supply… The “chip shortage” has not been completely alleviated, and “material shortage” is coming one after another.
With the surge in semiconductor demand (McKinsey predicts the industry will reach a trillion dollar scale by 2030), material procurement has shifted from a backend task to a critical component of national security and competitiveness. Currently, the global semiconductor industry is facing a collective dilemma of multiple categories of raw material shortages, with supply and demand imbalances, policy regulation, and technological barriers intertwined. This not only drives up industry chain costs, but also reshapes the pattern of the global semiconductor supply chain.
01 The Supply and Demand Dilemma of Core Semiconductor Materials: Multiple Categories Trapped in Shortage
The United States is facing the dilemma of ‘gallium shortage’
Recently, the Atlantic Council of the United States released a report stating that after China announced export controls on gallium metal and related items, the United States is facing a shortage of gallium. Currently, it is attempting to use “waste to gallium” technology to recycle gallium that has already circulated in the domestic industrial system of the United States to alleviate the shortage.
Gallium arsenide, antimonide, phosphide and other compounds have excellent semiconductor properties and are key materials for solid-state devices such as electronic equipment, lasers, microwave generators and electroluminescent devices.
From the perspective of the industrial chain, there is a natural bottleneck in the supply of gallium. Firstly, gallium does not have natural pure metal ores and needs to be extracted from by-products of bauxite and zinc smelting, with production capacity directly dependent on the scale of upstream aluminum and zinc industries; Secondly, the global distribution of gallium reserves is imbalanced. According to data from the United States Geological Survey (USGS), the global reserves of gallium metal are approximately 279300 tons, with China leading with 190000 tons (accounting for about 68%), while the United States has only 4500 tons of reserves, less than 1/40 of China’s; Thirdly, China, with its advantage in aluminum industry scale and mature extraction technology, has contributed the vast majority of global gallium production and is currently the only country with the ability to complete the entire gallium industry chain.
China’s export controls have had a direct impact on the global gallium market. The spot price of gallium in the European market has soared by more than 40%, which not only leads to longer delivery cycles, but also forces chip and wafer factories to reduce inventory and prioritize the production of key projects. Due to the inability of the relevant goods to leave the country before the license is approved, the seller needs to wait for approval, and some buyers have started to use their existing inventory.
The United States has a high dependence on Chinese gallium, with almost all of its low purity gallium and most of its high-purity gallium imported from China. Currently, only one factory in New York in the United States has the capability to upgrade imported raw materials and semiconductor waste into high-purity gallium metal. Although this capability is crucial, its scale is limited and it cannot guarantee the supply chain of war materials from being impacted; After the implementation of the export license system in China, American buyers have no other backup supply channels except for consuming a small amount of their own inventory.
AI food and forage are in urgent need, and the shortage of indium phosphide is impacting the industry chain
Indium is an indispensable key material in many fields such as electronic products, solar cells, national defense and military, aerospace, nuclear industry, and modern information industry. For example, indium is the core material for manufacturing next-generation copper indium gallium selenide (CIGS) solar cells, computer chips, and indium tin oxide (ITO), and a very small amount can greatly improve product performance. Currently, due to the explosive demand for core raw material indium phosphide caused by AI high-speed computing, there has been a serious shortage of indium phosphide. Downstream buyers have even stated that they will accept as much material as they have, and price is not a problem. At present, the inventory of indium phosphide has dropped to a low level, and some manufacturers have entered a state of production reduction and shutdown.
Nvidia unveiled its next-generation switch Quantum-X at the GTC 2025 conference, which focuses on 800G and 1.6T high-speed data transmission scenarios and relies on advanced silicon optical technology as its core. In the silicon optical technology system, external light source lasers are key components, and indium phosphide is the core material for manufacturing high-speed optical chips, further exacerbating its demand gap. According to research and analysis of the entire industry chain, data center optical modules are accelerating their iteration towards 1.6T/3.2T, with a bandwidth requirement four times that of existing 800G modules. Indium phosphide modulators and receivers have become the key to breaking through performance bottlenecks, directly triggering a market buying frenzy.
From the distribution of indium, the overall reserves of indium resources in the world are relatively small, mainly concentrated in countries such as China, Peru, the United States, Canada, and Russia. Among them, China has the highest reserves and is the world’s largest producer of indium. Since China implemented indium export restrictions, international market prices have continued to rise. In addition, the production of indium phosphide is highly dependent on technology patents from companies such as Sumitomo in Japan and AXT in the United States, and the release of domestic production capacity lags behind. In addition, the expansion cycle of indium phosphide substrates is as long as 2-3 years, while domestic leading enterprises such as Yunnan Germanium Industry currently have a production capacity of only 150000 indium phosphide wafers per year (specifications 2-4 inches), far below the global demand of 2 million wafers per year, with a significant gap.
Low orbit satellites and AI computing power drive germanium prices to reach a 14 year high
Affected by China’s export restrictions on key metals and the closure of domestic mining sites in the United States, coupled with the explosive demand in fields such as infrared military and AI computing power, the price of germanium metal reached a 14 year high in August 2025, and the supply-demand gap continues to widen.
On January 3, 2023, the average price of germanium ingots was 7950 yuan/kg (approximately 1100 US dollars/kg). As of August 25, 2025, the spot price in Rotterdam has risen to $4999/kg, an increase of over 350% compared to the beginning of 2023, and an increase of 67% within 2025.
On the one hand, supply is limited: China’s germanium export control has led to a 25% reduction in global circulation, and the US mining lockdown policy has also reduced global germanium supply. In the second half of 2024, the United States introduced the Rare Metals Strategic Reserve Act to ensure the safety of key local minerals, which explicitly suspended the mining permits of four germanium mines, including the Berkeley mine in Montana and the Stins Mountain mine in Idaho. These mines previously contributed 6% of global germanium production annually, about 9 tons, reducing global germanium supply. On the other hand, demand has exploded: the growth rate of demand for germanium in low orbit satellites, AI computing power, infrared military and other fields has exceeded expectations, while the global annual production of germanium ingots is only about 150 tons, resulting in a large supply-demand gap.
Tungsten hexafluoride prices increase by 70% -90%, impacting the chip manufacturing process
Tungsten hexafluoride (WF ₆), a compound of tungsten, is a “connector” in chip manufacturing. In the chemical vapor deposition (CVD) process, tungsten hexafluoride reacts with plasma and hydrogen gas in the deposition chamber to generate metallic tungsten, which is used to cover the holes and gaps in wafer channels. It is an essential material for logic chip, DRAM, and 3D NAND production.
Currently, tungsten hexafluoride is facing a “cost conductive price increase”. Upstream tungsten prices have doubled: China accounts for over 80% of the world’s tungsten mining and processing capacity. After the implementation of the export license policy in February 2025, tungsten prices have continued to soar. As of early September, tungsten ore prices have increased by 95% compared to the beginning of the year to 280000 yuan/ton, and APT (ammonium paratungstate) prices have increased by over 90% to 400000 yuan/ton. Downstream gas manufacturers have raised prices: Gas producers such as SK Specialty and Foosong in South Korea have notified chip manufacturers such as Samsung and SK Hynix that tungsten hexafluoride prices will increase by 70% -90% in 2026; Japanese manufacturers have raised prices by up to 90%, citing unfavorable exchange rates.
Industry insiders point out that the price increase of tungsten hexafluoride is not a temporary shock, but rather indicates a fundamental change in the supply chain. The strategic attributes of tungsten resources have been enhanced, with supply chain security taking priority over cost control, and future prices may remain high.
PCB upstream material: AI server driver, continuous shortage of high-end carrier materials
The global demand for AI infrastructure has surged, not only driving the demand for chips and servers, but also transmitting it to the upstream of PCB (printed circuit board). The supply of T-Glass glass cloth, quartz cloth, and low coefficient of expansion (Low CTE) glass cloth required for manufacturing high-end carrier boards (such as ABF carrier boards, used for advanced chip packaging) is tight, becoming a new “shortage focus” in the electronics industry.
The reason for the shortage is due to the combination of technological monopoly and a surge in demand. High end materials such as glass cloth and quartz cloth have high technological barriers and are mainly monopolized by Japanese, Korean, and Taiwanese companies (such as Nippon Denko and Taiwan Glass), with long expansion cycles; The demand for high-end carrier boards in AI servers has increased by over 50% year-on-year, but it is difficult for the supply side to match in the short term.
Zeng Zizhang, Chairman of Xinxing, pointed out that the current shortage of high-grade CCL (copper foil substrate) is quite challenging, and the next six months will be the peak period of shortage. However, starting from the 26th of Q3, the shortage is expected to quickly converge; At the same time, with continuous product innovation, materials, tools, and equipment will also change, and the shortage of high-end glass cloth, quartz cloth, LoW CTE, and other materials required for the carrier board is expected to last for about a year. Li Dingzhuan, Chief Operating Officer of PCB leader Zhending Group, stated that upstream materials will have the most critical impact on carrier board shipments in 2026, and it is estimated that carrier board growth will be strong in 2026. 2027 will be the peak, and high-end carrier boards are expected to be in short supply; The shortage of materials for BT carrier boards will affect the shipment of BT carrier boards in 26Q1. With the availability of relevant materials, the shipment of BT carrier boards in 26Q2 is expected to resume high volume.
02 What are the reasons behind the ‘shortage of materials’?
The current global shortage of semiconductor materials is not caused by a single factor, but by the interweaving of policy regulation, supply bottlenecks, and demand outbreaks, forming a “triple squeeze” pattern.
On the policy side, countries have included semiconductor materials as “national security assets” and restricted their circulation through export controls, strategic reserves, and other policies, directly compressing global supply. In December 2024, China issued a notice to strengthen export controls on dual-use items such as gallium and germanium to the United States. Indium export restrictions will be implemented in February 2025, and gallium controls will be further tightened in March (extending approval cycles and establishing a full chain traceability system), directly reducing the global circulation of core materials; At the same time, the Mineral Resources Law prohibits indiscriminate mining of small mines, and the eight departments’ “Work Plan for Stable Growth of Nonferrous Metals Industry” strengthens the strategic positioning of rare metals and controls production capacity from the source. And the United States has introduced the Rare Metals Strategic Reserve Act, suspending domestic germanium mining to reserve resources; Promoting the recycling technology of “waste to gallium” in an attempt to break away from dependence on Chinese gallium, but the amount of recycling is difficult to fill the gap in the short term; Japan, South Korea, and other countries are also strengthening their reserves of rare metals, and the global material supply chain is shifting from “global division of labor” to “regional autonomy”, further exacerbating shortages.
On the supply side, metal materials such as gallium, indium, and germanium do not have “independent minerals” and are all parasitic in the smelting processes of aluminum, zinc, and copper; It will take at least one year to build a new 10000 ton electrolytic aluminum production capacity, an additional 12 months to support the gallium production line, and the demand for AI computing power can double in half a year. Mining, smelting, and purification are stacked layer by layer, and if any level gets stuck, the entire chain will experience a sudden cardiac arrest.
On the demand side, AI、5G、 The “collective explosion” in emerging fields such as new energy vehicles, low orbit satellites, and quantum computing has shifted the demand for semiconductor materials from “linear growth” to “exponential growth”. The iteration of 1.6T/3.2T optical modules has driven a surge in demand for indium phosphide, and the AI computing power center is synchronously expanding its demand for germanium based infrared devices and tungsten based connection materials; Global 5G base station construction consumes a large amount of gallium materials annually; The rigid demand for materials such as germanium in low orbit satellite constellations (such as star chains) and radar systems further exacerbates the shortage in the civilian market.
03 The Chain Impact of Shortage Tide: From Cost Rising to Global Industrial Chain Restructuring
The shortage of semiconductor raw materials is not an isolated event, but rather triggers a “domino effect” that spreads from upstream material manufacturers to downstream chip, equipment, and terminal industries, and even affects the global technological competition landscape.
Firstly, the soaring cost of the industrial chain and the pressure of price increases on end products are transmitted. The rise in raw material prices directly drives up chip manufacturing costs: a 70% -90% increase in tungsten hexafluoride prices will directly increase the production costs of DRAM and 3D NAND; The rise in prices of gallium and indium has led to an increase in the cost of 5G base stations and optical modules; The shortage of high-end PCB materials will push up the price of AI servers. At present, chip manufacturers such as Samsung and SK Hynix have begun to accept material price increases, and the future costs are likely to be transmitted to end products such as mobile phones, computers, and new energy vehicles, ultimately borne by consumers.
Secondly, downstream industries are restricted and the pace of technological iteration is slowing down. The shortage of some materials has directly affected the release of production capacity: the shortage of indium phosphide has led to some optical module manufacturers reducing production and slowing down the production progress of 1.6T optical modules, thereby affecting the expansion speed of AI data centers; The shortage of high-end glass cloth has led to insufficient supply of ABF carrier boards, restricting the production capacity of advanced chip packaging and delaying the commercial process of chips below 7nm. In the short term, material shortages may prolong the technological iteration cycle of the global semiconductor industry.
In addition, the global supply chain is undergoing restructuring and the trend towards regional autonomy is strengthening. To ensure supply chain security, countries are accelerating the promotion of “resource autonomy” and “regional supply”. China strengthens the integration of the rare metal industry chain, promotes technological breakthroughs such as high-purity gallium and indium phosphide, and expands the construction of the domestic recycling system; The United States is increasing its investment in domestic germanium ore and gallium recovery technology, and has partnered with Japan and South Korea to establish a “Semiconductor Material Supply Chain Alliance” in an attempt to reduce dependence on China; Europe supports domestic semiconductor material research and development through the Chip Act, promoting the recycling of resources such as lithium and gallium.
This trend of “deglobalization” may lead to the division of the global semiconductor supply chain into a “Chinese led material supply circle” and a “European and American led technology application circle”, further intensifying the international technological game.
Ultimately, it will lead to adjustments in the technological roadmap, accelerating breakthroughs in alternative materials and recycling technologies. The pressure of shortage is also driving the industry to find a way out. If enterprises begin to explore the use of silicon-based materials to replace indium phosphide (such as silicon photonics chips), the alternative technology still requires a certain verification period; The United States is promoting the recycling of gallium from waste, while China is accelerating the extraction technology of germanium and indium from waste chips.
The essence of the global semiconductor material dilemma is the contradiction between “limited resources” and “unlimited technological demand”, as well as the conflict between “global division of labor” and “national security priority”.
The shortage of semiconductor raw materials is not simply a cyclical fluctuation, but a structural turning point under the resonance of multiple forces such as resource endowment, technological barriers, capital cycles, policy games, and ESG constraints. It marks the end of an era – over the past thirty years, the chip industry has followed Moore’s Law and skyrocketed, with raw material costs almost negligible; In the next decade, we are about to enter the ‘post Moore era’, where every improvement in 1nm performance may require a raw material cost of 10 times.
But crises also give birth to new life. Just as the oil crisis gave birth to nuclear energy, photovoltaics, and wind power, the bottleneck of semiconductor raw materials will also force the flourishing of recycling technology, alternative materials, process innovation, international cooperation, and financial instruments. For a country, controlling raw materials is the “master switch” that controls industrial security; For enterprises, upgrading their “procurement thinking” to “ecological chain thinking” is necessary to remain invincible in the face of ups and downs; For investors, laying out in advance on the main track driven by “resources+technology” is the key to sharing the dividends of this “hard technology” long-distance race.
When “sand” can also hold the throat of the world economy, humanity has to re-examine: what is truly precious may not be the billions of transistors in chips, but the grams of metal that have silently slept in the depths of the earth’s crust for billions of years, which gave birth to transistors. In the future where ‘uncertainty’ becomes the norm, whoever masters these ‘small and crucial’ resources holds the ‘spark’ of digital civilization.
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