China’s tungsten export controls and AI chip demand collide, reshaping the global specialty gas supply chain

A recent research report by China International Capital Corporation (CICC) published June 26 shows that increased spending on infrastructure for AI and the prohibition by the Chinese government on exporting high purity tungsten are putting pressure on the world’s supply of electronic specialty gases (ESG), which are a critical component needed to manufacture all advanced AI chips.

The importance of the current disruption stems from the current combinations of two separate forces: The demand for these gases is growing rapidly due to AI’s growing influence and the supply chain through Japan has been broken.

Chip manufacturers who are creating processors needed for data centers that support large language models, cloud-based machine learning inference systems and AI training facilities will face a bottleneck in their production, as will manufacturers of these gases. The bottleneck is not the capacity of fabs or packing/assembly but rather the semiconductor etching gases used to create electrical pathways that will limit production levels.

AI chip demand increases pressure on specialty gases

According to an in-depth report on ESG in semiconductor materials by Nanda Optoelectronics, ESG account for approximately 13% of the materials used in wafer fabrication. This makes ESG the second largest group of materials used in wafer fabrication, next to silicon wafers.

What really differentiates the impact of AI from other things is not only the higher volume of chips being produced, but the fact that the total gas consumption per wafer has increased exponentially due to the decrease in transistor geometries. In 65nm process technology, there are typically about 20 etch processes for each wafer and in comparison, at the 7nm node, which is used to make many current AI accelerator devices, this figure has increased to approximately 140.

Adding pressure to gas consumption is high bandwidth memory (HBM), which is the backbone of AI training hardware. Deep etch processes for creating through-silicon vias (TSVs) in HBM use sulfur hexafluoride and octafluorocyclobutane. Because of the increasing number of 3D NAND layers in AI-related non-volatile storage, the demand for these gases continues to grow.

That being said, the dollar amount spent on increased semiconductor production as a result of AI continues to grow rapidly, as evidenced by forecasts for both foundries and cloud service providers.

TrendForce has forecasted that global foundry revenue will be $218.8 billion in 2026, representing a 24.8% year over year growth. Capital expenditures made by the 8 largest cloud service providers would increase roughly 61% from the previous year, while global AI server shipments are expected to increase approximately 28%, according to the CICC report.

China’s tungsten controls hit Japan’s WF6 supply

In February 2025, Beijing placed export restrictions on tungsten and four other metals, requiring licenses for all twenty business-related products to export these materials, as reported by Reuters. These restrictions were framed as a response to U.S. tariffs and are designed to protect China’s national security interests.

The downstream effects from these restrictions impacted Japanese manufacturers of tungsten hexafluoride (WF6) much more than expected. WF6 is an essential compound used in depositing tungsten interconnects into logic chips, DRAM, HBM, and 3D NAND. Japanese manufacturers Kanto Denka and Central Glass notified their customers in South Korea that they had run out of inventory and would likely be unable to meet sustainable supply through the second half of 2026.

Japanese manufacturers account for approximately 24% of global WF6 production. There are few alternatives for filling the shortfall left by Japanese producers from suppliers located in Western countries. For instance, according to Reuters, the U.S. ceased tungsten mining operations in 2015 and has not produced refined bismuth since 1997.

Chinese gas producers move to fill the shortage

Rapid expansion of domestic Chinese gas production is being undertaken to capitalize on this opportunity. CSIC Special Gases, for instance, currently operates WF6 production capacity of 2,000 tons per year with plans to add an additional 1,000 tons to reach 3,000 tons by 2027, making it the world’s largest producer according to the CICC report. Meanwhile, HaoHua and Zhongju Core have capacity of 600 tons each and Heyuan Gas intends to commence trial production from a 600-ton facility this year.

Price data is indicative of this transformation in production levels. Based on customs data from China’s General Administration of Customs, the average export price for WF6 between January and May 2026 exceeded RMB 950,000 per ton. Furthermore, by the end of June the market price quote for 6N (99.9999% pure) WF6 was between RMB 2 million and $2.5 million per ton.

Electronic specialty gases become a strategic chip bottleneck

The global ESG market is estimated to reach $6.9 billion by 2032, which represents a compound annual growth rate (CAGR) of 4.4%; it was approximately $5.1 billion in 2025, as per Persistence Market Research. The Asia Pacific accounts for 69% of ESG consumption, driven by semiconductor manufacturing concentration in China, Taiwan, and South Korea.

According to the CICC report, the four major worldwide corporations, Linde, Air Liquide, Air Products, and Nippon Sanso, still control over 70% of the total electronic gases market. At present, approximately 25% of electronic gases for integrated circuit manufacturing in China are locally sourced. That number is climbing.

The CICC report states that there is an opportunity for the production of ESG from China to increase simultaneously and aggressively gain both volume and price advantages, which is seldom the case for similar commodities along the supply chain.

Chipmakers face new supply risks in AI hardware production

Hyperscaler firms and the chip manufacturers that they fund both face immediate questions regarding potential delays to fab ramp schedules in South Korea and other countries due to limitations on the supply of WF6. Major HBM producers Samsung and SK Hynix have disruptions in their supply chains, which have largely relied on Japan until this point.

In addition, the prevailing trend towards reliance on Chinese sources for specialized gases also presents a new dependency for an industry that is already experiencing challenges as result of U.S.-China technology restrictions. Acceptability of this trade-off will likely be determined by quality certification for purity of special gases, lead times for qualification of leading edge fabs, and the speed at which alternative sources of tungsten that do not originate from China can be found.

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