Author: Junxi
The latest round of semiconductor material market trends can hardly be summarized by a single "price hike cycle." Silicon wafer suppliers have disclosed rising capacity utilization rates for existing 12-inch fabs, photonic device manufacturers have cited the demand for optical interconnects in AI data centers as the basis for capacity expansion, and high-end IC packaging substrate manufacturers have observed a continuous increase in customer inquiries for large-size, multi-layer products. These changes are not occurring in the same materials, regions, or under the same contract terms, yet they point to a common trend: the constraints in the semiconductor industry are shifting from aggregate supply and demand to the effective delivery capability of high-specification materials.
The key to this change is not a simple increase in material demand, but rather that the demand structure has altered the way materials are consumed. WSTS forecasts that global semiconductor sales will reach $1.51 trillion in 2026, a year-on-year increase of about 90%; of which the memory market is expected to grow by about 250%, and logic chips by about 37%. The growth in high bandwidth memory, advanced logic, optical interconnects, and advanced packaging means that each unit of computing power requires higher-specification silicon wafers, more deposition layers, more complex substrates, and stricter material consistency. The material market is thus transitioning from "more wafers started" to "more complex consumption per wafer and per system."
01. Silicon Wafers Signal First
Silicon wafers are the starting point for observing the material cycle. SEMI data shows that in Q2 2026, the global silicon wafer shipment area reached 3.573 billion square inches, a year-on-year increase of 7.4% and a quarter-on-quarter increase of 9.1%. The recovery in shipments indicates that wafer fabrication activities are improving, but its internal structure differs from the previous boom. AI-related demand is spilling over from advanced logic and memory to power and photonics applications, while traditional endpoints such as PCs and smartphones remain constrained by memory prices and the pace of demand recovery.
This divergence is directly reflected in suppliers' capacity utilization rates and pricing strategies. GlobalWafers' Q2 revenue was NT$15.2 billion, up 8.8% quarter-on-quarter and down 5% year-on-year; the company stated that, excluding newly expanded production lines, existing 12-inch production lines are fully utilized, 8-inch utilization remains high, and the recovery of 6-inch products is relatively gradual. The same company also clearly distinguished the pricing treatment between non-long-term agreement products and existing long-term agreements during its earnings call. The changes in the silicon wafer market are first manifested in improved bargaining power for specific specifications, specific customers, and non-long-term agreement orders, rather than a uniform increase in quoted prices.
For downstream wafer fabs, this difference is more important than the average selling price. The supply of general-purpose polished wafers is relatively easy to adjust through inventory and capacity, while the value of products such as heavily doped, epitaxial, SOI, and silicon photonics comes more from process adaptation and customer validation. Therefore, the scarcity of materials depends not only on nominal capacity but also on the ability to deliver stably within the customer's process window. The signal from silicon wafers thus foreshadows the basic characteristics of this round of material market: the supply and demand relationship of high-specification products will change before the aggregate market.
02. Tungsten Hexafluoride and Indium Phosphide
What tungsten hexafluoride reflects is the superimposed constraints of "resources and purification". As an important electronic specialty gas for advanced deposition processes, its cost is highly sensitive to high-purity tungsten powder. Industry data shows that high-purity tungsten powder accounts for about 60%-70% of the production cost of tungsten hexafluoride; previously, the reference quote for high-purity WF₆ in China once reached 1,670-1,810 RMB/kg, and the average export price from China in April was $149.79/kg. The foundation for the price increase is not complex: upstream tungsten resources, raw material trade flows, and high-purification capabilities are tightening simultaneously, while the demand side is compounded by the increase in 3D NAND layers and the evolution of advanced logic processes.
The recent state of the tungsten market, however, indicates that material prices do not move along a single slope. Market information published by the China Tungsten Industry Association shows that wolframite concentrate is about 415,000 RMB/standard ton, and APT is about 610,000 RMB/ton; supply and demand remain in a stalemate, and the procurement side remains cautious. For WF₆ suppliers, what truly determines price elasticity is not the raw material itself, but whether raw material security, purity control, filling capabilities, and customer certification can be possessed simultaneously. For memory and logic fabs, the focus of procurement is not just to lower the unit price, but to maintain the continuity of the deposition process through multi-source certification and raw material traceability.
The logic for indium phosphide is different. Its core constraints stem from optical interconnect demand, supply concentration, and long certification cycles. According to statistics, AXT and Sumitomo Electric together account for nearly 80% of global indium phosphide substrate manufacturing; following export license constraints, the average price of 6-inch indium phosphide wafers has risen to about $5,000, an increase of about 250% from before. This change has shifted the material issue for high-speed optical chips from a purely cost topic to a supply chain security issue.
Changes on the demand side are intensifying this tension. Coherent's revenue in the fourth quarter of its latest fiscal year reached $2.05 billion, a year-on-year increase of 34%; the company cited the migration of AI data centers from copper connections to optical interconnects as a key reason for expanding manufacturing capacity. Customer advance payments and long-term supply arrangements disclosed by AXT also reflect that downstream players are beginning to move procurement forward to the capacity planning stage. Meanwhile, JX Advanced Metals plans to invest up to 120 billion yen over the next four years to increase indium phosphide substrate capacity to 7-10 times the current level. The scale of the capacity expansion plan is large, but crystal growth, defect control, epitaxial matching, and customer validation jointly determine the speed at which new capacity forms effective supply.
03. Tensions in Advanced Packaging
Changes in advanced packaging materials cannot be judged solely by the individual quotes of ABF films or electronic cloth. High-end IC packaging substrates are system products composed of build-up films, glass fiber cloth, copper foil, resin, circuit processing, and yield; a mismatch in any link will affect final delivery. IBIDEN recently raised its full-year sales forecast to 550 billion yen and its operating profit forecast to 127 billion yen, pointing out that demand for high-value-added substrates for AI servers and general servers remains strong, and related demand still exceeds the industry's supply capacity.
Such signals indicate that price improvements have extended from single materials to the more highly integrated packaging segment. However, its transmission is not linear. The increase in the average selling price of substrates may come from an increase in product layers, increased processing difficulty, improved yield, and changes in customer structure, which does not correspond to every upstream material increasing prices by the same margin. The true bottleneck on the material side is whether it can provide a combination of capabilities that meet the requirements of high speed, high frequency, and low thermal expansion.
The supply structure of high-end glass fiber cloth can illustrate this. TrendForce estimates that Nitto Boseki holds about a 90% market share in T-glass and about 60%-70% in NER-glass, with new capacity not expected to come online until mid-2027 at the earliest. This makes the risks of advanced packaging and server board-level materials more reflected in specifications, certification, and lead times, rather than just raw material costs. For packaging houses and board manufacturers, locking in high-end materials in advance, reserving production lines, and improving yield are often more critical than negotiating around a single procurement price.
04. The Warning from Helium
If silicon wafers, WF₆, and InP correspond to technical and capacity constraints, helium demonstrates geopolitical and logistical constraints. According to reports, Qatar accounts for nearly one-third of the global helium supply, and disruptions in Middle Eastern supply have begun to affect the supply chain for technology manufacturing. Helium is used in semiconductor manufacturing for cooling, leak detection, and certain process steps; with limited room for short-term substitution, the impact of unstable supply will quickly amplify into procurement and inventory pressure.
However, the helium market also illustrates the regional nature of material prices. In the first half of the year, the average import price of helium in China was roughly in the range of 450-600 RMB/kg, and long-term agreement supplies from Russia buffered spot market fluctuations to a certain extent. Spot, long-term agreement, and quotes in different regions for the same material may show significant differences. For multinational wafer fabs, material management is therefore no longer just about comparing prices, but a comprehensive arrangement of supply sources, transportation routes, inventory days, and alternative gas sources.
05. Effective Supply Determines Market Impact
A characteristic of this round of material tightness is that industrial capital expenditure is not absent; what is lacking is the new supply that can be immediately used by customers. JX Advanced Metals' indium phosphide capacity expansion targets and the new plans for high-end glass fiber both point to around 2027; and from the completion of factories and equipment to product stabilization, customer validation, and mass introduction, these projects usually have to undergo a longer ramp-up process. For silicon wafers, electronic specialty gases, compound substrates, and packaging substrates, nominal capacity, trial production capacity, and certified effective capacity are often at completely different magnitudes.
This is exactly why material prices react faster to supply tightness and slower to capacity expansion announcements. Quotes can be adjusted within one quarter, while customer certification often spans multiple product cycles. Advanced packaging substrates must also simultaneously match chip design, packaging formats, and system reliability; making up capacity in a single link cannot automatically eliminate delivery constraints. Therefore, to judge whether material supply has truly improved, one should simultaneously observe the capacity utilization rate of new production lines, customer certification progress, and yield after stable mass production, rather than just looking at investment amounts or planned capacity.
This lag in effective supply determines the way material price increases are transmitted to the chip market. AI accelerators, high bandwidth memory, and high-speed optical modules have high added value, and the supply chain is more likely to absorb part of the costs through long-term agreements, advance payments, and inventory management; for mature processes, consumer electronics, and highly competitive power devices, the room for cost pass-through is more limited. The difference between the two types of products determines that the impact of the same material price increase is completely different in different downstream applications.
More importantly, the unit price of materials is only an explicit cost. For wafer fabrication, purity fluctuations, batch stability, and delivery interruptions will also affect equipment utilization and yield; for advanced packaging, the combined performance of substrates, resins, and glass fiber must be validated together with chip design. Process fluctuations caused by a single material switch are often harder to handle than the increase in procurement prices themselves. Material procurement is shifting from traditional price negotiations to comprehensive management of supply security, customer certification, regional layout, and technical support.
Thus, the profits of material companies will also further diverge. Suppliers that can master raw material sources, purification capabilities, product platforms, global customer certifications, and available capacity are more likely to simultaneously gain market share, sales volume, and price improvements; companies still in the construction, sampling, or single-customer introduction stage will need more time to convert market heat into performance. For the domestic material industry, the most worthwhile metric is not the number of projects, but the effective capacity that can be sustainably delivered after customer validation.