The recent semiconductor materials market trend is becoming difficult to summarize with a single ‘price increase cycle.’ Silicon wafer suppliers report that existing 12-inch capacity utilization is rising; photonic device manufacturers cite AI data center optical interconnect demand as grounds for capacity expansion; and high-end IC substrate manufacturers observe continuously increasing customer inquiries for large-size, multi-layer products. These changes do not occur for the same material, in the same region, or under the same contract terms, but they point to a common trend: the constraints in the semiconductor industry are shifting from aggregate supply-demand dynamics to the effective delivery capacity of high-specification materials.
The key to this change is not a simple increase in material demand, but rather that the demand structure is altering the way materials are consumed. WSTS forecasts that global semiconductor sales will reach $1.51 trillion in 2026, representing a year-on-year increase of approximately 90%; within this, the memory market is expected to grow about 250%, and logic chips about 37%. The growth of High-Bandwidth Memory, advanced logic, optical interconnects, and advanced packaging means each unit of computing power requires higher-specification silicon wafers, more deposition layers, more complex substrates, and stricter material consistency. Thus, the materials market is transitioning from ‘running more wafers’ to a stage where ‘each wafer, each system consumes more complex materials.’
Silicon Wafers Gave the Signal First
Silicon wafers are the starting point for observing material cycles. SEMI data shows that in Q2 2026, global silicon wafer shipment area reached 3.573 billion square inches, a 7.4% year-on-year increase and a 9.1% quarter-on-quarter increase. The recovery in shipments indicates improved wafer fab activity, but its internal structure differs from the previous boom cycle. AI-related demand is spilling over from advanced logic and memory to applications like power and photonics, while traditional end markets like PCs and smartphones remain constrained by memory prices and the pace of demand recovery.
This divergence is directly reflected in suppliers’ capacity utilization and pricing strategies. GlobalWafers reported Q2 revenue of NT$15.2 billion, an 8.8% increase sequentially, but a 5% decrease year-on-year. The company stated that excluding newly expanded capacity, its existing 12-inch production lines were fully utilized, 8-inch utilization remained high, while the recovery for 6-inch products was more gradual. In its investor conference, the same company clearly distinguished its pricing approach for non-long-term agreement (non-LTA) products versus existing LTAs. The change in the silicon wafer market first manifests as improved pricing power for specific specifications, specific customers, and non-LTA orders, rather than a uniform price increase.
For downstream fabs, this distinction is more important than average selling price. The supply of general-purpose polished wafers is relatively easier to adjust via inventory and capacity, while the value of products like heavily doped wafers, epitaxial wafers, SOI wafers, and silicon photonics wafers lies more in process adaptation and customer qualification. Therefore, material scarcity depends not only on nominal capacity but on the ability to deliver stably within the customer’s process window. The signal from silicon wafers thus foreshadows a basic feature of this round of material trends: the supply-demand relationship for high-specification products will change ahead of the aggregate market.
Tungsten Hexafluoride and Indium Phosphide
Tungsten hexafluoride (WF6) reflects constraints arising from the combination of ‘resource and purification.’ As an important electronic specialty gas for advanced deposition processes, its cost is highly sensitive to high-purity tungsten powder. Industry information indicates that high-purity tungsten powder accounts for about 60–70% of WF6 production costs. Previously, the reference price for high-purity WF6 in China once reached 1,670–1,810 RMB/kg, with China's export average price in April being $149.79/kg. The basis for the price rise is not complex: upstream tungsten resources, raw material trade flows, and high-purity processing capacity simultaneously tightened, while demand was further boosted by increasing 3D NAND layers and the evolution of advanced logic processes.
The recent state of the tungsten market shows that material prices do not move along a single slope. Market information released by the China Tungsten Industry Association shows that black tungsten concentrate is around 415,000 RMB per metric ton unit, and APT (ammonium paratungstate) is around 610,000 RMB/ton, with supply and demand remaining in a stalemate and purchasing sides maintaining caution. For WF6 suppliers, the real factor determining price elasticity is not the raw material itself, but whether they possess simultaneously the capabilities for raw material security, purity control, filling capacity, and customer qualification. For memory and logic fabs, the focus of procurement is not just lowering unit cost, but maintaining process continuity for deposition through multi-source qualification and raw material traceability.
The logic for Indium Phosphide (InP) is different. Its core constraints stem from optical interconnect demand, concentrated supply, and long qualification cycles. According to statistics, AXT and Sumitomo Electric together account for nearly 80% of global InP substrate manufacturing. Following export license restrictions, the average price for 6-inch InP wafers has risen to approximately $5,000, up about 250% from before. This change has turned the material issue for high-speed optical chips from a simple cost topic into a supply chain security topic.
Changes on the demand side are intensifying this tightness. Coherent's latest Q4 revenue reached $2.05 billion, a 34% year-on-year increase; the company cited the transition from copper to optical connectivity in AI data centers as a major reason for expanding manufacturing capacity. Customer prepayments and long-term supply arrangements disclosed by AXT also reflect that downstream players are starting to front-load procurement to the capacity planning stage. Meanwhile, JX Metals plans to invest up to 120 billion yen over the next four years to increase InP substrate capacity to 7–10 times current levels. The scale of expansion plans is large, but crystal growth, defect control, epitaxial matching, and customer qualification together determine the speed at which new capacity becomes effective supply.
Tension in Advanced Packaging
The changes in advanced packaging materials cannot be judged by the spot price of a single item like ABF film or electronic-grade glass cloth. High-end IC substrates are system products composed of build-up film, glass fiber cloth, copper foil, resin, circuit processing, and yield. A mismatch in any one link affects final delivery. IBIDEN recently raised its full-year sales forecast to 550 billion yen and operating profit forecast to 127 billion yen, pointing to strong demand for high-value-added substrates for AI servers and general-purpose servers, with related demand still exceeding industry supply capacity.
Such signals indicate that price improvement has extended from single materials to the more integrated packaging segment. However, its transmission is not linear. The rise in substrate average selling price may come from increased product layers, higher processing difficulty, improved yield, and customer mix changes, and does not correspond to each upstream material increasing in price to the same degree. The real bottleneck on the materials side is the ability to provide a combination that meets the requirements for high speed, high frequency, and low thermal expansion.
The supply structure of high-end glass fiber cloth illustrates this point. TrendForce estimates that Nitto Boseki holds about a 90% share in the T-glass market and about 60–70% in the NER-glass market, with new capacity not expected to come online until mid-2027 at the earliest. This means the risk for advanced packaging and server board-level materials is more about specifications, qualification, and lead times, not 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 a single purchase price.
The Warning from Helium
If silicon wafers, WF6, and InP correspond to technical and capacity constraints, helium demonstrates geopolitical and logistics constraints. Reports indicate that Qatar supplies nearly one-third of global helium, and disruptions to Middle East supply have begun affecting the supply chains of technology manufacturing. Helium is used in semiconductor manufacturing for cooling, leak testing, and some process steps, with limited short-term substitution possibilities. The impact of supply instability can quickly amplify into procurement and inventory pressure.
However, the helium market also illustrates the regional nature of material pricing. China’s average helium import price in the first half of the year remained roughly within the range of 450–600 RMB/kg, with long-term contract supply from Russia somewhat cushioning spot price fluctuations. Spot, long-term contract, and regional prices for the same material can show significant differences. For multinational fabs, material management is therefore no longer just about price comparison, but a comprehensive arrangement covering supply sources, transportation routes, inventory days, and alternative gas sources.
Effective Supply Determines Market Impact
A characteristic of this round of material tightness is that industry capital expenditure is not lacking; what’s lacking is new supply that can be immediately used by customers. JX Metals’ InP expansion targets and new plans for high-end glass fiber both point to around 2027; however, these projects typically require an even longer ramp-up period from facility and equipment completion to product stabilization, customer qualification, and volume adoption. For silicon wafers, electronic specialty gases, compound substrates, and packaging substrates, nominal capacity, pilot capacity, and qualified effective capacity are often at completely different magnitudes.
This is precisely why material prices react more quickly to supply tightness and more slowly to capacity expansion announcements. Quotations can adjust within a quarter, but customer qualification often spans multiple product cycles. Advanced packaging substrates also need to simultaneously match chip design, packaging form, and system reliability; filling capacity in a single link cannot automatically eliminate delivery constraints. Therefore, judging whether material supply has genuinely improved should involve observing the utilization rate of new production lines, progress in customer qualification, and yield after stable mass production, not just investment amounts or planned capacity.
This lag in effective supply determines how material price increases are transmitted to the chip market. AI accelerators, High-Bandwidth Memory, and high-speed optical modules have higher added value, and their supply chains are more likely to absorb part of the cost through LTAs, prepayments, and inventory management. In contrast, mature nodes, consumer electronics, and fiercely competitive power devices have more limited cost pass-through capabilities. The difference between these two product categories means the impact of the same material price increase varies completely across different downstream segments.
More noteworthy is that the material unit price is only the visible cost. For wafer manufacturing, fluctuations in purity, batch stability, and delivery disruptions can also affect equipment utilization and yield. For advanced packaging, the combined performance of substrates, resin, and glass fiber must be validated together with chip design. Process fluctuations caused by a single material change are often more difficult to handle than the purchase price increase itself. Material procurement is shifting from traditional price negotiations to comprehensive management encompassing supply security, customer qualification, regional layout, and technical support.
Consequently, the profits of material companies will further diverge. Suppliers capable of mastering raw material sources, purification capabilities, product platforms, global customer qualification, and available capacity are more likely to simultaneously gain market share, volume, and price improvements. Companies still in the construction, sampling, or single-customer qualification phase will need more time to translate market heat into financial performance. For the domestic materials industry, the most valuable metric is not the number of projects, but the qualified effective capacity that can be sustainably delivered after customer validation.
This article is from the WeChat public account ‘Semiconductor Industry Perspective’ (ID: ICViews), author: Jun Xi
