The Growing Pressure on Electronic Specialty Gases (ESG) in the AI Era
Recent research from China International Capital Corporation (CICC), published on June 26, highlights a significant challenge in the global supply chain for electronic specialty gases (ESG). These gases are essential components used in the manufacturing of advanced AI chips. The pressure stems from two main factors: increased infrastructure spending on AI and a Chinese government ban on exporting high-purity tungsten. This has created a bottleneck in the availability of ESG, which is crucial for the production of cutting-edge semiconductors.
The current disruption is driven by two separate forces. First, the demand for these gases is growing rapidly due to the expanding influence of AI. Second, the supply chain through Japan has been disrupted. Chip manufacturers producing processors for data centers, large language models, cloud-based machine learning systems, and AI training facilities are facing bottlenecks in their production processes. The limitation is not in fab capacity or packaging but rather in the semiconductor etching gases used to create electrical pathways, which are critical for production levels.
AI's Impact on Gas Consumption
According to an in-depth report by Nanda Optoelectronics, ESG accounts for approximately 13% of the materials used in wafer fabrication. This makes it the second-largest group of materials after silicon wafers. What sets AI apart from other technologies is not just the higher volume of chips being produced, but also the exponential increase in gas consumption per wafer due to smaller transistor geometries.
For example, in 65nm process technology, there are typically about 20 etch processes per wafer. However, at the 7nm node, commonly used for many current AI accelerator devices, this number increases to around 140. Additionally, high bandwidth memory (HBM), which is central to AI training hardware, requires deep etch processes that use sulfur hexafluoride and octafluorocyclobutane. The increasing number of 3D NAND layers in AI-related non-volatile storage further boosts the demand for these gases.
China’s Tungsten Export Restrictions Affect Japan’s WF6 Supply
In February 2025, China imposed export restrictions on tungsten and four other metals, requiring licenses for all twenty business-related products. These restrictions were framed as a response to U.S. tariffs and aimed at protecting national security interests. The downstream effects have significantly impacted Japanese manufacturers of tungsten hexafluoride (WF6), which is essential for depositing tungsten interconnects in logic chips, DRAM, HBM, and 3D NAND.
Japanese companies like Kanto Denka and Central Glass have informed their South Korean customers that they have run out of inventory and may struggle to meet sustainable supply through the second half of 2026. Japanese manufacturers account for about 24% of global WF6 production, and there are few alternatives available from Western suppliers. For instance, the U.S. ceased tungsten mining operations in 2015 and has not produced refined bismuth since 1997.
Chinese Gas Producers Step In
To capitalize on the shortage, Chinese gas producers are rapidly expanding domestic production. CSIC Special Gases currently operates with a WF6 production capacity of 2,000 tons per year, planning to add an additional 1,000 tons by 2027, making it the world’s largest producer. Other companies such as HaoHua and Zhongju Core have capacities of 600 tons each, while Heyuan Gas intends to start trial production from a 600-ton facility this year.
Price data reflects this shift in production levels. According to 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. 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 as a Strategic Bottleneck
The global ESG market is projected to reach $6.9 billion by 2032, with a compound annual growth rate (CAGR) of 4.4%. In 2025, the market was approximately $5.1 billion, according to Persistence Market Research. Asia Pacific accounts for 69% of ESG consumption, driven by semiconductor manufacturing concentration in China, Taiwan, and South Korea.
Currently, four major global corporations—Linde, Air Liquide, Air Products, and Nippon Sanso—control over 70% of the total electronic gases market. In China, about 25% of ESG for integrated circuit manufacturing is locally sourced, and this percentage is rising. The CICC report suggests there is an opportunity for Chinese ESG production to grow aggressively and gain both volume and price advantages.
New Supply Risks for AI Hardware Production
Hyperscaler firms and the chip manufacturers they fund now face immediate questions regarding potential delays in fab ramp schedules in South Korea and other countries due to limitations in WF6 supply. Major HBM producers like Samsung and SK Hynix have experienced supply chain disruptions, which had largely relied on Japan until now.
Additionally, the growing reliance on Chinese sources for specialized gases introduces new dependencies for an industry already grappling with challenges from U.S.-China technology restrictions. The acceptability of this trade-off will likely depend on quality certification for gas purity, lead times for qualification of leading-edge fabs, and the speed at which alternative tungsten sources outside of China can be found.
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