Tungsten Supply Crisis Threatens AI Chip Production Amid Rising Demand
The world’s ambitions in artificial intelligence are encountering a significant bottleneck, not in chips or electricity, but in tungsten, a vital component for high-performance semiconductors. The global market is experiencing a dangerous depletion of tungsten supplies, with prices soaring as much as 622% in 2026 due to a combination of Chinese export restrictions, increased military demand, and the growing appetite for AI chip fabrication.
China currently controls about 80% of the world's tungsten supply. In 2025, the country imposed strict export limitations, allowing only a select number of firms to ship tungsten abroad. By 2026-2027, only 15 companies were authorized to export the metal. Concurrently, ongoing geopolitical conflicts, particularly in Ukraine and Iran, have heightened defense-related tungsten demand, as the metal is essential for armor-piercing ammunition and missile components.
The AI sector's demand for advanced semiconductors is escalating at an unprecedented rate, with tungsten hexafluoride (WF6) being crucial in the chip manufacturing process. Notably, two major producers of WF6, Japan’s Kanto Denka and Central Glass, ceased operations in July 2026 due to a lack of tungsten for processing. Together, these companies represented about 25% of global WF6 capacity, equating to approximately 2,200 tons annually.
Semiconductor manufacturers such as Samsung and SK Hynix are now under pressure to diversify their supply chains, as there are limited alternatives to Chinese tungsten. Global tungsten demand is projected to rise from approximately 143,000 tons in 2025 to 210,000 tons by 2035, with structural deficits expected to persist through at least 2028.
In response to the crisis, Almonty Industries has ramped up production at its Sangdong mine in South Korea, one of the few significant non-Chinese tungsten mines. However, this single mine cannot resolve the global supply deficit, as its output is still limited compared to the volume removed from the market due to China’s restrictions. The development of new tungsten projects outside China is also slow, with lead times extending over several years.
FAQ
What is causing the tungsten supply crisis?
The tungsten supply crisis is primarily caused by Chinese export restrictions, increased military demand, and the rising need for tungsten in AI chip fabrication. China controls about 80% of the world's tungsten supply and has imposed strict export limitations since 2025.
How has the price of tungsten changed recently?
Tungsten prices have soared dramatically, with increases of up to 622% projected by 2026 due to the supply crisis and rising demand from various sectors, including military and AI chip production.
What impact does the tungsten shortage have on AI chip production?
The tungsten shortage poses a significant threat to AI chip production as tungsten hexafluoride (WF6) is crucial in the semiconductor manufacturing process. The cessation of operations by major WF6 producers due to lack of tungsten has further exacerbated the situation.
What steps are being taken to address the tungsten supply crisis?
In response to the crisis, companies like Almonty Industries are ramping up production at their tungsten mines, such as the Sangdong mine in South Korea. However, this alone cannot resolve the global supply deficit due to limited output compared to the demand.
What is the projected demand for tungsten in the coming years?
Global tungsten demand is expected to rise from approximately 143,000 tons in 2025 to 210,000 tons by 2035, with structural deficits anticipated to persist through at least 2028.
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