BOCI has released a research report stating that, driven by rapid downstream industry growth, continuous technological iteration, and the broader trend of domestic substitution, the electronic materials sector is poised for sustained development opportunities.
First, benefiting from rising downstream demand and ongoing technological advancements, the global semiconductor materials market is expanding, with demand for advanced materials increasing rapidly. In several critical semiconductor material categories, Chinese companies are making steady progress in capacity layout and R&D, which is expected to continuously enhance their competitiveness and production scale.
Second, some semiconductor materials and raw materials are benefiting from price increases. Driven by high downstream景气度, slower-than-expected capacity expansion by overseas leaders, and volatility in raw material supply, China's semiconductor materials industry may be entering a critical window for accelerated domestic substitution.
Semiconductor Materials Sector in High Demand, Product Prices Rise Across the Board
Since the beginning of 2026, the global semiconductor materials sector has witnessed a wave of price increases. This round of price hikes has expanded from point to surface, spreading from key chemical raw materials to the entire manufacturing chain, covering almost all core categories such as silicon wafers, electronic specialty gases, wet electronic chemicals, targets, and packaging materials, leading to an upward price trend across the entire industry chain.
From a secondary market performance perspective, the semiconductor materials sector has outperformed the broader market since the start of 2026. As of July 31, 2026, the Shenwan Semiconductor Materials Index has accumulated a year-to-date increase of 47.19%, outperforming the CSI 300 Index and the Shenwan Electronics Index by 48.09 and 25.57 percentage points, respectively. The Shenwan Electronic Chemicals Index has risen 35.94% year-to-date, outperforming the CSI 300 and Shenwan Electronics indices by 36.84 and 14.32 percentage points, respectively.
Reasons for Semiconductor Material Price Hikes: A Triple Resonance of High Demand, Rising Costs, and Geopolitical Conflict
Firstly, the surging demand for AI computing power is driving demand across the entire semiconductor industry chain, leading to substantial growth in the global semiconductor market. WSTS estimates that the global semiconductor market size could reach $1.51 trillion in 2026 (up 89.9% year-on-year) and $1.91 trillion in 2027 (up 26.6% year-on-year). Demand for semiconductor materials directly benefits from the expansion cycles of downstream wafer fabs, and the AI wave has significantly increased the consumption of upstream materials. In 2025, global semiconductor material sales reached $73.2 billion (up 6.8% year-on-year), with wafer fabrication material sales at $45.8 billion (up 5.4%) and packaging material sales at $27.4 billion (up 9.3%).
Secondly, events in the Middle East have impacted global supply chains and energy costs. Energy price fluctuations have been transmitted to the manufacturing costs of chemical raw materials and some electronic materials. Disruptions in the Red Sea shipping lanes have pushed up international logistics costs. For example, a major global silicon wafer and photoresist company based in Japan initiated this round of price increases partly due to cost pressures.
Additionally, due to supply-side hard constraints and surging AI demand, metal prices have strengthened, leading to collective price increases for computing metals. For instance, impacted by rising raw material costs for chemicals and computing metals, as well as higher production costs, products like targets and electronic-grade hydrofluoric acid have seen price hikes. Affected by raw material export controls and overseas supply disruptions, products such as tungsten hexafluoride and helium have experienced price increases. Geopolitics may become the core contradiction in semiconductor material pricing. BOCI believes this price hike cycle differs from past cycles that were purely demand-driven, exhibiting characteristics of "control triggers - capacity cuts - price jumps - accelerated transmission."
Chinese Semiconductor Material Companies Continue to Advance Domestic Substitution
In 2025, semiconductor material sales in Mainland China reached $15.6 billion (up 12.5% year-on-year). In recent years, supported by national policies and market demand dividends, China's semiconductor materials industry has entered a phase of rapid development, with the process of domestic substitution steadily advancing. Domestic material companies are continuously enhancing their product technology levels and R&D capabilities, gradually transitioning from breakthroughs in single products to perfecting the supporting industrial chain, resulting in a steady improvement in overall industrial competitiveness. As the global semiconductor supply chain trends towards localization and diversified layouts, China's semiconductor materials industry is expected to encounter dual development opportunities in technological breakthroughs and market expansion.
Furthermore, given the current high downstream景气度, coupled with the slower-than-expected expansion by overseas leaders and the impact of raw material supply fluctuations, China's semiconductor materials industry may be entering a critical window for accelerated domestic substitution.
Risk Warnings
Risks include the risk of technology upgrade iteration, the risk of downstream demand recovery falling short of expectations, and the risks of global economic cyclical fluctuations, international trade frictions, and force majeure events.