The Global Supply Chain Pattern And Bargaining Power of Semiconductor Materials

The sharp fluctuations in global sulfur prices are a strong signal that runs through the entire chemical industry chain. Global sulfur (produced mainly in the Middle East, Russia, and North America) → Sulfuric acid → Anhydrous hydrogen fluoride (AHF) (China's production capacity accounts for approximately 60% of the global total) → Downstream fluorides. This cost shock is essentially a squeeze on fluorine chemicals from the resource side, but the international market structures of different products vary greatly, resulting in completely different price elasticities.

From an international perspective, the core logic of its impact on hydrofluoric acid and the three fluorides lies in the fact that sulfur is the "key to unlocking" the basic raw material for fluorine-based chemicals - anhydrous hydrogen fluoride (AHF). Through a clear industrial chain path of "sulfur → sulfuric acid → hydrofluoric acid → fluorine-containing special gases", it has triggered profound chain reactions Hydrofluoric acid, Sulfur hexafluoride (SF₆), Carbon tetrafluoride (CF₄) and Nitrogen trifluoride (NF₃). The prices of these materials are all rising, but the underlying driving logic, the extent of impact, and the long-term trends of the market are fundamentally different.

I have organized the influence paths and current situations of these four materials into the following table, which enables a clearer understanding of their respective circumstances:

To clarify this logical chain, we will examine it in three steps.

1. The main switch: How does sulfur influence the overall cost of the fluorine chemical industry?

Fluorite and sulfuric acid are the two primary raw materials for producing anhydrous fluorine hydride (AHF). The reaction equation is quite simple:

Fluorite (CaF₂) + Sulfuric acid (H₂SO₄) → Anhydrous fluorine hydride (HF) + Calcium sulfate (CaSO₄)

Sulfur is the raw material for approximately 60% of the world's sulfuric acid production. Therefore, the sharp increase in sulfur prices directly raises the price of sulfuric acid, thereby increasing the cost of AHF, and then transmitting it along the industrial chain downward.

This will give rise to a pair of core contradictions:

Demand rigid transmission: The downstream fluorine chemical industry must purchase AHF.

Supply passive contraction: The cost of AHF enterprises has sharply increased, profits have been severely squeezed, and they have no choice but to stop production or reduce load, resulting in a tightening of AHF supply itself.

AHF is the common source of hydrogen fluoride (electronic grade) and these three fluorides, so the tightening of the source has both commonalities and significant differences due to different market structures.

2. Analysis by variety: The profit scissors difference determines the trend direction

2.1 Electronic Grade Hydrofluoric Acid (High-Purity HF)

Trend Judgment: In the chain reaction triggered by the increase in sulfur prices, hydrofluoric acid is the first "domino" to fall. The price of electronic-grade hydrofluoric acid remains strongly rising, and the price gap with industrial-grade hydrofluoric acid continues to widen. The international oligarchs have reaped the greatest profits.

Market landscape: The global supply of highly concentrated in Japan (Stella Chemifa, morita chemical), South Korea (Soulbrain), China (multiple fluorine, etc.) and China's Taiwan. They can directly supply to companies like TSMC, Samsung, and Intel through long-term contracts. By leveraging "quality premium", they can fully pass on the costs to downstream semiconductor manufacturers, and even take the opportunity to widen the profit margin gap.

Conductive logic: The extremely high purity and customer certification barriers give suppliers extremely strong bargaining power. The increase in AHF costs can be fully passed on to the downstream by 100%, and even be used as an opportunity to expand profits. Additionally, the anti-dumping barriers imposed by Europe and the United States on China's industrial-grade hydrogen fluoride prevent the premium in the high-end market from being affected by low-priced products, and the price gap will continue to widen.

The cost structure has been completely restructured: Sulfuric acid originally accounted for only 30% of the cost of anhydrous hydrogen fluoride (AHF), but now this proportion has soared to over 50%. The price of sulfur, which is the raw material for sulfuric acid, has skyrocketed, directly and rapidly increasing the manufacturing cost of hydrogen fluoride. The price increase of AHF is directly passed on, and the dual pressure of supply and demand is exerted. Industrial-grade hydrogen fluoride, due to the sluggishness of downstream industries such as refrigerants, may not have smooth cost transmission; however, electronic-grade hydrofluoric acid is used for chip cleaning and etching, with extremely high purity requirements, and the customer verification period is long (1-2 years). Once the supply relationship is established, it will not be easily changed.

The supply chain landscape has changed: This price surge has exposed the vulnerability of the global supply chain. South Korea is highly dependent on China for imported anhydrous hydrogen fluoride (about 90%), and is currently under great pressure and accelerating the localization production process. However, the mass production of new factories still requires time. Meanwhile, Japanese suppliers have also begun to seek to purchase from China due to cost issues. This is a strategic window to cut into the global high-end supply chain and accelerate the substitution of localization.

2.2 Sulfur Hexafluoride (SF₆)

Trend: Global supply crisis, supply has sharply contracted, price elasticity is extremely high, there may be a "catastrophic shortage".

Policy and Supply: SF₆ is one of the most potent industrial gases in terms of greenhouse effect, with its GWP value being 23,500 times that of CO₂. The EU, the United States, etc. are accelerating the de-SF₆ of electrical equipment. The global SF₆ production capacity is highly concentrated in China, and China has also introduced policies to strictly control production capacity and list SF₆ in the "two high" restricted list, strictly controlling new production capacity and exports. However, the global electrification trend still ensures the huge demand for SF₆ in the field of power insulation.

Stacking effect: After the price of sulfur rises, production enterprises are reluctant to purchase AHF at high prices to produce a loss-making product subject to policy restrictions. They have no motivation and will inevitably significantly reduce production. This will directly lead to a sharp expansion of the supply gap, and the power grids in Europe and Southeast Asia, which are highly dependent on Chinese supply, may face a "supply cut-off". The price of SF₆ will move away from the cost and soar towards the high value of environmental protection quotas.

2.3 Carbon tetrafluoride (CF₄)

Trend: Moderately rising with cost support, but the increase is constrained by long-term contracts.

Demand stability: It is a necessary gas for etching and cleaning in semiconductor and display panel manufacturing. The cost support is extremely strong, and the supply side will improve the competitive landscape due to the withdrawal of small factories.

Negotiation game: The downstream semiconductor giants (Samsung, TSMC, etc.) have extremely strong bargaining power and mostly lock prices through annual long-term contracts. The increase in sulfur prices will push up costs, but CF₄ manufacturers cannot raise prices as significantly as SF₆, and can only absorb some of the pressure. This wave is more likely to accelerate the exit of small CF₄ factories in China and improve the layout of leading enterprises.

Institutional forecasts indicate that the global SF₆ and CF₄ market will reach 1.128 billion US dollars by 2032, with a compound annual growth rate of 5.6%.

2.4 Nitrogen Trifluoride (NF₃): Demand Dominates, Least Affected

Trend: Confirming the bottom of the industry, accelerating capacity clearance, preparing for a reversal.

Catalytic reshuffle: The sharp increase in raw material prices has turned it into a "cleansing agent". Capable plants without AHF support and those with high costs will suffer huge losses and be forced to shut down or exit. This precisely signals the industry's bottom, and after supply contraction, the survivors will enter a true prosperous period.

Strategic Cleaning Gas: NF₃ is currently the most widely used CVD chamber cleaning gas in the semiconductor industry, and almost every CVD/PVD equipment requires it to maintain a clean process environment.

Explosive Demand Growth: Currently, there is a severe global overcapacity, with major players being SK Specialty and Hyosung in South Korea, as well as China's Huatex Gas and Haohua Technology, etc. In the past two years, the prices were low, and the market is in a reshuffle period. This raw material price increase will accelerate the clearance of high-cost capacity, which is beneficial to the long-term development of leading enterprises. Once the backward capacity is cleaned out, supply and demand will return to balance, and NF₃ will enter a true prosperous period. With the increase in the number of stacking layers and line width reduction in 3D NAND and advanced logic processes, the cleaning steps have multiplied, directly driving the consumption of NF₃. Its market demand is highly correlated with the capital expenditure and equipment operation rate of chip factories, and the growth certainty ranks among the top in all electronic specialty gases.

3. Summary and Outlook

3.1 This sulfur crisis serves as a stress test, clearly revealing the core contradictions of these four materials:

The Achilles heel of hydrofluoric acid lies in the availability and cost of upstream resources. Japanese and South Korean enterprises producing electronic-grade hydrofluoric acid have taken the technological premium, and their profits are the highest.

SF₆ and CF₄ are caught in a dilemma where the upstream cost increase clashes with the strong demand from the downstream. Price hikes are highly likely, and they are also facing pressure from environmental protection alternatives. European grid operators will be the biggest victims of the skyrocketing SF₆ prices and will be forced to accelerate the search for alternative solutions.

The engine of NF₃ lies in the structural demand brought about by the technological upgrade in the downstream, which is almost unaffected by fluctuations in upstream resources.

An integrated fluorine chemical giant with AHF support → by leveraging cost advantages, it has taken over the lost market share in the CF₄ and NF₃ market competition.

3.2 Conclusion: What does this mean for the fluorine chemical chain?

Long-term cost support: The cost line of AHF (Anhydrous hydrogen fluoride) is unlikely to return to its previous low level. Fluorine chemical enterprises must learn to survive in an environment with high-priced sulfur and sulfuric acid.

Integrated advantages are more prominent: Enterprises with By-product fluosilicic acid containing phosphorus fertilizer (which can replace fluorite to produce AHF) can bypass the sulfur-silicon path and the cost advantage will be dramatically magnified during this cycle.

Small-capacity exits accelerate: Especially for cost-sensitive Nitrogen trifluoride and sulfur hexafluoride, the long-term pressure on the raw material side will continue to reshuffle until the supply and demand pattern is restructured.