China Restricts Tungsten Exports, Micro-Drill Bit Prices for AI Chip Supply Chain Surge Several-Fold
nashnova research
China's export controls on tungsten have driven micro-drill prices up several-fold this year; offshore tungsten now costs three times the onshore price, forcing non-Chinese suppliers back toward China's supply chain.
What are micro-drills, and why do AI chips need them?
Micro-drills are needle-thin bits made of tungsten carbide — an extremely hard tungsten-carbon alloy. They bore micro-holes in PCBs and chip substrates to connect layers of circuitry.
AI computing demands more PCB layers, harder materials, and tighter tolerances. That pushes up demand for high-end micro-drills.
This means → micro-drills are the unsung physical bottleneck of AI chips: no hole, no circuit connection.
How much has tungsten jumped, and what is the onshore-offshore gap?
China restricted exports of ammonium paratungstate (APT) — a key intermediate in tungsten refining — early last year. APT prices surged from about ¥212,750 per tonne in February 2025 to over ¥530,000 this week.
Offshore, the gap is starker: a drill-maker executive said overseas APT can reach ¥1.5–1.8 million per tonne — roughly three times the domestic price.
In plain terms = the same raw material triples in price the moment it crosses China's customs border. The cost squeeze on downstream drills and PCBs is obvious.
Why can't non-Chinese suppliers solve this on their own?
Top tungsten-carbide suppliers include Japan's Sumitomo Electric, Kyocera, and Mitsubishi Materials, the U.S.'s Kennametal, and Sweden's Sandvik.
Their manufacturing is advanced, yet they remain heavily dependent on Chinese tungsten refining and powder production. China accounted for roughly 79% of global tungsten output in 2025.
This means → manufacturing prowess does not equal raw-material independence. The "first mile" of the global tungsten chain is still firmly in China's hands.
What are Chinese companies gaining?
Chinese drill makers such as Guangdong Dingtai Technology and Shenzhen Jinzhou Precision Technology are expanding market share, aided by cheaper domestic tungsten.
Dingtai posted a record quarter in Q3 2026: revenue up nearly 180% year-on-year, net profit up over 280%.
CXTC High-Tech Materials, a unit of China's largest tungsten-carbide supplier Xiamen Tungsten, also hit a revenue record for the first three quarters of 2026, up 85% year-on-year.
This reflects a dual effect: export controls constrain rivals while opening a massive cost advantage and market window for domestic players.
How are downstream manufacturers responding?
Some PCB makers have already switched to Chinese drill or tungsten-carbide suppliers, as their Japanese, Taiwanese, and European vendors face material shortages.
One drill-maker executive said his company is testing Chinese materials and even considering setting up production in China to sidestep the controls.
In plain terms = the controls are not cutting off supply — they are pulling the entire chain toward China. The tighter the restriction, the deeper the dependence.
Is there any hope for alternatives?
Several countries are accelerating domestic tungsten exploration to reduce reliance on China.
But whether these efforts can yield viable alternatives in the short term remains an open question — tungsten mining has a long lead time from exploration to production, and China's scale advantage in refining cannot be replicated quickly.
This means → rebuilding supply-chain resilience is not just about finding ore. Refining capacity is the real chokepoint.
市场有风险，内容仅供研究参考，不构成投资建议。