Tungsten Supply Crisis Threatens AI Chip Production and Western Defense as China Tightens Export Controls

China's dominance in tungsten—controlling roughly 80% of global mined supply—has collided with surging demand from AI semiconductors and defense sectors, creating a structural shortage that has driven prices up 300-900% since 2025.[1][2] Beijing's export restrictions, limiting shipments to just 15 approved firms for 2026-2027 and effectively halting key flows to Japan since early 2026, have exacerbated the crunch.[3]

This directly impacts AI infrastructure. Tungsten hexafluoride (WF6) is essential for depositing microscopic tungsten wiring in advanced memory chips used in AI accelerators. Two major Japanese producers, Kanto Denka and Central Glass (accounting for ~25% of global WF6 capacity), ceased operations on July 1, 2026, after exhausting stockpiles of Chinese-sourced feedstock. Samsung and SK Hynix are now racing to qualify alternatives, with WF6 prices reportedly rising 70-90%.[1][4]

Defense applications face parallel pressures. The US Defense Logistics Agency explored stockpile purchases amid tight markets, while a 2027 procurement ban on Chinese-origin tungsten for defense contracts looms. Non-Chinese production remains limited and largely committed, with Western projects like Almonty Industries' Sangdong mine in South Korea (Phase 1 output ~2,300 tonnes/year) positioned as critical alternatives.[2][5]

Japan has pivoted to scrap imports, but US export restrictions on tungsten scrap have compounded shortages for its tool and hardmetal industries. Broader demand growth—from munitions to carbide tools and turbine alloys—projects a persistent ex-China supply gap of 12-21 kt WO3 through 2030, even with new projects.[6]

Efforts to diversify include US and allied mine developments in Idaho, Canada, and elsewhere, alongside recycling pushes, but timelines extend years amid declining Chinese ore grades and policy barriers. The crisis underscores vulnerabilities in concentrated critical mineral supply chains tied to geopolitical tensions.