Chip capacity expansion and liquid cooling as dual engines are booming—fluorine chemical industry stands at the super AI forefront!

The expansion of AI computing power is pushing fluorine chemical engineering from refrigerants and traditional materials toward new scenarios such as semiconductor manufacturing, liquid cooling, and PCB high-speed materials.

Since May, the fluorine chemical sector has significantly outperformed the overall chemical market. The rise is not due to a single pricing logic, but rather two overlapping changes: First, the US announced a delayed phase-out of several third-generation refrigerants in some applications; second, the expansion of computing power driven by AI is leading the market to reassess the role of fluorine materials in chip manufacturing, server cooling, and high-speed transmission materials.

According to Wind Trading Desk, UBS Securities Asia Limited released a research report on China’s chemical industry, led by Amily Guo, on June 22: “We expect that as AI development drives higher computing power demand and material system iteration, fluorine chemical materials in AI-related applications will grow rapidly; at present, suppliers of fluorine chemical materials are still significantly undervalued compared to electronic chemical materials companies, and the market has not fully priced in the growth opportunities brought by AI.”

This framework breaks down the AI opportunity for fluorine chemical engineering into two main threads: One is in semiconductor manufacturing, involving electronic-grade hydrofluoric acid, fluorine-containing fluids, and fluorine special electronic gases; the other is in data centers, involving PTFE high-speed materials, cold plate refrigerants for liquid cooling, and fluorine-containing cooling fluids for immersion liquid cooling.

Semiconductor Side: Three Product Lines, Domestic Substitution Window Opening

Electronic-Grade Hydrofluoric Acid (EG-HF): G5 Level, Threshold Determines Everything

Hydrofluoric acid is an indispensable wet electronic chemical for semiconductor cleaning and etching processes. The Chinese market size is expected to reach about 4.25 billion yuan in 2025, with strong rigid demand.

The highest purity G5 level (UPSSS level, used for 12-inch wafers 55nm process and below) has much higher technical barriers than low-end products and is significantly more expensive.

The domestic G5-grade EG-HF market is highly concentrated—according to Befar Group’s H-share IPO prospectus, domestic G5 electronic hydrofluoric acid CR5 will reach 98% in 2025. Major players include Do-Fluoride, Jingding (a company affiliated with Juhua), Befar Group, Xinnuo Bang, and Sanmei Chemical, all of which are laying out through joint ventures.

There is a new variable on the supply side: The Middle East conflict has led to global sulfur supply tightening since March. Anhydrous hydrofluoric acid prices have been rising overall this year, and high-end G5 products are relatively tight due to strong demand for memory chips. China is the world’s largest supplier of anhydrous hydrofluoric acid, and domestic manufacturers have a natural advantage in raw material security.

Fluorinated Fluid: 3M Exit Leaves a Huge Gap

Fluorinated fluids are widely used in semiconductor manufacturing for cleaning and cooling, with strong chemical inertness, non-flammability, good insulation, and are irreplaceable process materials in wafer manufacturing.

Here comes the problem: The world’s largest supplier of semiconductor-grade fluorinated fluid, 3M, will completely cease production of PFAS (perfluoro and polyfluoroalkyl substances) by the end of 2025. 3M’s PFAS business has annual sales of about $1.3 billion, with the semiconductor and automotive sectors contributing 35%-40% of revenue. 3M’s exit is not proactive contraction, but forced by increasingly stringent global PFAS environmental regulations.

Since fluorinated fluid directly affects process stability and yield in wafer manufacturing, customer validation cycles are long and entry barriers are high. First movers have significant advantages.

Xinnuo Bang is currently ranked first in domestic market share for semiconductor cooling fluids, with HFE (hydrofluoroether) capacity of 3,000 tons/year and PFPE (perfluoropolyether) capacity of 2,500 tons/year, and has established stable supply relationships with major domestic wafer fabs (both logic and memory). Juhua and Yongtai Technology are also developing their presence but are lagging behind Xinnuo Bang in customer validation and large-scale orders.

Fluorinated Special Electronic Gases: Tungsten Hexafluoride Prices Surge This Year

Fluorinated specialty gases used for semiconductor dry etching and CVD processes require purity of 5N or even 6N and have long been dominated by overseas giants for high-end varieties.

Of special note is tungsten hexafluoride (WF₆) — upstream tungsten resources have seen prices surge due to export controls and tighter mining, Japanese major producers are expected to cut supply, and strong demand from memory chips has led to significant price increases for WF₆ this year.

Products with a relatively high domestic localization rate include NF₃, SF₆, CF₄, while C₄F₆ (hexafluorobutadiene) and WF₆ have higher technical barriers and greater potential for domestic substitution, with domestic companies such as Haohua Technology, Peric Special Gases, and Natraphotonics accelerating breakthroughs.

Data Center Side: Liquid Cooling Materials, Both Routes Involve Fluorine

How big is the liquid cooling market? Estimates show that the direct liquid cooling (DLC) market size may reach $31 billion by 2030, corresponding to a compound annual growth rate of 51% from 2025-2030.

Traditional air cooling can no longer meet the heat dissipation needs of high power-density AI servers. Liquid cooling is becoming mainstream, but the technology route is not yet settled.

The current mainstream is cold-plate liquid cooling, which is low-cost and easy to maintain. Among them, the two-phase cold-plate solution (using liquid vaporization for cooling) utilizes refrigerants including R134a, R1234yf, R1233zd, directly linking to fluorine chemical engineering.

Immersion liquid cooling has a stronger cooling effect but higher cost, and penetration is currently low. As chip power density continues to rise, two-phase immersion cooling is expected to accelerate after 2030. In two-phase immersion cooling, fluorinated liquids have obvious overall compatibility advantages, and products such as PFPE and HFE are expected to benefit.

However, the current immersion liquid cooling market remains small, especially two-phase immersion liquid cooling. The reason is simple: lower-cost cold plate liquid cooling meets most needs for now. Under the path assumptions, significant growth in two-phase immersion liquid cooling is more likely to appear after 2030 when higher server power density triggers the switch.

AI Servers Require Lower Loss Materials, PTFE Comes Into Focus

AI servers have higher requirements for high-speed, high-frequency materials. PTFE, or polytetrafluoroethylene, is regarded as one of the potential materials for next-generation high-speed transmission scenarios due to its low dielectric constant and low dielectric loss.

The most direct application for this line is PCB copper-clad laminate materials, especially orthogonal backplane materials for AI server racks. However, pure PTFE resin has shortcomings such as high thermal expansion coefficient and poor processability, so it often needs glass fiber, silicon micropowder and other fillers for modification, giving rise to complex formulations and processes.

Downstream copper-clad laminate and PCB companies already have relevant technical reserves. Shengyi Technology showcased its material route and solutions for 224G/448G ultra-high-speed transmission at DesignCon 2026, including PTFE orthogonal backplane materials.

For upstream PTFE enterprises, the real challenge is not just "having capacity". The new generation of low-loss, high-speed materials requires strict control of metal ion impurities, meaning PTFE enterprises need to improve basic resin purity and consistency, and develop electronic-grade PTFE varieties. Meanwhile, they need to work with downstream companies to develop modifications, improving processability, composite performance, and multilayer compatibility.

Leading domestic PTFE enterprises include Dongyue Group, Haohua Technology, and Juhua. Dongyue Group’s PTFE capacity is 55,000 tons/year, making it the largest PTFE producer in China. In August 2025, the company announced an investment of HKD 89.56 million to enhance ultra-high-purity PTFE quality, targeting high-end PTFE products for the semiconductor industry.

Risks Are Significant, Core is Price, Route and Regulation

Fluorine chemical engineering is not without risks.

First, fluctuations in product and raw material prices will directly affect profits. Hydrofluoric acid, refrigerants, fluorine-containing polymers, and fluorine-containing fine chemicals all have cyclical characteristics.

Second, downstream demand uncertainty exists. Cycles in semiconductors, pace of AI server construction, weather, and macroeconomic fluctuations all affect the pace of demand realization.

Third, third-generation refrigerant quota policies remain uncertain. Refrigerants are an important profit source for fluorine chemical engineering, and policy changes can affect supply, demand, and prices.

Fourth, PFAS (perfluoro and polyfluoroalkyl substances) regulation is a double-edged sword. While 3M’s exit brings substitution opportunities, further tightening of overseas PFAS regulations might also shrink part of the fluorine material market space.

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The above content is from Wind Trading Desk.

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