Impact of the Rising Cost of Hafnium on Semiconductor Manufacturing

Hafnium is a versatile silvery-white metal widely used in various industries due to its unique properties. It is highly sought after for applications in aerospace and industrial alloys, semiconductors, data storage devices, nuclear reactors, and defense components.  

Its high dielectric constant characteristic makes it an essential material for maintaining capacitance and reducing power leaks in chip production. As a result, it is widely used in the semiconductor manufacturing of nanochips and the manufacturing of DRAM.  

Robust demand from the aerospace and electronic industries has fueled a 400% rise in Hafnium prices, taking them to record highs. The current price of Hafnium is between $4,500-$5,000 a kg from $1,200-$1,400 a kg a year ago.

"With the resurgence of aircraft production and growing demand for Hafnium tetrachloride coatings from semiconductor manufacturers for the next generation of nanochips, the Hafnium market is now experiencing a period of significant imbalance between supply and demand," said Rowena Smith, chief executive at Australian Strategic Materials.

The Hafnium Market

The demand for Hafnium is projected to continue to rise due to its increasing use in various industries, including aerospace, aviation, industrial turbines, semiconductor manufacturing, optical coating, and nuclear reactors, which account for almost 50% of the global demand.  

This rising demand is expected to continue, especially in China, which is projected to have the highest compound annual growth rate for Hafnium usage between 2023-2028, given its plans to build six to eight nuclear reactors annually in this period in addition to its semiconductor and electrification projects.

However, the global supply of Hafnium is currently limited because it cannot be produced directly but is obtained as a byproduct of the zirconium purification process. This limitation is further compounded by the 50:1 ratio of zirconium to Hafnium production, which requires roughly 50 tons of zirconium to produce a single ton of Hafnium. As a result, the production of Hafnium is both expensive and time-consuming.

Furthermore, Hafnium production is currently concentrated in France and the United States, resulting in a shortage in supply. The Russian dual-use material export license ban and China's limited export of the metal have also exacerbated the metal's supply deficits.  

The existing limitations in Hafnium production and supply, coupled with the growing demand, have led to the metal's scarcity and price increase.

What Does This Mean to the Semiconductor Industry

As the cost of Hafnium rises, so do the manufacturing costs of semiconductor manufacturers and major memory companies such as Samsung Electronics and SK Hynix, which are among the top users of Hafnium.  

A thin layer of the metal is deposited on top of the capacitors in the anatomic layers of DRAMs to help insulate and block current leakage between the capacitors making Hafnium crucial in DRAM manufacturing.

Currently, Samsung Electronics receives all of its Hafnium from Adeca Korea. In contrast, SK Hynix gets its supply from SK Trichem, which receives materials from Lake Materials, UP Chemical, and other suppliers with an estimated 100 tons per year of usage each. As such, the significant increase in the metal price is adding to the manufacturing costs of these companies.  
As an industry analyst states, the price increase of raw materials is quite significant, so Samsung Electronics, SK Hynix, and other manufacturers will not be able to avoid the cost impact in the future, leading to price increases in DRAMs.  

Although the pandemic supply chain disruptions and semiconductors shortages have been easing, other factors, such as raw material shortages, continue to impact the supply and pricing of chips. See how Z2Data can help you stay on top of market and supply chain disruptions to build resilience in your operations from engineering, compliance, supply chain, and procurement using the world's most comprehensive supplier, component, and market data.

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