China's export controls on tungsten are also affecting the cost of manufacturing AI servers. Nikkei Asia reported that the price of micro drill bits used to drill holes in printed circuit boards (PCBs) for AI servers has risen several-fold because of the controls. Yet according to estimates by Shanghai Metals Market (SMM), combined 2026 tungsten consumption by PCB micro drills and tungsten hexafluoride (WF6), a gas used in semiconductor manufacturing, comes to only about 3,800 tonnes of contained metal, or roughly 4.6% of China's total. Why is a use that is relatively small by volume so strongly affected? Comparing U.S. Geological Survey (USGS) statistics, China's Ministry of Commerce export control notice, SMM price data, and Sumitomo Electric's price revisions and technical papers brings out three factors: the processing stage of the raw materials subject to controls, the material quality demanded of very fine drills, and the divergence between price trends inside and outside China.
China accounts for 78.8% of world output, but domestic production is flat
According to the USGS Mineral Commodity Summaries 2026, China's 2025 tungsten mine production was an estimated 67,000 tonnes of contained tungsten. Against a world total of 85,000 tonnes, that is a 78.8% share. China also produced 67,000 tonnes in 2024, but the world total was 82,000 tonnes, giving China a share of 81.7%. In other words, Chinese output was flat, but because global production grew, its share fell by about 3 percentage points. Part of the growth in world output came from the start of mining at Kazakhstan's Boguty deposit, which lifted that country's output from zero in 2024 to 2,400 tonnes in 2025.
China also looms large in reserves. The USGS puts China's tungsten reserves at 2.5 million tonnes, about half of the world total of more than 4.7 million tonnes. However, China's share of actual production is higher than its share of reserves. Today's concentration of supply in China reflects not only where the deposits are but also a concentration of mining and production capacity.
Even in China, domestic tungsten concentrate production is falling. SMM estimates that concentrate output in January–September 2026 fell 7.84% year on year, and full-year supply is expected to fall 6.1% to 101,000 standard tonnes. Meanwhile, SMM's calculations based on Chinese customs data show concentrate imports of about 17,400 standard tonnes in January–August 2026, up 118% from a year earlier. This suggests China is increasingly making up for lower domestic output with imported concentrate. Note, however, that the "standard tonne" is an industry-specific unit converted to 65% tungsten trioxide (WO3) content, which differs from the contained-tungsten figures used by the USGS, so the two cannot be compared directly.
Diversifying supply sources is not the only difficulty; substituting other materials is not easy either. The USGS lists molybdenum and niobium carbides, ceramics, and cermets as candidate substitutes for tungsten-based cemented carbides. But it notes that many of these can reduce tungsten use without fully replacing it. Constraints on changing materials are especially large in applications demanding high hardness and precision machining.
Controls reach the intermediate products that go into drill bits
On February 4, 2025, China's Ministry of Commerce and the General Administration of Customs issued Announcement No. 10 of 2025, putting export controls on tungsten and other related items into effect the same day. For tungsten, ammonium paratungstate (APT), tungsten oxides, and tungsten carbide (WC) not covered by the separate control item 1C226 are listed under item 1C117.d. All of these are important intermediate materials used in metalworking and electronic component manufacturing.
Large solid tungsten items such as alloys with a tungsten content of 97% or more, tungsten-nickel-iron alloys, and the technologies to make them also became subject to controls. The solid tungsten control item excludes powders and particles, covering material that can be machined into cylinders of at least 120 mm in diameter and 50 mm in length. Exporters of covered items must obtain a license from China's commerce authorities. The announcement also placed controls on items related to tellurium, bismuth, molybdenum, and indium, in addition to tungsten.
The drill bits used to drill PCBs are made mainly from cemented carbide, produced by mixing tungsten carbide (WC) powder with cobalt (Co) powder and sintering it. The announcement does not directly list cemented carbide rods or finished drill bits. But the WC used to make them, and the earlier-stage materials APT and tungsten oxides, are all subject to controls. The USGS likewise explains that U.S. processors make tungsten metal powder and WC powder from tungsten concentrate, APT, tungsten oxides, scrap, and other feedstocks. What matters, then, is that the export controls reach not the finished drill bits but the refined intermediate materials needed to make them.
A 2011 technical paper published by Sumitomo Electric confirms this relationship between raw materials and manufacturing processes. To mass-produce fine-grained WC, the company developed its own carburization method that produces WC directly from tungsten oxide without going through tungsten metal. The starting material for this method, tungsten oxide, is the same substance listed in China's export control announcement. However, the paper does not state where the raw materials are sourced, so it cannot be confirmed whether Sumitomo Electric actually uses Chinese tungsten oxide.
SMM also explains that WC powder is subject to strict export screening as a dual-use item. According to its tally, China's exports of intermediate tungsten products in January–August 2026 were about 9,071 tonnes, down roughly 15% year on year. Exports of carbide tools were 1,967 tonnes, also down about 15%. However, SMM cites weak operating rates at overseas manufacturers and tariff changes as factors in the decline in carbide tool exports, and does not attribute all of the drop to export controls.
A single 15 μm coarse grain can break a 0.1 mm drill
PCB drills are generally made with a shank diameter of 1/8 inch (3.175 mm) and an overall length of 1.5 inches (38.1 mm). According to Sumitomo Electric's 2011 paper, solid types made entirely of cemented carbide had been the mainstream, but at the time the industry was shifting to composite types in which only the cutting tip is cemented carbide, joined to a stainless steel shank by brazing or insertion. This was also a technical change in the direction of using less cemented carbide per drill. Drill diameters run from roughly 0.4 to 0.8 mm for automotive boards and down to about 0.1 mm for semiconductor package substrates, and products as thin as 0.05 mm, about the thickness of a human hair, were already in practical use.
In such extremely fine drills, even a slight defect inside the material can lead to breakage. According to a paper Sumitomo Electric published in 2016, a drill with a diameter of 0.10 mm has a web thickness, the thickness of its central portion, of only 0.03 to 0.05 mm. A single coarse WC grain 0.015 mm (15 μm) in diameter there can become a fracture origin through stress concentration. The paper says it is clear that such coarse grains lead to breakage.
The problem is that coarse grains can form during manufacturing even when the raw material's grain size is made uniformly fine. The WC powder used for PCB drills has an extremely fine average particle size of 0.1 to 0.5 μm. But when sintered at 1,300°C or above, Co melts, and WC grains finer than 0.1 μm can dissolve into the Co and then re-precipitate, causing grains to grow. This phenomenon, called Ostwald ripening, can produce coarse grains of around 15 μm, far larger than the raw material's average size.
Also, if Co is unevenly distributed in parts of the material, hardness drops in those areas and wear progresses unevenly. As a result, the positional accuracy of the holes drilled deteriorates. Sumitomo Electric homogenized the internal structure of the material by making the WC raw material's grain size uniform and by revising powder mixing methods and sintering temperatures. This, it says, improved hole position accuracy and resistance to drill breakage.
However, making WC grains finer does not improve every performance measure. According to the 2011 paper, the smaller the WC grain size, the higher the transverse rupture strength and hardness, but fracture toughness is lower than in coarser-grained materials, making the cutting edge more prone to chipping. Because hardness and toughness trade off against each other, drill materials must be chosen to balance the two.
Co content also affects drill performance. The less Co, the higher the hardness and Young's modulus, and the stiffer the material, which makes it easier to achieve hole position accuracy. PCB drilling requires positional accuracy of 50 μm or better, and stiffer materials have the advantage. In Sumitomo Electric's 2011 paper, an average WC grain size of 0.3 μm was the mainstream, and even finer 0.2 μm material was already in practical use.
Thus, for PCB drills it is not enough simply to secure tungsten. WC powder with an average particle size of 0.1 to 0.5 μm must be used, with hardness, toughness, and stiffness properly tuned while suppressing coarse grain formation and Co segregation during sintering. SMM's estimate puts PCB drill and WF6 consumption at a small 4.6% of China's total, but the need for high-quality material suited to micromachining sets this use apart from typical tungsten applications.
European APT prices up about 4.4-fold, Chinese domestic prices up about 15%
A key point in assessing the effect of export controls is the difference in raw material prices inside and outside China. APT prices have moved very differently in the two markets. According to the USGS, the APT price in Rotterdam, a major European trading hub, rose from $331 per mtu to $675 per mtu in 2025. An mtu is a trading unit equal to 10 kg of tungsten trioxide (WO3). In addition, SMM's analysis of September 18, 2026 shows the weekly average CIF Rotterdam APT price reaching $3,000 per mtu, unchanged for the fourth consecutive week.
Comparing the two sets of data, the Rotterdam APT price rose about 4.4-fold, from $675 in 2025 to $3,000 in September 2026. Meanwhile, the Chinese domestic APT price rose only about 15%, from 512,500 yuan on December 4, 2025 to a weekly average of 590,000 yuan on September 18, 2026. Because currencies and price units differ between Europe and China, the comparison here is of rates of change in each market, not of price levels themselves.
Caution is needed with this comparison, however. The $675 starting point for Europe is the end point of the 2025 price change given by the USGS, and no specific date is identified. The Chinese starting point is a point-in-time price on December 4, 2025, while the end point uses a weekly average. Because the sources differ in how prices are compiled and in the periods covered, the figures of about 4.4-fold and about 15% should be taken as rough guides to the scale of price increases in each market.
Still, the large gap between domestic and overseas price trends cannot be ignored when considering the competitive environment for carbide tool makers. In an October 2026 analysis, SMM noted that Chinese carbide tools have gained price competitiveness against overseas products since the second half of the year. Nikkei Asia also reports that Chinese drill makers are expanding market share because they can source relatively cheaper tungsten. The two accounts are consistent, but the available materials do not allow a quantitative estimate of how much the APT price gap contributed to the rise in finished drill bit prices.
Price revisions are also continuing among Japanese tool makers. In October 2025, Sumitomo Electric announced increases of 10% or more for solid drills and end mills. In April 2026 it announced increases of 60% or more, and in August of that year it revised the range, from a 25% cut to a 10% increase depending on tool diameter. The October 2025 announcement cited rising prices and labor costs and did not mention tungsten. The April and August 2026 announcements, by contrast, gave difficulty in obtaining material due to export controls, and the resulting persistently high tungsten prices, as reasons for the revisions.
However, these revisions cover carbide tools including those for metalworking, and the same rates do not necessarily apply to materials for PCB drills. The announcements alone do not make it possible to confirm their scope of application to PCB materials or the specific rates. Judging the impact on the manufacturing cost of AI server boards requires distinguishing pricing by tool application and material.
In response to the price surge, demand-side moves to reduce tungsten use are also visible. According to SMM, the carbide tool industry is moving toward material formulations that use less tungsten and toward switching to ceramic tools. At the same time, in a December 2025 analysis, the company pointed out that substitute materials are limited for high-value-added uses. PCB drills, which must use fine WC grains and combine high precision with resistance to breakage, are among the applications that are hard to substitute.
Note that the roughly 4.6% share of China's tungsten consumption cited by SMM includes not only PCB drills but also WF6 for semiconductor manufacturing, and consumption by drill bits alone has not been disclosed. It is therefore difficult to assess the effect of PCB drill demand alone on the overall raw material market. But in considering why finished product prices are rising, what matters is not only the size of total consumption but also whether stable supplies of high-quality material with strict requirements can be secured.
The focus going forward is whether the gap in APT price increases between China and overseas will narrow. According to SMM, the Chinese domestic APT price was 600,000 yuan in long-term contracts in the first half of September 2026, while the contract price for the first half of November announced by a major company in Chongyi is 550,000 yuan. It will be necessary to keep watching these domestic price trends in China and how European APT prices change from here. How PCB materials are treated in Sumitomo Electric's price list, announced to apply to orders from October 1, will also be an important indicator. To gauge the effect of China's tungsten export controls on AI server manufacturing costs, it will be necessary to watch the supply of the high-quality materials needed for micromachining, along with the trend in raw material prices.