How does silver demand in emerging electronic consumption change during the localisation substitution process of the IC industry chain? [SMM Analysis]

On August 5, the People's Bank of China and six other departments jointly issued the "Guiding Opinions on Financial Support for New-Type Industrialization," marking the substantial implementation of financial support for the new-type industrialization strategy at the national level. Among all the industry chains mentioned, integrated circuits ranked first, fully demonstrating the importance of the industry.

》Guiding Opinions of Seven Departments on Financial Support for New-Type Industrialization

IC（Integrated circuits） are a crucial component of emerging electronic consumer terminals. What is the state of the integrated circuit industry chain and market size? Which process links involve the consumption of precious metal silver? What is the annual silver consumption level in the semiconductor packaging link? SMM has compiled the following information based on publicly available data and interviews:
(1) IC Industry Chain
As the core of the information technology industry, integrated circuits are classified by function into logic chips, memory chips, and analog chips, and are widely used in consumer electronics, automotive electronics, and artificial intelligence fields. Domestic enterprises have achieved breakthroughs in 5G communication chips, AI chips, and other areas, but their overall market share is less than 20%, indicating a high degree of reliance on overseas enterprises in the chip sector. It is worth noting that the localization rate of AI chips in China is expected to exceed 40% by 2025, with enterprises like Cambricon benefiting from the demand for domestic substitution driven by policies.
The raw materials for the integrated circuit industry chain are mainly divided into three categories: substrate materials, semiconductor process materials (including photoresist, masks, process chemicals, electronic gases, polishing materials, and target materials), and packaging materials. Among these, silver-containing materials are mainly used in chip packaging materials in the back-end packaging and testing factories (such as substrate interconnection, wire bonding, lead frames, shielding, thermal interface, etc.), with a few target materials in semiconductor process materials at wafer fabs using silver-based targets (the front-end process of physical vapor deposition, PVD). Additionally, according to SMM, similar silver-based targets are used in the sputtering coating of perovskite-based cells in solar cells, but the scale of such products is relatively small, with silver-based targets mainly applied in the electronics industry. Generally, the purity requirement for targets in solar cells and flat-panel displays is 4N, while for integrated circuit chips, it is 6N, indicating a higher purity requirement.
(2) Estimation of Silver Consumption in Emerging Electronic Consumer Fields
According to estimates by the World Semiconductor Trade Statistics (WSTS), the global semiconductor market size reached $688 billion in 2024, with US enterprises still occupying a 50% market share. In high-performance computing for AI applications, there has been an increase in silver consumption in the semiconductor sector. AI server infrastructure represents a particularly silver-intensive application. A typical AI server cluster, due to its higher power density, more complex cooling system, and higher interconnection requirements, has 2-3 times the silver content of traditional data centers.

According to the Silver Institute, the global "electronics and battery industry" consumed 231.6 million ounces of silver (approximately 6,567 mt, up 2.1% MoM from 2023) in 2024. AI terminals played a significant role in driving silver processing demand in the electronics industry in 2024, and this supporting factor is expected to continue in 2025 amid substantial demand for AI infrastructure construction. Semiconductor packaging materials account for approximately 18-22% of electronic applications, meaning that the global semiconductor packaging link consumes about 1,200–1,500 mt of silver annually, with mainland China accounting for about 1/4, and high-end advanced packaging being relatively concentrated in Taiwan, China, and South Korea. In terms of target materials, the total annual consumption of domestic silver-based targets is about 20-30 mt, with the semiconductor packaging link being the core source of precious metal consumption in the integrated circuit sector. In terms of end-use applications, driven by the three major demands of power SiC modules, AI accelerators, and Chiplet packaging, combined with policy support and the expectation of domestic substitution development in key technologies, silver consumption in semiconductor packaging will continue to maintain rapid growth amid the high-speed development of the integrated circuit market.