Northeast Securities Co., Ltd. has released a report stating that in the short term, the mass production of diamond-copper composite materials offers the best earnings flexibility, while over the medium to long term, the domestic substitution of CVD single-crystal equipment and large-size wafers serves as the core investment theme. Companies that secure certification within the top-tier computing supply chain are expected to undergo a revaluation.
The diamond heat dissipation sector has a clear growth outlook, bolstered by multiple favorable factors including the iteration of computing hardware, the generational advantages of material performance, and the domestic industry's supply advantages. These forces collectively drive a significant expansion in the market size. A differentiated competitive landscape has emerged, featuring three main paths: traditional superhard material companies, equipment manufacturers, and new material startups.
AI Computing Heat Dissipation Reshapes Industry Logic, Domestic Substitution Accelerates to Capture High-End Markets
The demand logic for the diamond industry has undergone a fundamental transformation. While traditional abrasive business grows steadily, AI computing heat dissipation has opened up a 240-fold incremental market space. The industry exhibits a structural divergence, with overcapacity in the low-end market and a tight supply of semiconductor-grade CVD diamond heat sinks. Competition has escalated to a contest of comprehensive capabilities, including in-house equipment development and high-purity crystal processes. The barriers for leading companies mastering MPCVD equipment and 8-inch large-size wafer preparation are continuously strengthening. The current track is characterized by a three-tier technology path supply structure, fully covering the gradient heat dissipation needs of computing power. Core profitability hinges on factors like the localization rate of CVD equipment and the penetration rate of thermal management in computing, with high-end semiconductor-grade diamonds serving as the key profit moat. In the short term, mass production of diamond-copper composites offers the best earnings elasticity, while the medium-to-long-term core is the domestic substitution of CVD single-crystal equipment and large wafers. Companies that pass certifications from top-tier computing supply chains can expect a revaluation.
High-Growth Drivers: Synergistic Industry Logic Reinforces the Strong Growth Prospects of the Diamond Heat Dissipation Track
The growth outlook for the diamond heat dissipation track is clear. Multiple positives, including hardware iteration, materials' generational performance advantages, and domestic supply chain strengths, work together to drive a quantum leap in market scale. 1) On the demand side, the rising power consumption of Nvidia's Rubin platform and future Ultra versions of chips, the failure of air cooling, the widespread adoption of liquid cooling, and the increased thermal pressure from 3D-HBM stacking all highlight the limitations of traditional copper and aluminum materials. Diamond, with its ultra-high thermal conductivity, is becoming the core heat dissipation medium. It is projected that by 2030, the penetration rate of diamond heat sinks in data centers will rise from 0.1% in 2025 to 12%, expanding the market by 240 times. 2) On the supply side, China controls over 90% of global HPHT industrial diamond production capacity, but high-end MPCVD equipment is monopolized overseas. The localization rate for 4-inch or larger semiconductor single crystals is below 20%, and the global supply-demand gap continues to widen. 3) On the policy side, China has implemented a comprehensive export control policy, forcing the computing supply chain to become self-reliant and setting clear targets for the localization rate of high-end heat sinks. 4) On the material side, diamond's core physical properties are superior. It has been incorporated into the thermal management system of Nvidia's flagship GPUs, significantly improving heat dissipation and energy efficiency. 5) On the industry side, the domestic superhard materials cluster has formed a closed loop, with local computing manufacturers batch-introducing related solutions.
Competitive Landscape and Core Barriers: Capacity Stratification Solidifies, High-End Track Barriers Continue to Rise
The global diamond industry has a clear hierarchy with a strong Matthew effect, forming three tiers. The top tier, dominated by US, Japanese, and European companies, leads the high-end CVD single-crystal track, possessing the complete ecosystem for 8-inch large-size wafer growth and semiconductor packaging, and monopolizing the core market for ultra-high-power chip single-crystal heat sinks. The middle tier consists of leading domestic superhard material companies, which leverage their HPHT production advantages to focus on diamond-copper composite materials and 2-4 inch CVD polycrystalline heat sinks, entering the mid-to-high-end AI server liquid cooling supply chain. The bottom tier includes small and medium-sized manufacturers concentrated in the low-end abrasive and lab-grown diamond tracks, with low product value-added and intense homogenized competition. Industry resources are continuously concentrating towards leading companies with advanced process capabilities. Current barriers include in-house mass production of MPCVD microwave equipment, ppt-level high-purity crystal growth processes, long-cycle supply chain qualification certifications from Nvidia and domestic computing companies, and diamond-semiconductor heterojunction bonding and precision processing technology. These barriers continuously widen the competitive gap between leading companies and smaller players. The three main growth paths for companies are: traditional superhard material firms leveraging HPHT advantages to move up into CVD high-end thermal materials; equipment manufacturers breaking through the bottleneck of domestic MPCVD technology and extending downstream into wafer preparation; and new material startups focusing on the single-crystal heat sink track, partnering with top AI chipmakers to provide customized thermal solutions. These three paths form a differentiated competitive landscape.
Risk Factors
Risks include the iteration of AI computing power falling short of expectations, and slow progress in improving CVD process yields.
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