Shenwan Hongyuan released a research report discussing the similarities between indium and tungsten, specifically including: both are strategic metals in which China holds production and market advantages; both have important applications in the AI field; both are export-controlled metals; Japanese companies hold significant market shares in the downstream applications of both; and both downstream sectors are at a critical stage of rapid capacity expansion. Referencing the stock price trends of companies in the tungsten industry, the firm is bullish on the subsequent performance of indium sector stocks. The main viewpoints of Shenwan Hongyuan Group Co.,Ltd. (000166) are as follows:

Indium and Tungsten Are Both China's Advantageous Critical Mineral Resources Under the Trend of Deglobalization

Tungsten and indium are both metal varieties in which China holds a global supply advantage. China ranks first globally in indium resource reserves and production. As of the end of 2022, China accounted for 40.14% of globally identifiable indium resources, and as the largest primary indium producer, China has consistently accounted for approximately 60% of the world's total primary indium output. China also ranks first globally in tungsten resource reserves and production, with China's tungsten reserves accounting for 53.19% of global total reserves and China's tungsten production accounting for 78.82% of global total output.

Dual-Use Item Export Controls on Tungsten and Indium Leverage the AI Industry Chain

With both tungsten and indium subject to export control policies in China, both have leveraged their important applications in the AI field to drive profound changes across the global AI industry chain. Since the implementation of export control policies, export volumes of both tungsten and indium have experienced certain declines. At the application level, tungsten hexafluoride and PCB drill bits downstream of tungsten are both used in the AI field; for indium, optical modules using indium phosphide as a raw material are becoming the primary connectivity solution in the AI field.

Japan Holds a Relatively High Share of Production in Downstream Processed Tungsten and Indium Products

Global supply of tungsten hexafluoride is highly concentrated among a small number of producers in Japan, South Korea, and China. Japan remains one of the largest suppliers, led primarily by Kanto Denka Kogyo and Central Glass, which together account for approximately 20-30% of global capacity. In the area of high-end rods for PCB drill bits, Japan also holds a relatively high market share. For indium, indium phosphide substrate materials are currently still mainly supplied by Japan's Sumitomo and Japan's JX. According to Yole statistics, in 2020, Japan's Sumitomo held a global share of 42%, and Japan's JX held a global share of 13%.

Export Controls on Japan Present a Good Opportunity for Domestic Supply Chains to Overtake

According to export data from the General Administration of Customs, in 2026, export volumes to Japan of tungsten powder (the raw material for tungsten hexafluoride) and unwrought tungsten, including simply sintered bars and rods (the raw material for PCB drill bits and tungsten rods), both showed significant declines. Meanwhile, in the processing segment where Japanese products hold a high market share, China's export volumes showed notable increases.

FCC Restrictions Intensify, Indium Phosphide May Have Far-Reaching Impact

Since August 2018, the FCC began implementing restrictive measures against Chinese telecommunications equipment, including optical modules. As of October 19, 2026, Zhongji Innolight, Eoptolink, Dongshan Precision, and T&S Communications were all not on the list. On February 4, 2025, the Ministry of Commerce announced a decision to implement export controls on tungsten, tellurium, bismuth, molybdenum, and indium-related items, explicitly listing indium phosphide and tungsten-related items as export-controlled items.

Domestic Substitution Plus Surging Demand: Capacity Expansion Underscores Resource Importance

The active capacity expansion by companies in the tungsten and indium industry chains will inevitably cause price movements on the raw material side. As of November 2, 2026, the domestic price of tungsten powder was 790,000 yuan per ton, up 150% year-over-year; the domestic price of refined indium was 4,950 yuan per kilogram, up 90.02% year-over-year.

Risk Warnings: Risks include changes in technology roadmaps, reduced impact from macroeconomic events, and unexpected changes in indium supply, among others.