CITIC Securities: Diamond thermal management enters commercialization year as AI chip power surges

By Wang Zhe, Liu Haibo, Li Chao, Zhao Yuhang

Driven by three converging factors—the steep rise in AI chip power consumption, traditional metal cooling approaching physical limits, and continuous optimization of diamond fabrication technology—the diamond thermal management industry is poised for its first commercial-scale investment opportunities. We recommend focusing on two key investment themes: (1) industry leaders that have achieved early small-batch delivery of heat spreaders, proprietary equipment development, and leading production capacity; and (2) companies with advanced manufacturing capabilities, large-size fabrication expertise, full industrial chain integration, and accelerated expansion plans.

Diamond: A High-Performance Carbon Crystal Shifting Toward Functional Applications

Diamond combines the highest natural hardness (Mohs 10) with the highest thermal conductivity (2000–2200 W/(m·K)), while its coefficient of thermal expansion closely matches mainstream substrates such as silicon and silicon carbide. The product spectrum is evolving along a three-tier upgrade path: "abrasive grade → gem grade → electronic grade."

In terms of production volume and structure, China accounts for approximately 90% of global synthetic diamond output. By carat weight, industrial-grade diamonds represent 98.7% of production. However, by value, industrial-grade diamonds account for 60%, while thermal management-grade diamonds contribute 22.6%, indicating a accelerating shift toward functional applications.

The diamond materials industry is expanding along a gradient of "mature volume production → batch adoption → incubation and introduction," forming a nine-scenario landscape across three tiers:

• Tier 1 (Mature volume): Abrasives and grinding tools
• Tier 2 (Batch adoption): Military/defense thermal management, consumer electronics, optical modules
• Tier 3 (Incubation/introduction): AI server heat sinks, diamond drill bits, GaN-on-Diamond substrates

We believe that, driven by its superior physical properties in AI server thermal management, diamond materials will enter their first year of mass production in 2026. This represents the largest and fastest-growing incremental opportunity in the AI thermal management materials sector.

Industry Outlook: Soaring AI Power Curves Create Vast Diamond Cooling Potential

Taking NVIDIA's AI chips as an example, power consumption has risen from 700W (Hopper series) to 1200W (Blackwell series) and is projected to reach approximately 1800W (Rubin series). Industry estimates suggest the Feynman generation could reach approximately 4400W—a more than sixfold increase in four years.

The AI thermal management system follows a layered architecture: "chip → TIM → heat spreader → cold plate → liquid cooling." As power curves steepen, local chip heat flux has already exceeded 500 W/cm² and is moving toward 1000 W/cm². Traditional metal materials such as copper (approximately 400 W/(m·K)) are approaching their physical thermal conductivity limits. Diamond, with thermal conductivity five times that of copper, has become the inevitable choice for next-generation cooling.

Market sizing: Based on industry ramp-up timelines, we estimate that diamond will progressively replace metal in AI chip lids, heat sink substrates, cold plates, and optical modules. The global diamond thermal management market could reach approximately 115 billion RMB by 2030, with a compound annual growth rate (CAGR) of approximately 143% from 2027 to 2030, reflecting substantial headroom and elasticity.

Key Players: Focused on Industry Penetration Bottlenecks, Major Players Accelerate

In 2026, diamond thermal management is transitioning from sample validation to volume orders. Landmark projects from multiple companies have been launched, and the industry is entering a phase of accelerated commercialization.

From the current industry landscape, efforts are concentrated on two fronts: cost and equipment/process.

1. Cost: CVD thermal-grade diamond substrates remain priced in the "per-gram" range, nearly an order of magnitude higher than copper or aluminum heat sinks. Equipment depreciation and electricity costs in the growth phase are key levers for cost reduction.

1. Process: Large-chamber MPCVD equipment and magnetron technology still require breakthroughs. Bonding processes and thermal boundary resistance (TBR) control represent the most significant gap between domestic and international players.

The competitive landscape is characterized by "Element Six leading, with China-Japan-US competition and collaboration." Overseas players lead in single-crystal diamond and TBR control, while Chinese manufacturers are rapidly closing the gap through advantages in polycrystalline capacity, composite processes, and low electricity costs.

We expect that as domestic manufacturers accelerate along the full chain—"material growth → post-processing → integrated application"—multiple expansion projects will be launched intensively. Leveraging the world's largest installed capacity of thermal-grade diamond and low-cost electricity advantages, Chinese diamond manufacturers are well-positioned to enter a phase of rapid growth.

Risk Factors

• Risk of customer validation and BOM adoption falling short of expectations
• Risk of concentrated capacity release
• Risk of high energy and equipment costs
• Risk of international trade and export controls
• Risk of competition from alternative materials and technologies

Investment Strategy

Driven by the three converging factors of rising AI chip power, the physical limits of traditional metal cooling, and ongoing optimization of diamond fabrication processes, the diamond thermal management industry is approaching its first commercial-scale investment opportunity. We recommend positioning along two key themes:

1. Focus on industry leaders that have achieved early small-batch delivery of heat spreaders, proprietary equipment development, and leading production capacity—these companies are well-positioned to benefit from demand ramp-up.

1. Monitor companies with process advantages, including large-size manufacturing capabilities, full industrial chain integration, and accelerated expansion plans.