Fluorochemicals: Beneficiary of AI-driven New Opportunities
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UBS believes the fluorochemicals sector has outperformed the broader chemicals index by approximately 9% since early May. This rally is primarily driven by the US delaying the phase-out of certain third-generation refrigerants and growing expectations for AI-related fluorochemical applications. UBS expects rapid growth in AI-driven demand, boosted by rising computational needs and material system iterations. Currently, fluorochemical material suppliers trade at a significant valuation discount compared to electronic chemical peers, suggesting the market has not fully priced in AI-driven growth opportunities.
The report highlights key applications such as electronic-grade hydrofluoric acid (EG-HF), fluorinated fluids, and gases in semiconductor manufacturing. G5-grade EG-HF faces high technical barriers. Additionally, 3M's exit from PFAS production by end-2025 due to regulations creates substitution opportunities for Chinese suppliers. In data centers, PTFE is emerging as a next-generation PCB candidate due to its low dielectric constant. Mainstream liquid cooling chemical solutions are not yet standardized.
Consequently, UBS raised target prices for Dongyue Group to CNY 29.7, Capchem to CNY 122, and EM Technology to CNY 94.1. The firm identifies Dongyue Group, Capchem, and Guanggang Gases as potential AI-driven demand beneficiaries. Chinese G5 EG-HF producers should benefit from downstream semiconductor demand growth, import substitution trends, and tightening global supply exacerbated by Middle East conflicts affecting sulfur and anhydrous hydrofluoric acid availability.
Key exhibits
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