CITIC SEC: Ultimate Heat Dissipation Arrives, Diamond Ushers in Its First Year of Industrialization

CITIC SEC released a research report stating that driven by three factorsthe steep rise in AI chip power consumption, traditional metal heat dissipation approaching physical limits, and continuous optimization of diamond preparation technology and processesthe diamond heat dissipation industry is expected to usher in investment opportunities in its first year of industrialization. It is recommended to position around two main lines: first, focus on industry leaderscompanies that are the first to achieve small-batch supply of heat spreaders, self-developed equipment, and leading production capacity scale are expected to fully benefit from demand expansion; second, pay attention to companies with leading processes, large-size manufacturing and full industry chain capabilities, and accelerated capacity expansion layouts. CITIC SEC's main points are as follows: Diamond: A carbon-based crystal with excellent performance, with value focus shifting toward functional applications. Diamond combines the highest hardness in nature (Mohs hardness 10) with the highest thermal conductivity (2000-2200W/(mK)), and its thermal expansion coefficient is highly matched with mainstream substrates such as silicon and silicon carbide. Products are upgrading along the three-tier spectrum of "abrasive gradegem gradeelectronic grade." In terms of output and structure, China's synthetic diamond production accounts for about 90% of the global market share. Although by carat, industrial-grade diamond accounts for 98.7%, from the output value perspective, industrial-grade diamond accounts for 60% of output value, heat dissipation grade 22.6%, and the value focus is accelerating its migration toward functional grade. The diamond materials industry is expanding in depth along the gradient of "mature volume productionbatch introductioncultivation and introduction," forming a three-tier progressive nine-scenario pattern including abrasives and grinding tools, military heat dissipation, consumer electronics, optical modules, AI server heat sinks, diamond drill needles, and GaN-on-Diamond substrates. It is judged that with its excellent physical properties in AI server heat dissipation applications, diamond materials are expected to enter their first year of mass production in 2026, making this the largest and fastest-growing incremental direction in the AI heat dissipation materials industry. Industry assessment: AI power consumption curve rises steeply, diamond heat dissipation has broad space. Taking NVIDIA AI chips as an example, as computing power demand continues to increase, their power consumption has risen from 700W for the Hopper series and 1200W for the Blackwell series to about 1800W for the Rubin series, and the industry expects the Feynman generation to reach the 4400W level, more than a 6x increase in four years. The AI heat dissipation system presents a hierarchical structure of "chipTIMthermal platecold plateliquid cooling." As the power consumption curve rises steeply, local chip heat flux density has exceeded 500W/cm and is evolving toward 1000W/cm. Traditional metal materials such as copper (about 400W/(mK)) are approaching the physical limit of thermal conductivity in heat dissipation, and diamond, with thermal conductivity 5 times that of copper, has become the inevitable choice for heat dissipation upgrades. Space estimation: according to the industry's volume production pace, it is estimated that diamond will gradually replace metal heat dissipation in AI chip lids, heat sink sheets, cold plates, and optical modules. It is expected that by 2030 the global diamond heat dissipation market space is expected to reach RMB 115 billion, with a CAGR of about 143% from 2027-2030, offering broad space and great elasticity. Player progress: Focusing on industry penetration bottlenecks, major players continue to push forward. In 2026, diamond heat dissipation completed the leap from sample verification to batch orders, and landmark projects from multiple companies were successively implemented, with the industry entering a stage of accelerated commercialization. From the current state of industry development, the main focus is on two aspects: cost and equipment processes. First, on the cost side, the unit price of CVD heat dissipation-grade diamond sheets is still in the "gram-level" range, nearly an order of magnitude higher than copper and aluminum heat sinks, and reducing equipment depreciation and electricity costs in the growth stage is an important path; second, on the process side, large chambers and magnetrons for MPCVD equipment still need breakthroughs, and bonding processes and thermal boundary resistance (TBR) control are the areas with the most obvious gap between domestic and international players. Currently, the competitive landscape shows a "Element Six-led, China-Japan-U.S. coopetition" posture. Overseas players lead in single crystal and TBR directions, while Chinese manufacturers are rapidly narrowing the gap by leveraging advantages in polycrystalline capacity, composite processes, and low electricity costs. It is expected that as domestic manufacturers accelerate efforts along the full chain of "material growthback-end processingintegrated application," multiple batches of expansion projects in the industry will be intensively implemented. With China's already formed reserve of the world's largest heat dissipation-grade diamond production capacity and low electricity cost advantage, domestic diamond manufacturers are expected to enter a high-speed development channel. Risk factors: Risks of customer verification and BOM introduction falling short of expectations, risks of concentrated release of capacity planning, risks of high energy and equipment costs, risks of international trade and export controls, and risks of competition from substitute materials and technology routes.