In-Depth Analysis of the GaN (Gallium Nitride) Sector: The New Favorite of AI Power Supplies, or Just a Bubble of Hype?
On September 17th, the concept of "gallium nitride" suddenly became active in the A-share market, with stocks such as Shilianxing and Jiejie Microelectronics seeing gains of over 5%. Market rumors claimed that "orders for gallium nitride AI power supplies have increased significantly, and the cost is approaching that of silicon-based devices," which directly ignited investors' enthusiasm.
However, as financial journalists and scholars, we need to see through the stock price fluctuations and understand the underlying industry realities. In simple terms, this is a market reaction driven by both "anxiety about AI computing power" and "expectations of technological iteration," but the reality is much more cautious than the rumors suggest. Gallium nitride does indeed have a bright future in the field of AI server power supplies, but it is not yet time for it to completely replace silicon chips, as the cost gap still exists.
Here is a breakdown of this news event from five different perspectives to help you understand the changes in the semiconductor industry in plain language:
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Why the Sudden Rise? AI Servers Have Become Power-Hungry, and Traditional Power Supplies Can't Keep Up
First, we need to understand why there is a sudden focus on gallium nitride: the main driving force is AI's high power consumption.
In the past, server power consumption was relatively controllable. But now, with the surge in demand for large model training and inference, the power of individual data center cabinets is moving towards the "megawatt level." You can think of current AI servers as a group of sprinters pushing their limits, requiring an extremely powerful and stable energy supply.
Traditional silicon-based power supplies (using silicon MOSFETs) face bottlenecks when dealing with such high power and density:
1. High heat generation and low efficiency: Silicon devices lose a lot of energy at high frequencies and voltages, leading to larger power supplies and increased heat dissipation requirements.
2. Large size: To accommodate more power, power supply modules become bulky, taking up valuable space inside servers.
Gallium nitride (GaN), as a third-generation semiconductor material, naturally possesses the characteristics of high frequency, high voltage, and high efficiency. In AI server power supplies, it can provide more power in a smaller size while generating less heat. Therefore, when the news of increased AI power supply orders came out, investors immediately realized that since AI is the biggest trend in the next few years, the key component for powering AI—gallium nitride—would also be in high demand.
In simple terms: AI servers are power-hungry and sensitive to heat. Traditional silicon power supplies can't meet these demands, while gallium nitride power supplies are more efficient and compact, making them very attractive.
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Rumors vs. Reality: "Cost Approaching Silicon" is an Exaggeration; It's Still in the Early Stages of Small-Scale Testing
The news mentioned that the cost of gallium nitride is approaching that of silicon-based devices, which was a key factor in the stock price rise, but industry insiders and research institutions have tempered this claim:
This statement is not entirely accurate, at least for high-end server applications.
We need to distinguish between two scenarios:
1. Consumer-grade power supplies (such as phone chargers): After years of innovation, the cost of gallium nitride has significantly decreased and is now very close to or even lower than silicon-based solutions, which is why fast chargers are getting smaller and cheaper.
2. Industrial/server-grade power supplies (high voltage, high power): These are the core components used in AI data centers. Currently, the cost of high-voltage gallium nitride devices is still significantly higher than that of traditional silicon-based MOSFETs.
Why is it more expensive? Because the manufacturing process is more complex. Gallium nitride production involves epitaxial growth, yield control, and packaging, all of which are technically challenging and costly. At present, the application of gallium nitride in AI power supplies is still in the early stages of small-scale adoption. Leading power supply manufacturers (such as Delta and Lite-On) have started experimenting with it, but it has not yet become widespread.
In simple terms: Just like in the early days of electric vehicles, although the technology was advanced, the cost of batteries was much higher than that of gasoline cars, so only a few high-end models used them. Similarly, gallium nitride in server power supplies is a high-end, expensive option that has not yet become widely available.
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Timeline Prediction: 2026 is a Critical Year, with Astonishing Growth in the Next 5 Years
Although it has not yet become widely adopted, the industry is very optimistic about the future. According to analysis from CASA Industry Research Institute and several experts, we can predict the following timeline:
- Current (2024-2025): Verification and Early Adoption Phase.
- The penetration rate of gallium nitride in AI power supplies is very low, expected to be only 5%-10% by the end of 2026.
- It will mainly be used in high-end applications where efficiency is critical, as a supplement to silicon-based devices, not as a replacement.
- 2025-2030: Explosive Growth Phase.
- With the acceleration of new AI computing centers and the replacement of old power supplies, the market is expected to grow at an annual rate of 70%.
- This is an astonishing figure, meaning the market capacity will multiply several times over these years.
- Next 2-3 Years: Preparatory Phase for Large-Scale Replacement.
- The industry expects that significant replacement will only occur in the next two to three years.
In simple terms: Buying gallium nitride stocks now is investing in the future story rather than current performance. This story will take time to unfold, with noticeable market share changes expected by 2026, and the real explosion in adoption coming after 2025.
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The Secret to Cost Reduction: Moving from 6-Inch to 8-Inch Wafers, and "Low Voltage" is the Key
Many people worry that gallium nitride will always be expensive, but the cost is actually decreasing rapidly, mainly due to two factors:
1. Wafer size upgrade (6 inches -> 8 inches -> 12 inches):
- The current mainstream is 6-8-inch production lines. As 8-inch gallium nitride production lines become more efficient and 12-inch production capacity is released, the cost per chip will decrease.
- Experts like Research Director Zhang Wenling have noted that the cost of 650V (high voltage) gallium nitride from some domestic manufacturers has approached that of silicon devices, but the cost competitiveness for voltages below 100V still needs to improve.
2. Low-voltage devices are the Key to Mass Production:
- This is a crucial point that is often overlooked. In megawatt-level cabinets, the usage of low-voltage gallium nitride devices is about 18 times that of high-voltage devices!
- This means that the competition for gallium nitride companies will shift from who can produce high voltage to who can supply low-voltage devices at low costs on a large scale. Companies that can break through in the low-voltage domain will gain the biggest market share.
In simple terms: The cost of gallium nitride is decreasing due to larger wafer production. The future market will be dominated by low-voltage devices, not high-voltage ones.
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Industry Landscape: Complementary Rather than Competitive
Finally, let's correct a common misconception: Will gallium nitride completely replace silicon?
The answer is no.
Industry experts have made it clear that silicon devices are also being upgraded (such as with super-junction MOSFETs and IGBTs), and the two technologies are more likely to complement each other rather than replace one another.
- Gallium nitride's strengths: High frequency, high voltage, high density, and high efficiency. Typical applications include AI server power supplies, fast charging, energy storage, OBC (on-board chargers) for electric vehicles, and robot power supplies.
- Silicon's strengths: Medium and low voltage, high current, and cost-sensitive applications in large-scale general use.
The long-term drivers are:
1. AI computing infrastructure: The growing demand for server and energy storage power supplies.
2. Electric vehicles and robots: With the adoption of 800V high-voltage platforms in electric vehicles and the development of humanoid robots, power supply systems in these fields will also rely heavily on gallium nitride.
For example, the leading company Innosilicon reported a 183% increase in AI and data center chip shipments in the first half of the year, demonstrating real demand growth. However, they also noted that the adoption in data centers is still in its early stages, and companies are exploring cooperation with cloud providers.
In simple terms: Silicon and gallium nitride will coexist, with each playing its role. Silicon will remain the foundation, and gallium nitride will complement it in high-end applications. Over the next few years, as costs decrease, gallium nitride will expand from a niche market to more industrial and computing applications, but silicon will still dominate many areas.
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Tips for Ordinary Investors:
1. Be cautious of short-term speculation: Stock prices often rise ahead of fundamental trends. The claim that costs are approaching those of silicon-based devices is not yet supported by evidence, so be wary of potential corrections after the hype.
2. Focus on long-term trends: The construction of AI computing infrastructure is a definite trend, and gallium nitride, as a key beneficiary, has significant long-term growth potential (70% annual growth).
3. Pay attention to technical indicators: Watch the yield of 8-inch production lines, the speed of cost reduction for low-voltage devices, and the procurement ratios of leading power supply manufacturers. These are key indicators of whether the industry is truly entering a growth phase.
4. Don't overreact to replacement: Don't expect gallium nitride to replace all silicon chips overnight; it will be a gradual process. The next 2-3 years will be critical for observing these developments.
In summary, investing in gallium nitride stocks now is betting on the future potential of this technology. The market will show clear changes by 2026, with the real explosion in adoption following in 2025.