The global agarwood chips market size is estimated to attain around USD 84.91 billion by 2034 increasing from USD 41.2 billion in 2024, with a CAGR of 7.51%.
Agarwood Chips Market Key Points
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North America dominated the market in 2024, accounting for over 40% of the total share.
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Asia Pacific is expected to experience the fastest growth throughout the forecast period.
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By application, the oil production segment held the largest market share in 2024.
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The incense and fragrance segment, by application, is projected to grow at a considerable rate in the coming years.
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By distribution channel, the indirect segment accounted for a significant market share in 2024.
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The direct segment, by distribution channel, is anticipated to register notable growth between 2025 and 2034.
Market Overview
The agarwood chips market, also known as oud chips, is a niche yet fast-expanding segment within the global luxury fragrance, traditional wellness, and incense industries. Agarwood is formed when Aquilaria trees become infected with a specific type of mold, prompting the tree to produce a dark, aromatic resin as a defense mechanism. This resin-impregnated wood is harvested and processed into chips that are widely used in religious ceremonies, traditional medicine, perfumery, and aromatherapy.
Historically revered in regions like the Middle East, South Asia, and Southeast Asia, the market is gaining traction in Western countries due to rising demand for natural, exotic, and sustainable luxury products. With increasing consumer interest in cultural heritage, natural fragrances, and wellness rituals, the market is evolving from a traditional, artisanal industry into a more structured global trade. Valued at over USD 9 billion in 2023, the market is projected to grow steadily, driven by expanding applications and increased commercialization of cultivated agarwood.
Growth Factors
Several factors contribute to the strong growth trajectory of the agarwood chips market. One primary growth driver is the surging global demand for natural and luxury fragrances, particularly in high-end personal care and perfumery. Oud-based fragrances have gained a cult following among premium brands and consumers seeking rare and opulent scent profiles. Another significant growth factor is the increasing popularity of wellness and spiritual practices, such as meditation, yoga, and aromatherapy, where agarwood chips are used for their calming, grounding scent. Moreover, rising disposable incomes in emerging markets, particularly in Asia and the Middle East, are fueling higher consumer spending on incense and traditional wellness products.
Simultaneously, sustainable cultivation techniques and plantation-based production are addressing the scarcity of wild agarwood, making the chips more accessible and affordable to broader markets. Innovations in fungal inoculation methods have shortened resin-formation time from decades to a few years, encouraging commercial agarwood farming in countries like Vietnam, India, Thailand, and Malaysia. In addition, government support and international regulations are encouraging legal trade through sustainable practices and certification, providing credibility and driving demand for ethically sourced agarwood products.
Impact of AI on the Market
Although the agarwood industry has traditionally been artisanal, artificial intelligence (AI) is beginning to make inroads, particularly in improving cultivation, grading, and traceability. In plantation management, AI-driven systems are being used to monitor the growth conditions of Aquilaria trees, optimize fungal inoculation processes, and predict the timing of resin formation for optimal harvesting. These innovations help standardize and scale production, making agarwood farming more profitable and sustainable.
AI is also playing a critical role in quality assessment and grading. Traditionally, agarwood chips are graded manually, which can lead to inconsistency and subjectivity. AI-enabled vision systems, trained on large datasets of chip images and resin content measurements, can assist in automating grading with high precision. Furthermore, AI is enhancing supply chain transparency by enabling digital platforms to trace the origin, quality, and processing history of agarwood products. This is especially important for consumers and regulators demanding authenticity and sustainability. In the long term, the integration of AI may reduce labor dependency, ensure consistent quality, and enhance global consumer trust in premium agarwood products.
Market Drivers
Key drivers behind the growing agarwood chips market include cultural significance, rising demand in the luxury fragrance and aromatherapy sectors, and expanding applications in holistic wellness and traditional medicine. The spiritual and ceremonial importance of agarwood in Islamic, Hindu, and Buddhist cultures ensures sustained demand, particularly in the Middle East, India, and Southeast Asia. In perfumery, oud has become a symbol of opulence, featured in exclusive collections from global fragrance houses. Moreover, the chips are also used in traditional Chinese medicine, Ayurveda, and Tibetan healing for their purported anti-inflammatory and sedative properties.
The increasing commercialization of agarwood plantations and the transition from illegal wild harvesting to legal, sustainable cultivation is another crucial driver. Countries like Vietnam, Laos, and India are rapidly developing plantation infrastructure, supported by government initiatives, industry cooperatives, and technological advancements. The rise of e-commerce and global digital marketing has also exposed consumers in the US, Europe, and other non-traditional markets to agarwood-based products, further expanding demand.
Opportunities
The agarwood chips market presents vast opportunities across product innovation, geographic expansion, and digital transformation. One of the most exciting areas is the development of value-added products, such as agarwood-infused essential oils, soaps, candles, and skincare formulations, which can attract health-conscious and eco-friendly consumers. In the fragrance industry, custom oud chip blends and limited-edition offerings are growing in popularity among connoisseurs.
There is also a significant opportunity in developing sustainable and transparent supply chains. As environmental awareness grows, consumers and luxury brands alike are seeking ethically sourced and certified agarwood. Blockchain, IoT, and AI-enabled platforms can provide end-to-end traceability, assuring customers of authenticity and sustainability. Additionally, the market is seeing rising potential in non-traditional regions like North America and Western Europe, where the rise of wellness culture and natural products has created a niche for exotic incense and aromatherapy products.
Challenges
Despite its growth potential, the agarwood chips market faces several challenges. Scarcity and high cost of raw materials remain critical issues, especially for premium-grade chips harvested from old-growth trees. Wild agarwood is rare and strictly regulated under CITES (Convention on International Trade in Endangered Species), making sourcing difficult and often expensive. Even cultivated agarwood requires years of growth and careful fungal inoculation, leading to long production cycles and supply limitations.
Regulatory barriers also pose challenges, particularly in international trade. Export restrictions, complex documentation requirements, and customs delays can hinder small-scale farmers and businesses from accessing global markets. The risk of counterfeit products and adulteration is another concern, with synthetic oud or low-grade chips often sold as premium-grade wood, eroding consumer trust. Moreover, the lack of standardization in grading and pricing contributes to market opacity. Educating consumers, ensuring consistent quality, and enforcing transparency will be key to overcoming these challenges.
Agarwood Chips Market Companies
- Hoang Giang Agarwood Ltd
- Lao Agar International Development
- Asia Plantation Capital Pte Ltd.
- K.A.B. Industries
- Arista Agarvina Co. Ltd.
- Green Agro Sadaharitha Plantations Limited
- ASSAM AROMAS
- BINH NGHIA AGARWOOD CO., Ltd.
- Myanmar Treasure Co-op Ltd.
- Sai Export India
THE MJI GROUP - NHANG THIEN JOINT STOCK COMPANY
- Homegrown Concept Sdn Bhd.
Segments Covered in the Report
By Application
- Oil Production
- Incense and Fragrance
- Others
By Distribution Channel
- Direct
- Indirect
By Region
- North America
- Asia Pacific
- Europe
- Latin America
- Middle East & Africa
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