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It was first discovered many millennia before the Galactic Civil War for use in power cells. Jedi Knights would sometimes use phobium power cells for their lightsabers.
During the early years of the Galactic Civil War, Emperor Palpatine stationed work crews on Gargon to mine the element. The ore on Dor was processed and mixed with doonium compounds, which in turn, were used to coat the power core of the second Death Star.