Yunnan Germanium InP Wafer Capacity Expansion Targets Optical Communications Growth

Yunnan Chihong

Yunnan Germanium InP wafer capacity expansion will strengthen China’s position in compound semiconductor materials used in optical communications, data centres and high-speed laser systems. The company plans to invest 188.56mn yuan, or about $27.4mn, to add a new high-quality indium phosphide single-crystal wafer production line.

The project will add annual capacity of 300,000 wafers on a 4-inch equivalent basis, including 6,000 6-inch wafers. Once completed, Yunnan Germanium InP wafer capacity will reach 450,000 wafers per year on a 4-inch equivalent basis.

Yunnan Germanium InP wafer capacity growth reflects rising demand from high-speed optical modules, laser chips and detector chips. The company said its existing capacity can no longer meet market requirements as downstream customers demand larger wafer sizes and higher quality.

Indium Phosphide Demand Rises With AI and Optical Networks

Indium phosphide wafers are III-V compound semiconductor materials used in laser and detector chip production. These components are essential for high-speed optical modules, data centre interconnects, optical communications equipment and high-power lasers.

Demand has continued to rise as the optical communications market expands. High-speed optical modules have entered large-scale deployment, driven by data centre growth, AI computing infrastructure and faster network transmission requirements.

Yunnan Germanium produced 35,400 pieces of 2-4 inch indium phosphide wafers in the first half of 2025, up 4% from 33,900 pieces a year earlier. The new 18-month expansion project will help the company move beyond current capacity limits.

China Deepens Control Over Indium-Based Semiconductor Materials

The expansion also reinforces China’s role in indium supply. Indium phosphide wafers are a downstream application for indium metal, and China remains the world’s largest indium producer, with combined primary and recycled output of 1,800-1,900t in 2025.

The material also carries strategic trade significance. China placed indium phosphide under its strict dual-use export licensing system in February 2025, reflecting its importance in advanced semiconductor, optical and defense-related technologies.

For Yunnan Germanium, the project adds value beyond upstream germanium and indium exposure. It moves the company deeper into high-end semiconductor materials, where wafer quality, scale and export control positioning can shape competitiveness.

The Metalnomist Commentary

Yunnan Germanium’s expansion shows that minor metals are becoming strategic through their downstream semiconductor applications. Indium phosphide capacity will matter more as AI data centres, optical modules and high-speed communications push demand for advanced compound materials.