Vital Materials InP Wafer Project Targets China’s Compound Semiconductor Growth

Vital Materials

Vital Materials InP wafer project plans will add new indium phosphide and gallium arsenide materials capacity in Hubei province as China expands its compound semiconductor supply chain. The project will be developed in Jingzhou by subsidiary Hubei Vital New Material.

Vital Materials InP wafer project capacity is planned at 90 t/yr of indium phosphide and 160 t/yr of gallium arsenide wafer materials. The company started an environmental impact assessment on 28 May, although a commissioning schedule has not been disclosed.

Vital Materials InP wafer project development reflects rising demand for high-speed optical components used in artificial intelligence infrastructure, data centres and communications networks. InP is becoming increasingly strategic as optical bandwidth requirements rise.

The investment also deepens China’s downstream use of indium, where the country already dominates global production of both primary and recycled material.

AI and Optical Networks Drive InP Capacity Expansion

Indium phosphide wafers are critical substrates for high-speed optical and photonic devices. They are widely used in lasers, detectors and optical modules that move data between servers and networking systems.

AI data centres are becoming one of the strongest growth drivers for these applications. As computing clusters expand, optical connectivity is increasingly needed to move information at higher speeds and lower latency.

This is supporting a wider global race to expand InP capacity. Chinese producer Yunnan Germanium is increasing production of high-quality InP single-crystal wafers, while overseas manufacturers are also investing in new capacity.

Gallium arsenide remains another important compound semiconductor material. It is widely used in radio-frequency, wireless, sensing and optoelectronic applications where conventional silicon has performance limitations.

Vital’s planned combination of InP and GaAs therefore gives it exposure to multiple growth markets, including AI infrastructure, optical communications, telecommunications and advanced electronics.

The project also fits China’s broader strategy of building more domestic semiconductor materials capacity and reducing dependence on foreign processing technologies.

Export Controls Raise Strategic Value of Indium Processing

China added InP to its dual-use export control system in February 2025, increasing the material’s strategic importance.

Export controls can affect international supply availability even when domestic production is sufficient. This makes local wafer and substrate capacity more valuable to Chinese downstream manufacturers.

China produced an estimated 1,800-1,900t of primary and recycled indium in 2025, giving it a strong upstream resource position. Expanding InP wafer capacity allows more of that indium to move into higher-value semiconductor applications.

That downstream shift matters economically. Selling processed wafers and engineered materials captures more value than exporting refined minor metals alone.

For the global market, the project also reinforces concentration risk. China already holds a dominant position in several minor metals and is now expanding further into downstream semiconductor materials.

The key issue will be whether non-China InP capacity can grow quickly enough to keep pace with AI-driven demand and mitigate supply risks linked to export controls.

The Metalnomist Commentary

Vital’s project shows that the indium supply chain is moving rapidly from metal production toward strategic wafer materials. AI demand is making InP capacity as important as upstream indium availability itself.