AI Demand for InP Drives Major Semiconductor Capacity Expansion

Indium Phosphide

AI demand for InP is triggering a global investment cycle as semiconductor and photonics manufacturers race to expand indium phosphide wafer capacity. Supply remains tight as AI data centres require increasingly powerful optical interconnects between processors, memory and networking systems.

AI demand for InP has prompted Coherent to plan successive capacity expansions at its Sherman, Texas, facility. The company intends to double production by the end of 2026 and double capacity again by the end of 2027.

AI demand for InP is also accelerating investment in Japan, China and downstream US photonics manufacturing. Long-term supply agreements and customer prepayments show that manufacturers increasingly view access to InP substrates and components as a strategic constraint.

The expansion creates a direct link between AI infrastructure investment and indium demand, pushing a traditionally small specialty metal deeper into the semiconductor supply chain.

Six-Inch InP Wafers Become Strategic for AI Photonics

Coherent's Texas facility is focused on high-volume 150mm, or six-inch, InP semiconductor manufacturing. The company sees the transition from three-inch to six-inch wafers as a major driver of future production efficiency.

Larger wafers allow manufacturers to produce more devices from each substrate and potentially improve manufacturing economics. Coherent has also reported stronger yields from its six-inch lines compared with three-inch production.

The company shipped its first transceivers containing components manufactured on six-inch InP lines during the first quarter.

US industrial policy is supporting the expansion. Coherent has reached a preliminary agreement for up to $50mn in direct funding under the CHIPS and Science Act.

Nvidia has also invested $2bn in Coherent and secured supply through the end of the decade. This highlights how AI companies are moving upstream to secure optical component capacity rather than relying solely on conventional procurement.

Coherent also plans to establish six-inch InP production at another facility in Zurich, further expanding its geographic manufacturing base.

Japan's JX Advanced Metals is pursuing an even larger capacity programme. The company plans to invest up to ¥120bn over four years and increase InP substrate capacity by seven to ten times.

Expansion will include additional production at Isohara Works and new capacity in Hitachinaka. JX is also discussing price revisions with customers as it seeks to build a more sustainable long-term supply model.

Tight InP Supply Extends Into Indium and Optical Manufacturing

China is seeing similar efforts to secure material. AXT's Beijing Tongmei subsidiary has signed a 2027 supply agreement with Nanjing Casela Technologies covering 173mn yuan of InP substrate wafers.

Casela will prepay 50% of the contract value, demonstrating the level of competition for future wafer availability. The agreement also gives the customer priority for additional volumes if capacity allows.

Export restrictions on Chinese InP have added another source of supply uncertainty, increasing the incentive for customers outside China to secure alternative production.

The shortage is also driving investment further downstream. Nokia is expanding its advanced photonic semiconductor test and packaging operation in Pennsylvania by up to ten times.

The facility packages photonic chips into optical modules used in AI and telecommunications infrastructure. Nokia is investing around $30mn alongside federal and state support.

These investments show that the bottleneck extends across the entire photonics chain, from InP substrates and epitaxial wafers to lasers, modulators, transceivers and packaging.

For metals markets, the expansion strengthens the outlook for indium. InP production requires high-purity indium, meaning sustained AI-driven wafer growth could place additional pressure on upstream refining and feedstock availability.

The Metalnomist Commentary

AI is turning indium phosphide from a specialised telecom material into strategic computing infrastructure. The next bottleneck could move upstream from photonic devices to high-purity indium and qualified six-inch wafer capacity.

Tower Semiconductor InP Wafer Deal Secures AI Photonics Supply

iQE

Tower Semiconductor InP wafers will be supplied by UK-based IQE under a long-term agreement supporting next-generation optical connectivity products for artificial intelligence data centres. The deal strengthens Tower's access to indium phosphide epiwafers as demand for high-speed photonics accelerates.

Tower Semiconductor InP wafers will be used across several silicon photonics platforms, including technology for 200 Gb/s per lane optical transceivers and prototype 400 Gb/s per lane modulators. These components are designed to handle the rapidly increasing data requirements of AI training and inference systems.

Tower Semiconductor InP wafers have become strategically important because AI data centres require faster connections between servers, switches and accelerators. Indium phosphide is particularly suited to lasers and modulators operating at optical communications wavelengths.

The agreement includes minimum purchase commitments from Tower and reciprocal supply obligations from IQE, giving both companies greater visibility as they prepare for higher production volumes.

AI Data Centres Accelerate InP Photonics Demand

AI infrastructure is pushing optical networking requirements beyond traditional telecom applications. Larger computing clusters need higher bandwidth while also reducing the amount of electricity consumed moving data between processors.

InP plays a central role because it can efficiently generate and manipulate light for high-speed optical transmission. This makes it valuable for lasers, modulators and other photonic devices integrated with silicon-based platforms.

Tower plans to use IQE material for 200 Gb/s per lane pluggable transceivers and is also developing 400 Gb/s per lane modulators. Optical circuit switching represents another potential application as hyperscale data centres seek more efficient network architectures.

Commercial commitments are already building around Tower's expansion. The company has signed $1.3bn of silicon photonics contracts linked to 2027 revenue and received $290mn in customer prepayments to reserve production capacity.

These figures highlight how optical connectivity is becoming a major infrastructure bottleneck alongside processors, memory and power supply.

Supply Commitments Highlight Tight InP Capacity

The agreement is also important because global InP wafer availability remains constrained. IQE has been working with multiple suppliers to secure enough material as semiconductor manufacturers compete for capacity.

The minimum volume commitments give IQE a clearer demand base for future investment while providing Tower with greater supply certainty.

IQE recently secured investment and purchase commitments from US semiconductor manufacturer Macom, helping the company avoid a potential sale and reinforcing its position in the compound semiconductor market.

As hyperscalers such as Amazon and Google continue expanding AI infrastructure, more semiconductor manufacturers may seek long-term contracts to secure InP supply.

The Tower-IQE deal therefore reflects a broader shift in the semiconductor supply chain. Access to advanced materials is becoming as strategically important as chip fabrication capacity itself.

Under a separate agreement, Tower will also provide IQE with a worldwide royalty-free licence covering porous silicon patents, resolving previous intellectual property litigation between the companies.

The Metalnomist Commentary

InP is moving from a specialist telecom material into a core AI infrastructure input. As optical bandwidth requirements rise, long-term wafer supply agreements could become increasingly important to securing semiconductor capacity.

China Strategic Minerals Framework Tightens State Control Over 36 Resources

Strategic Minerals

China strategic minerals policy has entered a more formal phase after Beijing placed 36 mineral resources under tighter central government control. The revised regulations strengthen state oversight of mining, exploration, production quotas and strategic reserves.

China strategic minerals covered by the framework include major industrial metals, battery materials, rare earths, semiconductor metals and energy resources. The rules also include non-metallic materials such as graphite, phosphate, fluorite and high-purity quartz.

China strategic minerals regulation is significant because many of the affected materials are essential to batteries, aerospace, defence, semiconductors, energy infrastructure and advanced manufacturing.

The immediate market impact has been limited because several controls already existed in practice. However, formalising them under a single legal framework could strengthen Beijing's ability to manage supply over the longer term.

Centralised Quotas and Reserves Strengthen Supply Management

The Ministry of Natural Resources, working with the National Development and Reform Commission, will set annual mining quotas for strategic minerals.

The objective is to prevent uncontrolled production while giving central authorities greater control over national resource development.

Approvals for new exploration and mining rights will also be consolidated at the central level. Authorities will restrict the number of mining licences granted for individual deposits.

This could slow uncontrolled capacity growth in some markets while giving Beijing more influence over production timing and regional development.

The new framework also establishes a three-tier reserve system covering physical product inventories, production capacity and undeveloped resource sites.

State and private companies will jointly participate in stockpiling, while resource-site reserves are expected to remain available for at least five years.

This creates a broader security mechanism than conventional commodity stockpiles. China will not only hold material inventories but also preserve future production capability and undeveloped resources.

For strategically sensitive metals, this could provide Beijing with greater flexibility to respond to supply disruptions, price volatility or geopolitical pressure.

Rare Earths and Semiconductor Metals Gain Greater Strategic Weight

The list covers 25 metallic commodities, including iron, copper, aluminium, titanium, vanadium, manganese and chromium.

Battery materials such as lithium, cobalt and nickel are included alongside all 17 rare earth elements.

China has also designated tungsten, antimony, tin and molybdenum as strategic resources, together with semiconductor and specialty metals including gallium, germanium, indium, rhenium, niobium, tantalum, beryllium, zirconium and hafnium.

This combination is important because China already holds dominant positions across many of these supply chains.

Rare earth separation, tungsten processing, antimony, gallium and germanium are particularly sensitive because alternative global processing capacity remains limited.

The inclusion of high-purity quartz also highlights the expanding definition of strategic materials. Quartz is an important input in semiconductor and solar manufacturing, linking mineral security directly with advanced technology industries.

The framework therefore goes beyond mining policy. It strengthens China's ability to manage the upstream materials required for manufacturing competitiveness and national security.

The Metalnomist Commentary

China is moving from individual export controls and quotas toward a comprehensive strategic resources system. The long-term implication is greater state influence over not only current supply, but also future capacity and undeveloped reserves across many of the world's most critical materials.

LEO Semiconductor Demand Rises as US-China Space Race Accelerates

LEO chip

LEO semiconductor demand is accelerating as low earth orbit satellite deployment expands and the US-China space technology race intensifies. Greater satellite density is increasing the semiconductor content required for communications, sensing, computing and power management.

LEO semiconductor demand is also creating new opportunities for advanced materials including gallium nitride, silicon germanium and indium phosphide. These materials support high-frequency communications, radio-frequency power, photonics and other functions where conventional silicon can face performance limits.

LEO semiconductor demand is moving beyond traditional government space programmes as private capital enters satellite broadband, direct device connectivity and potential orbital data centres. The shift is increasing launch frequency and expanding the commercial market for space-qualified electronics.

The development has strategic implications for gallium and indium supply chains. Higher deployment of GaN and InP devices could increase demand for high-purity materials already considered strategically sensitive.

GaN and InP Gain From Higher Satellite Semiconductor Intensity

Modern LEO constellations require increasingly sophisticated radio-frequency chips, optical communications devices, sensors and power electronics.

GaN is particularly important for RF power amplifiers because it performs efficiently at high frequencies and power levels. This makes it suitable for satellite communications, phased-array antennas and future 6G networks integrating space, air and ground infrastructure.

China is building more domestic capability across this value chain as US technology controls increase pressure for semiconductor self-sufficiency.

CETC-linked companies are already supplying advanced components for Chinese spacecraft and communications systems. Recent mass production of millions of GaN RF chips indicates that China is moving some advanced compound semiconductor technology from specialised programmes toward higher-volume deployment.

Indium phosphide could benefit from another part of the satellite market. InP is important for high-speed optical communications and photonic systems, which could become increasingly valuable as satellite networks move larger volumes of data.

Silicon germanium also offers advantages in high-frequency and radiation-sensitive electronics, adding another specialty materials route into the expanding space semiconductor market.

The result is a broader materials opportunity. Satellite growth is no longer only about aluminium structures, titanium components and propulsion materials; semiconductor-grade gallium, indium and germanium are becoming increasingly important.

Orbital Manufacturing Could Open a New Semiconductor Investment Cycle

The US is also considering greater policy support for semiconductor manufacturing in space. Proposed legislation would clarify that semiconductor manufacturing in LEO can qualify for incentives under the CHIPS and Science Act.

The objective reflects growing concern that China could gain an early advantage in orbital manufacturing.

Microgravity manufacturing is attracting interest because some semiconductor materials could potentially be produced with fewer defects and improved uniformity compared with terrestrial processes.

Private companies are accelerating that development. SpaceX, Blue Origin, Google and specialist manufacturers are exploring concepts ranging from orbital data centres to in-space semiconductor production.

The economic model of the space industry is also changing. Commercial investment now represents a much larger share of total space spending than government budgets, increasing the pace at which new technologies can move from development into deployment.

Reusable rockets, lighter satellites and higher-volume manufacturing have reduced the cost of deploying large constellations. Advanced antennas and semiconductor systems originally developed for military applications are also moving into commercial markets.

For metals and materials suppliers, this creates another high-growth demand channel. Aerospace-grade titanium and nickel alloys remain important, but the next phase of the space economy will increasingly depend on advanced semiconductor materials and high-purity minor metals.

The Metalnomist Commentary

The LEO race is becoming a materials race as much as a satellite race. Gallium, indium and germanium could gain strategic value as communications, computing and semiconductor manufacturing move increasingly into orbit.

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.

Lumentum Indium Phosphide Capacity Expansion Targets AI Optical Demand

Lumentum

Lumentum indium phosphide capacity is set to expand in the US as the photonics manufacturer increases production for artificial intelligence and cloud infrastructure. The company is preparing a new North Carolina facility focused on six-inch InP wafer production.

Lumentum indium phosphide capacity is strategically important because InP is a critical material for high-speed laser chips used in optical transceivers. These devices move large volumes of data between servers, switches and accelerators inside AI data centres.

Lumentum indium phosphide capacity expansion also reflects a broader shortage of compound semiconductor manufacturing capacity. AI infrastructure is now creating a new demand channel for InP beyond traditional telecom and sensing applications.

The company has ordered multiple InP production systems from German equipment supplier Aixtron. The North Carolina site is expected to open by mid-2028.

Nvidia Deal Anchors US InP Manufacturing Growth

Part of Lumentum’s future production is already committed to Nvidia under a multibillion-dollar supply agreement for advanced InP laser components. Nvidia is also investing $2bn in Lumentum’s manufacturing expansion.

That commercial backing is important because compound semiconductor fabs require large capital investment and long qualification cycles. Firm customer commitments reduce the risk of adding capacity ahead of demand.

AI data centres require increasingly fast optical links as computing clusters grow larger. Copper interconnects remain important at shorter distances, but optical systems become more critical as bandwidth and transmission distance increase.

InP laser chips sit at the centre of that shift. They enable high-speed optical transceivers used to connect servers and networking equipment inside cloud and AI infrastructure.

These AI-related applications now account for around 10% of global InP demand. That share could rise as data-centre operators move toward higher-speed optical architectures.

The expansion therefore gives Lumentum exposure to one of the fastest-growing segments of the semiconductor materials market.

Structural Supply Constraints Lift InP Investment

Global InP manufacturing capacity remains limited, prompting producers in several regions to expand.

UK semiconductor producer IQE has said it could convert some gallium arsenide capacity to InP if customer demand continues to strengthen. That illustrates how manufacturers are reallocating compound semiconductor assets toward higher-growth photonics markets.

Chinese producer AXT is also expanding aggressively. The company plans to double InP capacity in 2026 and again in 2027 to serve growing data-centre demand.

This competition shows that InP is becoming a strategic material rather than a niche semiconductor substrate. Supply availability, wafer quality and production scale will increasingly affect optical component growth.

For AI infrastructure, the bottleneck is shifting beyond processors. High-performance computing also depends on optics, power electronics, cooling and materials capable of moving data efficiently.

The next phase of AI investment will therefore benefit companies positioned in these supporting supply chains. Lumentum’s North Carolina expansion places InP wafer production directly inside the US manufacturing ecosystem.

The Metalnomist Commentary

AI growth is turning indium phosphide into a strategic semiconductor material, not just a telecom input. The companies that secure wafer capacity and qualified laser production early could gain significant leverage as optical connectivity becomes a core data-centre bottleneck.

IQE InP Capacity Positions UK Wafer Producer for AI Data Centre Demand

IQE

IQE InP capacity gives the UK compound semiconductor wafer producer a stronger position as artificial intelligence infrastructure drives demand for faster optical data transmission. The company says it has enough capacity to ramp output for AI infrastructure, aerospace and defence, and wireless markets in 2026.

IQE InP capacity is becoming more strategically important because indium phosphide supports high-speed photonic products used in data centres. These systems need faster, lower-latency connectivity as AI workloads increase.

IQE InP capacity could also be expanded by converting some gallium arsenide capacity if customer commitments support the move. That flexibility gives IQE a way to respond to demand without large immediate capital spending.

The company expects 2026 revenue to grow by more than 20%, supported by strong demand across core segments and a sharper recovery in photonics.

InP and GaN Demand Strengthens With AI Infrastructure

Indium phosphide demand is rising because AI data centres require ultra-fast optical and wireless communications. High-performance photonics are becoming essential as data movement becomes a bottleneck in AI infrastructure.

IQE produces InP, gallium nitride, gallium arsenide and gallium antimonide wafer products and material systems. The company sees the strongest opportunities in InP and GaN.

The AI buildout helped turn IQE’s business around in the second half of last year. First-half revenue had been pressured by tariff uncertainty, weakness in wireless handsets, customer inventory builds and delays in military and defence funding.

Photonics revenue rose by 15% to £57.1mn in 2025, supported by AI, data centres and the release of funding for some US military and defence programmes.

GaN is also gaining relevance. Demand for GaN power semiconductors is being driven by data centres, aerospace, defence and space applications, where efficiency, power density and heat resistance are critical.

GaAs remains relevant in wireless and sensing markets. IQE’s message is that InP may be leading the current growth cycle, but it sits inside a broader compound semiconductor materials platform.

Supply Security and Customer Commitments Will Decide Expansion

IQE’s capacity position improved after US chipmaker Macom invested in the company last month. The investment allowed IQE to avoid a sale process and retain manufacturing sites in the UK, US and Taiwan.

Each site has its own technology focus and capacity to scale production without major new capital expenditure. But any expansion must be supported by customer engagements, commitments or financing.

That condition matters because compound semiconductor supply chains require long qualification cycles. Customers need reliable wafer quality, secure supply, technical consistency and predictable production before committing to larger volumes.

IQE is also working with suppliers to reduce exposure to shortages in InP materials. The company is looking to dual-source or expand sourcing capabilities so it does not depend on a single supplier.

This highlights a wider materials issue. AI infrastructure is increasing demand not only for chips, but also for specialised semiconductor materials such as indium, gallium, phosphorus and antimony-based systems.

For IQE, the opportunity is clear. If AI, defence and wireless demand remain strong, the company can use its existing asset base to scale higher-value wafer production.

The challenge is execution. IQE must secure firm customer commitments, manage raw material sourcing and convert technical capacity into qualified volume growth.

The Metalnomist Commentary

IQE’s outlook shows that AI infrastructure is pulling compound semiconductors deeper into strategic supply-chain planning. The next bottleneck may not only be chip design, but access to qualified InP, GaN and GaAs wafer capacity.

China Boeing Aircraft Deal Signals Trade Thaw but Rare Earth Controls Remain

Boeing

China Boeing aircraft deal confirmation marks a concrete outcome from recent China-US trade talks, but Beijing’s position on tariffs and rare earth export controls shows that strategic supply-chain tensions remain unresolved. China’s Ministry of Commerce said the country will purchase 200 Boeing aircraft under commercial principles.

China Boeing aircraft deal terms also include US commitments to provide sufficient engine and related component supplies. Both sides described aviation as a key sector for mutually beneficial cooperation, giving the agreement wider industrial significance beyond aircraft sales.

China Boeing aircraft deal confirmation is important for aerospace supply chains because Boeing aircraft demand supports engines, titanium, aluminium, nickel superalloys, avionics, landing gear and precision manufacturing. A large Chinese order could improve long-term visibility across several high-value materials and components.

The readout also clarified China’s tariff stance. Beijing said any future US tariffs on Chinese goods should not exceed levels agreed under the joint arrangement reached at the Kuala Lumpur trade consultations.

Aviation Deal Supports Aerospace Supply Chains

The planned purchase of 200 Boeing aircraft could support a broad aerospace supply chain if deliveries move forward smoothly. Aircraft orders generate demand across airframes, engines, forgings, fasteners, castings, electronics and maintenance networks.

For metals markets, the deal is relevant to titanium, aluminium, nickel-based superalloys and specialty steels. Aircraft production and engine supply depend on qualified materials with long approval cycles and strict traceability requirements.

The US side’s commitment to engine and component supply is also significant. Aircraft sales are not only about airframes. Engines, spare parts and related systems determine delivery schedules, airline operations and aftermarket demand.

The agreement may also help stabilise one of the most politically sensitive parts of China-US industrial trade. Aviation has historically been a major commercial bridge between the two economies.

However, execution will matter. Aircraft deliveries require production slots, engine availability, regulatory coordination, financing and customer acceptance. The announcement gives direction, but the supply-chain impact will depend on actual delivery timing.

Tariffs and Rare Earth Controls Keep Strategic Tension Alive

China said future US tariffs on Chinese goods should stay within the levels agreed under the Kuala Lumpur framework. It also said it wants to remove unilateral US tariffs through follow-up negotiations.

Under the earlier arrangement, the US removed a 10% fentanyl-related tariff on Chinese goods and suspended a 24% reciprocal tariff for one year. It also suspended the 50% permeation rule under export controls for one year.

Section 301 tariffs on certain Chinese products remain in place. This means the tariff dispute is not finished, even if both sides are discussing reciprocal reductions for goods worth at least $30bn on each side.

Critical minerals remain the sharper strategic issue. MOFCOM said China applies export controls on rare earths and other materials according to law, and that compliant civilian licence applications are being reviewed.

The materials named include yttrium, scandium, neodymium and indium. These inputs are important for aerospace, defence, semiconductors, magnets, displays, alloys and advanced manufacturing.

US rare earth buyers remain concerned that approved licence volumes are limited. Market participants expect approval cycles could shift from around one week of supply toward biweekly or monthly volumes, but uncertainty remains high.

This means the China-US trade thaw is selective. Aviation cooperation may improve, but Beijing is preserving control over critical mineral flows that give it leverage in strategic industries.

Agricultural products may also enter the reciprocal tariff reduction framework. China still applies 10-15% tariffs on US agricultural goods, which could affect whether private buyers can meet purchase commitments.

The broader message is that China and the US are trying to stabilise trade without fully removing industrial security barriers. Aircraft, agriculture and selected tariff reductions may advance, while rare earths and export controls remain managed pressure points.

The Metalnomist Commentary

The Boeing deal shows that China and the US can still use aviation as a commercial stabiliser. But rare earth licensing remains the real strategic lever, and that will keep aerospace, defence and advanced manufacturing buyers focused on supply security rather than trade headlines.

Indium Corp Gallium Recovery Grant Targets US Semiconductor Materials Security

Indium Corp

Indium Corp gallium recovery plans have gained US government support as Washington looks to build domestic supply chains for strategic semiconductor materials. The US-based metals refiner and manufacturer will receive a $3.2mn Department of Energy grant to recover gallium from industrial residues.

Indium Corp gallium recovery will focus on converting gallium-bearing residues into high-purity gallium for semiconductors and electronics. The project is part of the DOE’s Technology for Recovery and Advanced Critical-material Extraction-Gallium initiative.

Indium Corp gallium recovery matters because gallium is a critical input for compound semiconductors, radio-frequency devices, optoelectronics, defence systems and advanced electronics. The US remains heavily exposed to foreign supply because primary gallium production is concentrated in China.

The company will begin by developing a prototype to reclaim metallic gallium at its Rome, New York facility. In a second phase, it aims to scale the process to produce at least 1 t/yr of 99.99% pure gallium.

Gallium Residues Offer a Domestic Recovery Route

The project targets gallium-bearing residues rather than new primary mine output. This is strategically important because gallium is usually recovered as a by-product from alumina and zinc processing, making standalone primary supply difficult to build quickly.

Residue recovery can create a faster domestic supply route. If Indium Corp can economically recover high-purity gallium from waste streams, it could reduce dependence on imported material and strengthen US electronics supply chains.

The planned 99.99% purity level is important for semiconductor and electronics applications. High-purity gallium is used in materials such as gallium arsenide and gallium nitride, which support power electronics, LEDs, lasers, sensors, radar and communications equipment.

The Rome facility gives the project an existing industrial base. That can shorten the path from laboratory development to pilot production, although scale-up remains the key technical challenge.

A target of at least 1 t/yr is modest compared with global demand. However, the strategic value is larger than the tonnage suggests. The project could validate a recovery process that can later be expanded or replicated across other gallium-bearing waste streams.

TRACE-Ga Reflects US Push Into Critical Materials Recycling

Indium Corp was selected as one of five recipients under the DOE’s TRACE-Ga initiative. The programme will award a total of $5.4mn across companies working on gallium recovery and extraction technologies.

Other recipients include PHNX Materials, Atlantic Alumina, Found Energy and Kunin Technologies. Their inclusion shows that the US is exploring several recovery routes, from industrial waste refining to alumina-linked by-products and emerging mineral processing technologies.

The initiative reflects a broader policy shift. Washington is trying to secure critical materials not only through mining, but also through recycling, residue recovery, by-product extraction and domestic refining.

This approach is logical for gallium. China accounts for nearly all primary gallium production, making the market highly vulnerable to export controls, licensing delays and geopolitical disruption.

Gallium’s strategic value has increased because it supports both commercial and defence technologies. It is used in semiconductors, military systems, optics and high-frequency electronics.

For US manufacturers, secure gallium supply is becoming more urgent as demand grows from data centres, 5G systems, satellites, radar, power electronics and defence platforms.

The Indium Corp project will not solve the US gallium deficit by itself. But it is an important step toward creating a domestic recovery ecosystem for a metal that is difficult to source quickly during supply shocks.

The Metalnomist Commentary

The Indium Corp grant shows that gallium security will depend on by-product recovery and recycling as much as new mining. For the US, even small domestic gallium projects matter because the current supply chain is too concentrated for a material tied to semiconductors and defence.

InP and GaN Wafer Supply Deal Strengthens Macom’s Compound Semiconductor Chain

Macom

InP and GaN wafer supply has become a strategic priority for Macom Technology Solutions as the US semiconductor manufacturer invests in UK-based compound semiconductor wafer supplier IQE. The investment secures long-term epitaxial wafer services and strengthens Macom’s access to materials used in photonics, defence, satellites and 5G telecom systems.

Macom has committed £45mn as part of an £81mn investor package for IQE. The financing includes £23mn of reinvestment from convertible loans and will allow IQE to repay debt while funding core technologies such as indium phosphide and gallium nitride.

InP and GaN wafer supply is increasingly important because both materials sit at the centre of high-performance semiconductor applications. Indium phosphide supports optical transmission and silicon photonics, while gallium nitride enables high-frequency, high-power radio frequency and defence electronics.

The investment also allows IQE to end its strategic review. The company had considered selling or spinning out operations in Taiwan and later examined a possible full sale of the business. Those discussions have now been terminated.

Macom Secures Materials for Photonics and Data Centres

Macom said it will sign long-term supply agreements with IQE across multiple epitaxial technologies. These agreements will support scalable, high-volume manufacturing and strengthen supply-chain resilience.

This matters because AI data centres are driving rapid growth in optical transmission technologies. As computing loads rise, data centres need faster and more energy-efficient data movement between chips, servers and racks.

Indium phosphide is a critical material for lasers and photonic components used in optical networks. It has become a key bottleneck as demand from AI infrastructure, cloud computing and high-speed communications accelerates.

Macom’s strategy includes expanding laser and silicon photonic-based optical transmission products. Long-term InP and GaN wafer supply from IQE gives the company more confidence as it scales these technologies.

IQE also benefits from the arrangement. The funding improves its balance sheet and gives the wafer supplier stronger customer visibility from an existing key customer.

For the compound semiconductor industry, the deal shows how customers are moving closer to upstream wafer suppliers. Securing epitaxial capacity is becoming as important as chip design when materials availability is tight.

GaN Demand Links Defence, Satellites and 5G

Gallium nitride is another core part of Macom’s growth strategy. GaN is used in radio frequency sensors, amplifiers and other components for defence, satellite and 5G telecom systems.

These applications require materials that can handle high power, high frequency and demanding operating conditions. GaN offers performance advantages over conventional silicon in several advanced RF and power applications.

Macom is also developing advanced GaN-on-silicon processes and installing new equipment to modernise and expand manufacturing capabilities. This points to a broader push to scale production while improving cost and process efficiency.

IQE’s manufacturing footprint gives the partnership wider supply-chain relevance. The company operates two sites in south Wales, a facility in Milton Keynes, four plants in the US and operations in Taiwan.

IQE expects revenue to grow by more than 20% in 2026. The company cited strong demand from AI and data-centre photonics, laser and wireless products for smartphones, and continued strength in aerospace and defence.

The transaction also gives Macom a governance role, as the company will join IQE’s board. This deepens the relationship from customer-supplier contracting into strategic influence.

InP and GaN wafer supply will remain critical as semiconductor demand becomes more materials-intensive. Data centres, defence electronics, satellites and telecom infrastructure all need reliable compound semiconductor capacity.

The Metalnomist Commentary

Macom’s investment in IQE shows that semiconductor supply security is moving upstream into compound wafer materials. As AI data centres and defence RF systems expand, control over InP and GaN capacity will become a strategic advantage, not just a procurement issue.

Yunnan Germanium Output Falls as Downstream Wafer Demand Absorbs Metal

Germanium

Yunnan Germanium output of raw material-grade germanium available for external sales fell in 2025 as the company redirected more metal into internal downstream production. The shift reflects stronger demand from photovoltaic wafers, optical fibre materials and compound semiconductor products.

Yunnan Germanium output for external raw material-grade germanium sales fell by 13% to 29.7t metal equivalent. The figure excludes 68.95t used for internal consumption and third-party processing.

Yunnan Germanium output therefore signals a change in material allocation rather than simple production weakness. More germanium units are being retained inside the company’s higher-value product chain instead of being sold as raw material.

Revenue rose by 38% to 1.07bn yuan, supported by higher prices for raw germanium, optical fibre materials, PV germanium products, infrared products and semiconductor products.

PV and Optical Fibre Demand Pull Germanium Into Internal Processing

Yunnan Germanium nearly doubled production of 4-6 inch PV-grade germanium wafers in 2025. Output rose to 909,000 pieces from 491,400 pieces a year earlier.

This growth is strategically important because germanium wafers serve high-efficiency photovoltaic applications. Stronger wafer output means more raw germanium is being converted into higher-value products rather than sold into the merchant market.

Optical fibre materials also expanded. Output of optical fibre-grade germanium tetrachloride rose to 39.8t from 27t, showing stronger demand from communications infrastructure and optical transmission markets.

Infrared-grade germanium raw material output fell by 28% to 4.77t metal equivalent. However, production of infrared lenses and optical systems rose sharply to 4,717 sets from 1,828 sets.

That mix shows deeper downstream processing. The company reduced some raw infrared material output but increased finished optical systems, capturing more value further along the chain.

For germanium buyers, the key issue is external availability. When China’s largest germanium producer consumes more material internally, less raw metal is available for third-party customers.

Indium Phosphide Expansion Strengthens Compound Semiconductor Push

Yunnan Germanium also increased indium phosphide wafer output in 2025. Production of 2-4 inch InP wafers rose by 55% to 100,100 pieces.

In contrast, gallium arsenide wafer production declined by 13% to 76,300 pieces. This shows a shift in compound semiconductor emphasis toward InP, where demand is rising from advanced optical and semiconductor applications.

The company plans to keep increasing PV-grade germanium wafer and indium phosphide wafer output in 2026. It also plans to reduce infrared product output.

Yunnan Germanium targets 73t metal equivalent of raw material-grade germanium products in 2026, including internal use and third-party processing. It also plans to produce 1.45mn pieces of 4-6 inch equivalent PV-grade wafers and 180,000 pieces of 2-6 inch InP wafers.

The company also plans to produce 35t of optical fibre-grade germanium tetrachloride, 80,000 pieces of 3-6 inch GaAs wafers, 3t of infrared-grade germanium raw materials and 8,000 sets of infrared lenses and optical systems.

The planned 188.56mn yuan investment to expand high-quality InP single-crystal wafer capacity reinforces this strategy. Yunnan Germanium is moving from raw germanium supply toward integrated semiconductor and photonics material production.

The Metalnomist Commentary

Yunnan Germanium’s lower external metal output should not be read as weak demand. It shows that strategic germanium producers are capturing more value internally, tightening merchant supply while expanding into PV, optical fibre and InP wafer markets.

Minor Metals Security Premium Becomes Cost of Supply Chain Resilience

Minor Metals

Minor metals security premium is becoming a structural cost for western buyers as China’s dominance in processing leaves supply chains exposed to disruption. Speakers at the FT Commodities Global Summit in Lausanne said consumers must pay more for non-Chinese minor metals if they want resilient supply.

The argument is no longer theoretical. Chinese export controls have reduced available supply in western markets and widened the price gap between China and Europe. Materials that once traded closely across regions now reflect very different fundamentals.

Minor metals security premium is most visible in dual-use products subject to Chinese export controls. European gallium prices are more than double Chinese export levels, while Rotterdam germanium prices are also close to twice Chinese fob values.

This premium is not only a temporary reaction to trade disruption. Speakers argued that higher western prices must persist even if export controls are eased, because alternative processing capacity outside China needs long-term economic support.

China Export Controls Break Traditional Price Links

China’s concentration in minor metals processing has created a major vulnerability for western manufacturers. Many critical materials are produced as by-products, refined in small volumes and traded through narrow supply chains.

That structure makes the market highly sensitive to policy changes. When China restricts exports, buyers in Europe and the US cannot easily replace supply because there are few alternative processors with qualified material.

The result is a geographic price split. European warehouse prices once tracked Chinese markets closely, but that relationship no longer reflects real availability outside China. Chinese prices now represent domestic conditions, while western prices reflect scarcity, logistics risk and origin security.

Gallium and germanium show this most clearly. Both metals are essential for semiconductors, optics, power electronics, defence systems, satellite communications and advanced manufacturing. Both are also heavily exposed to Chinese processing and export licensing.

For western buyers, the question is no longer whether Chinese prices look cheaper. The real question is whether material can be accessed, shipped, qualified and used without exposing factories to sudden supply interruptions.

That changes procurement behaviour. Buyers are increasingly willing to pay a security premium for material with reliable origin, clearer documentation and lower exposure to export restrictions.

The same logic is spreading to other by-product metals. Indium, bismuth and antimony are gaining strategic attention because they support electronics, flame retardants, solders, alloys, photovoltaics, semiconductors and defence-related applications.

These metals are often small in volume but large in industrial consequence. A missing input can stop production even if the dollar value of the metal is tiny compared with the final product.

This is why western buyers are treating minor metals differently from ordinary commodities. They are paying for continuity, not only material.

Supply Security Needs Processing Capacity and Long-Term Demand

Minor metals security premium must support investment, not only emergency buying. If higher prices disappear as soon as immediate disruption fades, new processing projects outside China will struggle to survive.

This is the key industrial challenge. Building non-Chinese supply requires refining capacity, technical know-how, environmental permitting, qualified output and customer commitments. These cannot be created quickly during a crisis.

A short-term price spike can help existing suppliers, but it does not guarantee new capacity. Investors need confidence that buyers will continue paying for secure supply after the market stabilises.

This is where security premiums differ from green premiums. Green premiums have often been debated because buyers could delay paying more for lower-carbon materials. But critical materials supply disruption leaves fewer choices.

If rare earths, gallium, germanium or antimony are unavailable, manufacturers may face production stoppages. In that situation, the premium becomes part of operating cost rather than a voluntary sustainability expense.

Governments can help bridge this gap through stockpiles, offtake support, price floors, procurement rules and financing tools. But industry also needs to accept that resilient supply chains cost more than the lowest-price global model.

For miners, by-product metals can improve project economics. Recovering indium, bismuth, antimony, gallium or germanium can add revenue streams to larger operations and strengthen the business case for complex ore bodies.

For refiners, sustained premiums can justify investment in separation and purification capacity. For manufacturers, long-term contracts can reduce the risk of sudden shortages and forced spot-market buying.

The larger strategic point is clear. Western supply chains cannot become more secure while continuing to benchmark only against Chinese domestic prices. Security, traceability and supply reliability require a different pricing model.

Minor metals security premium therefore represents a shift in how critical materials are valued. Buyers are beginning to price the risk of disruption, not just the cost of production.

The Metalnomist Commentary

The security premium for minor metals is the market’s way of pricing geopolitical risk into industrial supply. Western buyers cannot build resilient supply chains while demanding Chinese-cost material from non-Chinese sources.

US Gallium Recovery Projects Target Domestic Supply Chain for Defense and Semiconductors

DOE(The US Department of Energy)

US gallium recovery projects will receive $5.4mn in funding from the Department of Energy as Washington tries to rebuild domestic supply for a metal critical to defense systems, semiconductors and advanced electronics. The funding will support five US-based projects under the Technology for Recovery and Advanced Critical-material Extraction – Gallium initiative.

The TRACE-Ga initiative is designed to prototype technologies that can recover gallium from US metal-processing feedstocks. This is important because the US is fully import-reliant for gallium and has not produced the metal domestically since 1987.

US gallium recovery projects are gaining urgency because gallium is essential for compound semiconductor materials, including gallium nitride. These materials support power electronics, radio-frequency devices, radar systems, satellite communications, fast chargers, LEDs and other high-performance technologies.

The funding is modest in scale, but strategically important. It signals that the US is no longer focusing only on mining new critical minerals. It is also trying to recover strategic metals from industrial by-products, waste streams and existing processing networks.

TRACE-Ga Funding Targets Recovery From Existing Feedstocks

The DOE award will support five companies working on gallium recovery technologies. Participants include PHNX Materials, Atlantic Alumina Company, Found Energy, Kunin Technologies and Indium Corporation.

The selection of companies shows how broad the recovery opportunity could become. Gallium is not usually mined as a primary product. It is commonly recovered as a by-product from other industrial processes, especially alumina and zinc-related supply chains.

This makes gallium recovery different from conventional mining. The key challenge is not only finding deposits, but identifying feedstocks where gallium exists in recoverable concentrations and developing technologies that can extract it economically.

Industrial waste refiner PHNX Materials could support recovery from complex waste streams. Atlantic Alumina Company brings relevance to alumina-linked feedstock. Found Energy adds an aluminum-related industrial angle, while Kunin Technologies focuses on mineral by-product recovery. Indium Corporation brings downstream metals refining and manufacturing expertise.

The TRACE-Ga initiative therefore targets the middle of the supply chain. It seeks to bridge the gap between laboratory recovery methods and scalable domestic production.

That gap matters because gallium supply is highly concentrated. China dominates primary gallium production and has used export controls to increase pressure on global buyers. For US defense and semiconductor supply chains, reliance on foreign gallium has become a clear strategic risk.

Domestic recovery could help reduce that exposure. Even if early projects produce limited volumes, they can prove process routes, identify feedstock partners and create the technical base for larger recovery systems.

The use of US metal-processing feedstocks also fits a wider circular materials strategy. Instead of waiting for new mines, the US can extract critical materials from industrial streams already moving through domestic facilities.

This could make recovery faster than new primary production. However, it still requires technical success, feedstock security, refining capability and customer qualification.

Gallium Nitride Demand Raises Strategic Pressure

Gallium’s strategic value has increased because of its role in gallium nitride and other compound semiconductor materials. Gallium nitride is widely used where high power, high frequency, efficiency and heat performance matter.

These applications are highly relevant to defense and advanced electronics. Radar, communications systems, satellite technologies, power conversion equipment and semiconductor devices all rely on materials where gallium can be difficult to substitute.

The DOE’s TRACE-Ga funding also sits alongside a larger notice of funding opportunity of up to $69mn. That programme targets technologies and processes that advance domestic production and refining of critical materials, including gallium and gallium nitride for semiconductor applications.

This shows that Washington is building a layered funding strategy. TRACE-Ga supports recovery prototypes, while broader DOE programmes aim to scale refining, alloying and advanced material production.

For the semiconductor industry, domestic gallium supply is not only a raw material issue. It is connected to wafer production, epitaxy, device manufacturing, packaging and defense procurement. A shortage or export disruption at the gallium stage can move through the entire compound semiconductor chain.

This is why gallium recovery matters even if volumes are small at first. Strategic materials often have low tonnage but high consequence. A reliable domestic supply stream can reduce procurement risk for critical systems.

The challenge will be commercialisation. Recovery from waste and by-products can be technically complex because gallium concentrations may be low and feedstock chemistry can vary. Companies must prove that their processes can recover gallium consistently, meet purity requirements and operate at competitive cost.

The US also needs downstream refining capacity. Recovering gallium-bearing material is not enough if the material cannot be refined into forms suitable for semiconductor and defense applications.

The DOE funding is therefore best understood as an early-stage industrial rebuilding tool. It does not immediately solve US gallium dependence, but it helps create the technologies and partnerships needed to rebuild supply.

The Metalnomist Commentary

US gallium recovery projects show that critical mineral security increasingly depends on recovering by-products from existing industrial systems. The strategic test will be whether TRACE-Ga can move beyond prototypes and create reliable domestic feedstock for gallium nitride, defense electronics and semiconductor manufacturing.

Indium Phosphide Exports Become China’s New Chokepoint in AI Data Centre Supply Chain

AI data centre

Indium phosphide exports have become a strategic pressure point in the global AI data centre supply chain as China’s licensing controls delay shipments of a material essential for high-speed optical chips. The restrictions are exposing a new vulnerability in AI infrastructure: the physical materials behind silicon photonics and optical interconnects.

The issue has moved quickly from a specialist semiconductor concern to a high-level trade and industrial policy problem. Coherent, a key optical components supplier backed by Nvidia, warned in early May that indium phosphide shortages were already affecting the market. Its chief executive then joined a US business delegation to China as companies sought relief from export licence delays.

Indium phosphide exports matter because AI data centres are moving beyond copper-based interconnects. As AI workloads grow, hyperscalers need faster, lower-latency and more energy-efficient data transmission between processors, accelerators, switches and optical modules. Indium phosphide is one of the core materials enabling that shift.

The material is used in high-speed optical chips, lasers, detectors and photonic components. These devices support the optical links that move huge volumes of data across AI clusters. Without reliable indium phosphide substrates and wafers, the expansion of advanced AI data centre networks could slow.

China’s control over indium phosphide exports shows that critical materials policy is becoming more granular. Beijing no longer needs to restrict only rare earths or finished technology products. It can also influence upstream compounds, substrates and wafers that determine whether advanced semiconductor supply chains can scale.

Export Controls Expose a Hidden Bottleneck in Silicon Photonics

Silicon photonics has become a critical technology for AI infrastructure because it allows data to move through light rather than electrical signals. This reduces energy use per bit and supports the bandwidth required by large AI systems.

But silicon photonics is not only a silicon story. The most advanced optical systems often require compound semiconductor materials such as indium phosphide, gallium arsenide, gallium nitride and germanium-based compounds. Indium phosphide is especially important for lasers and high-speed optical devices.

This creates a difficult supply chain problem. AI companies, hyperscalers and chipmakers are racing to scale optical modules, but one of the key substrate materials remains highly concentrated. China is the world’s largest indium producer, accounting for about 70% of global output in 2024.

That concentration became more serious after China introduced export restrictions on indium phosphide in February 2025. Since then, licence delays have created backlogs for companies that manufacture or source InP substrates from China.

AXT, one of the world’s largest indium phosphide substrate producers and a major supplier to Coherent, said export permits were its most significant challenge. The company manufactures most of its InP substrates in China and only received its first permits last June. It still faces a large order backlog.

The effect has spread beyond individual suppliers. Coherent, Lumentum, VPEC and LandMark Optoelectronics all sit inside the optical components ecosystem that depends on reliable substrate supply. When permit delays hit upstream InP material, the impact moves through wafers, chips, optical modules and AI data centre equipment.

Prices show the severity of the shortage. Since China introduced export restrictions, the average price of a 6-inch indium phosphide wafer has surged by 250% to about $5,000. That price increase reflects both physical scarcity and the strategic premium attached to non-disrupted supply.

The supply squeeze also comes at a time of aggressive photonics investment. Nvidia announced $2bn investments each in Coherent and Lumentum in March. Marvell Technology also moved into photonics through its acquisition of Celestial AI, reflecting stronger demand for optical technology in AI computing.

These investments show where the industry is heading. AI infrastructure needs optical interconnects to manage power, latency and bandwidth. But China’s indium phosphide controls mean that materials availability could become a gating factor for deployment.

Companies are trying to respond. Coherent plans to double its InP wafer capacity at its Texas plant this year and more than double it again by the end of 2027. US photonics firms are also seeking supply from non-Chinese producers such as Sumitomo Electric Industries.

However, capacity additions are slow. New substrate plants can take two to three years to bring online. Qualification cycles are also long because optical chipmakers cannot easily switch substrate suppliers without testing performance, reliability and consistency.

This makes the shortage difficult to solve quickly. Even if new capacity is announced, it may not arrive fast enough to meet near-term AI data centre demand. Meanwhile, many non-China producers already consume part of their own output internally, reducing the amount available to the broader market.

China’s Materials Chokepoint Strategy Strengthens Domestic Producers

China’s indium phosphide export controls are creating both pressure and opportunity. They restrict global supply, but they also support domestic Chinese substrate producers that are expanding capacity.

Yunnan Germanium, Guangdong Xiandao and Zhuhai Dingtai Xinyuan are among China’s leading domestic InP substrate players. Their role is becoming more important as Beijing uses materials controls to strengthen strategic leverage across semiconductor and AI supply chains.

Yunnan Germanium has already moved to expand. The company announced a 189mn yuan investment in April to raise production capacity to 450,000 single InP wafers annually. Its shipments of InP wafers rose by 74% in 2025, showing fast domestic market growth.

Guangdong Xiandao is also expanding through its subsidiary Guangdong Xianrui. The project is expected to produce 40 t/yr of indium phosphide crystals, which are used as raw material for substrates.

These investments fit a broader pattern. China is not only defending control over upstream critical materials. It is also building downstream processing capacity in higher-value compound semiconductor materials.

However, Chinese producers may not immediately solve the global shortage. Some are still seeking export approvals, and any overseas shipments may be limited. Domestic demand remains a priority, especially as China builds its own AI, optical communications and semiconductor ecosystem.

AXT

Supplier qualification creates another barrier. Companies such as Coherent and Lumentum are unlikely to switch easily from established suppliers. Coherent relies heavily on AXT, while Lumentum sources mainly from Sumitomo and JX Advanced Metals. New suppliers must pass demanding qualification cycles before they can enter critical optical chip supply chains.

This gives China’s export controls a long-lasting effect. Even if alternative suppliers exist, the market cannot instantly redirect demand. The bottleneck is not only production volume. It is qualified, high-quality, customer-approved substrate supply.

The strategic lesson is clear. AI supply chains are not only exposed to advanced chips, GPUs and packaging capacity. They also depend on a deep materials stack that includes indium, phosphorous chemistry, InP crystals, substrates, wafers, lasers, detectors and optical modules.

This is why indium phosphide exports have become so important. AI data centre buildouts need more optical links as clusters grow larger. Copper interconnects face limits in speed, distance and energy consumption. Photonics offers a solution, but only if the materials chain can scale.

For the US and its allies, the response will likely require more than emergency licence negotiations. It will require investment in indium recovery, InP crystal growth, substrate manufacturing, wafer capacity and long-term offtake agreements. It may also require strategic stockpiles for high-purity indium and compound semiconductor substrates.

The issue also strengthens the case for recycling and secondary recovery. Indium is often produced as a by-product, making primary supply difficult to expand quickly. Recovering indium from industrial scrap, displays, semiconductors and related waste streams could become more important if export controls persist.

For AI data centre developers, the risk is timing. Demand for optical modules is accelerating now, while new ex-China capacity may not fully arrive until 2027 or later. That mismatch could raise costs, delay deployments and intensify competition for qualified photonics suppliers.

The market may therefore see a split. Companies with secured InP supply will be better positioned to support hyperscaler demand. Companies exposed to licence delays, qualification bottlenecks or spot-market wafers may face higher costs and delivery risk.

The Metalnomist Commentary

China’s control over indium phosphide exports shows that the AI race is becoming a materials race. The next bottleneck may not be only GPUs or power supply, but the compound semiconductor substrates needed to move data fast enough inside AI clusters.

Metallium Gallium Recovery Project Advances US Critical Minerals Recycling

Australian Metallium

Metallium gallium recovery project plans have moved forward after the Australian recycling firm completed the first phase of a US Department of Defense contract ahead of schedule. The company is developing a process to recover gallium from complex waste streams, including semiconductor scrap and electronic waste.

The project is strategically important because gallium is essential for semiconductors, military systems, optics and advanced electronics. Global supply remains highly concentrated, with China accounting for nearly all primary gallium production.

Metallium gallium recovery project development comes as China’s export controls have intensified competition for non-China supply. Higher prices and stronger defense-related demand are making recovery technologies more commercially relevant.

Flash Joule Heating Targets Low-Concentration Gallium Streams

Metallium is using its proprietary Flash Joule Heating process to recover trace gallium from steel, alloy scrap, semiconductor scrap and electronic waste. The company also aims to recover germanium and other critical minerals in later phases.

End-of-life gallium recycling remains difficult because the metal is present in very small quantities once used in finished products. This makes recovery technically challenging and usually uneconomic unless prices, feedstock access and process efficiency improve together.

Metallium can now apply for Phase II funding of up to $1mn to advance pilot-scale operations. The company expects to start full commercial operations at its Texas facility this year.

Feedstock Deals Strengthen US Recycling Scale-Up

Metallium gallium recovery project scaling is supported by both government funding and private capital. The company raised $55mn from investors in June to accelerate commercial development.

Glencore will supply 2,400 t/yr of electronic waste, becoming Metallium’s major feedstock supplier and offtake partner. This agreement gives the Texas facility a clearer route to steady input material, which is critical for recycling economics.

Metallium also signed a deal last week to supply US-based metals refiner and manufacturer Indium with several recovered metals from its US recycling operations. Together, these agreements help connect scrap collection, recovery technology and downstream advanced materials demand.

Gallium prices have risen by 175% year on year and remain supported by firm demand and limited ex-China availability. That price environment improves the case for niche recycling projects, especially where defense and semiconductor supply security are involved.

The Metalnomist Commentary

Metallium’s project shows that critical mineral security will increasingly depend on recovering trace metals from complex waste streams. Gallium recycling will not replace primary supply quickly, but it can become a strategic buffer for defense, semiconductor and optics supply chains.

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.