Asia Semiconductor Demand for AI Data Centres Surges on Regional Infrastructure Expansion

AI

Asia semiconductor demand for AI data centres is accelerating rapidly, driven by generative AI development, regional cloud infrastructure investment, and rising demand for high-bandwidth memory and logic chips. The shift marks a geographic rebalancing in semiconductor orders, which were previously centered on U.S. data centre growth.

AI, HBM, and Logic Chips Drive Semiconductor Orders in Asia

Dutch semiconductor equipment maker BESI reported increased orders from Asian subcontractors in Q1 2025, specifically for AI-related data centre applications. Orders rose 3.3% year-over-year and 8.2% quarter-over-quarter, even as other segments like mobile and automotive remained weak.

AI-centric devices are boosting demand for advanced semiconductor packaging, especially for high-bandwidth memory (HBM) 4 and logic chips. BESI received hybrid bonding orders from two memory producers and additional logic chip orders from an Asian foundry, underscoring regional momentum. Compound semiconductors and minor metals remain essential to meet AI’s performance, efficiency, and optical communication needs.

Chinese data centres, in particular, are preparing for broader adoption of optical technologies and laser detectors as they scale capacity to support domestic AI models like DeepSeek.

China, Singapore, and Malaysia Lead AI Data Centre Build-Out

China is rapidly scaling its AI data centre footprint. GLP, a Singapore-China investment firm, raised ¥2.6bn ($356.7mn) for a Beijing-area data centre and controls 20 data centres with a total capacity of 1.4GW across major regions. This expansion is backed by Chinese policy support for AI, cloud, IoT, and 5G development, with the country’s data centre market forecast to grow at a 38% CAGR through 2029.

Singapore remains southeast Asia’s largest data hub, hosting 1.4GW of capacity with expansion plans. However, regulatory restrictions on power and land usage are slowing growth. Meanwhile, Johor, Malaysia, is emerging as a new hotspot, with projected capacity of 1.6GW—poised to surpass Singapore.

Chinese firms have invested over $10bn in Malaysian data centres since 2019. Companies like ByteDance and Alibaba Cloud are leveraging Malaysia’s semiconductor-friendly environment to bypass U.S. export controls and support international operations.

The Metalnomist Commentary

The boom in Asia semiconductor demand for AI data centres signals a decisive shift in global digital infrastructure. As U.S. restrictions reshape supply chains, Asia is emerging as the new battleground for AI-optimized semiconductor and data centre development—anchored by domestic innovation and strategic capital deployment.

AI Growth Boosts Electronics Metal Demand, But Broader Semiconductor Market Faces Weak Recovery

AI

The explosive growth of Artificial Intelligence (AI) is undoubtedly driving demand for specific electronic metals, but the broader electronics market, particularly the semiconductor sector, is struggling with a slower-than-expected recovery. As we approach 2025, the demand outlook remains mixed, despite AI's role in pushing innovation and technological expansion.

AI Fuels Electronics Demand

This year, AI technologies, especially AI-powered chatbots and smartphones, gained widespread traction. Companies like Apple and Samsung have been rolling out their own AI systems, with Apple’s “Apple Intelligence” software joining Samsung’s Galaxy AI. At the same time, OpenAI's ChatGPT reached 200 million active weekly users, doubling from the previous year. These developments indicate the mainstreaming of AI tools in everyday life.

The continued growth of AI will be supported by the physical expansion of data centres and the increased demand for hardware capable of handling AI's vast data processing needs. This translates into higher demand for specialty materials that make up critical electronic components. As data centres require more energy-efficient solutions to process increasing data volumes, materials like gallium nitride (GaN) and indium phosphide (InP) will play a central role.

Gallium Nitride (GaN) and Indium Phosphide (InP) Boosted by AI Expansion

As AI technologies scale, the energy demands of data centres will rise significantly. According to research from Goldman Sachs, the data centre expansion needed to support AI could increase electricity consumption by up to 160% by 2030. This will likely spur greater demand for GaN-based power electronics, which are more energy-efficient than traditional silicon electronics. GaN-based devices generate less heat and can operate at higher temperatures, making them ideal for data centres where cooling accounts for up to 40% of energy consumption.

Another compound semiconductor, indium phosphide (InP), is expected to gain traction as well. InP is already used in data and telecom transceivers and is poised to play a key role in the future of 6G wireless and satellite communications networks. InP-based photonic integrated circuits enable faster, more energy-efficient data transfers, making them essential for the high-speed data transfers required by AI clusters in data centres. This has garnered attention from the U.S. government, with the CHIPS Act supporting multiple InP-related projects this year.

Wider Electronics Demand Faces Challenges

Despite the promising outlook for AI-driven growth in specific sectors, the broader semiconductor market is still grappling with weaker-than-expected recovery. Materion, a U.S.-based producer of specialty materials for electronics, reported slower-than-expected semiconductor recovery in its third-quarter results. The company, which manufactures materials for chip manufacturing, including tantalum sputtering targets and antimony chemicals, noted that while there is strong demand for high-performance chips used in computing, the market for 2025 remains uncertain.

The situation was mirrored by ASML, a major chip equipment manufacturer, which lowered its revenue forecast for 2025 from €30-40 billion to €30-35 billion. ASML highlighted that semiconductor manufacturers are curbing capacity expansions due to the ongoing weakness in chip demand recovery.

Semiconductor Shipments and Market Outlook

The global semiconductor industry witnessed a peak in silicon wafer shipments in 2022, driven by supply shortages and high demand for consumer electronics during the pandemic. However, shipments of silicon wafers—a key indicator of chip production—are expected to drop from 14,565 million square inches (MSI) in 2022 to 12,174 MSI in 2024. Although global silicon wafer shipments are projected to rise to 13,328 MSI in 2025, the recovery expected in 2024 has largely failed to materialize, indicating continued challenges in the broader electronics market.

Conclusion

The demand for electronic metals, particularly those used in AI and data centre technologies, is on the rise. However, the semiconductor sector as a whole is still experiencing a slow recovery, with uncertainty surrounding the broader electronics market heading into 2025. While AI's growth continues to offer opportunities for companies involved in the production of GaN and InP-based components, the overall demand picture for electronics remains mixed, with slower-than-expected recovery from the pandemic-induced boom.

Corning Nvidia Optical Connectivity Partnership Expands US AI Infrastructure Supply Chain

Corning

Corning Nvidia optical connectivity plans will expand US manufacturing capacity for the optical systems needed to support artificial intelligence data centres. Corning will build three new manufacturing facilities in North Carolina and Texas as it targets a tenfold increase in optical connectivity output.

Corning Nvidia optical connectivity investment also includes a more than 50% expansion in Corning’s fibre production. The move reflects rising demand for high-speed data movement across AI infrastructure, where advanced optical links are becoming as important as chips themselves.

Corning Nvidia optical connectivity partnership strengthens the domestic supply chain around Nvidia’s AI computing ecosystem. Nvidia chips require high-performance optical fibre connectivity to move data quickly and at scale across large data centre networks.

The agreement also has a strategic materials angle. The fibre-optics industry is the largest US end-user of germanium, making AI data centre buildout increasingly relevant to minor metals demand.

AI Data Centres Drive Optical Connectivity Demand

AI workloads require massive data movement between chips, servers and storage systems. As computing clusters grow, copper-based connections face performance, distance and energy-efficiency limits in some high-speed applications.

Optical connectivity helps solve that problem. It allows data to move faster and across longer distances, supporting the scale required by advanced AI data centres.

Corning’s planned facilities in North Carolina and Texas will increase domestic capacity for these optical systems. That is important because AI infrastructure is becoming a national industrial priority, not only a technology market.

For Nvidia, the partnership supports the physical network behind its chips. AI accelerators create value only when data can move efficiently through the system.

For Corning, the deal gives stronger exposure to one of the fastest-growing infrastructure markets. Optical fibre, cable assemblies and connectivity products are becoming critical components in the AI supply chain.

Germanium Demand Links AI Growth to Critical Materials

The partnership also connects AI infrastructure to germanium demand. Germanium is used in optical fibre production, making fibre expansion relevant to critical minerals and specialty materials markets.

This matters because germanium supply is already strategically sensitive. It is used in fibre optics, infrared systems, semiconductors, defence electronics and solar applications.

If AI data centre construction accelerates, optical fibre demand could strengthen further. That would increase attention on germanium availability, recycling, refining and origin security.

The transaction also includes a financial component. Nvidia has the right to purchase up to 15mn shares of Corning stock at a fixed price of $180/share, as well as a pre-funded warrant to purchase up to 3mn shares for a total price of $500mn.

That structure shows how strategic customers are moving closer to upstream and midstream suppliers. Nvidia is not only buying components. It is helping secure the manufacturing base needed for future AI infrastructure.

For the US, the partnership supports domestic manufacturing around semiconductors, photonics and critical materials. It also reinforces the wider shift toward regionalised supply chains for high-value technology infrastructure.

The Metalnomist Commentary

The Corning-Nvidia partnership shows that AI supply chains are moving beyond chips into optical fibre, photonics and specialty materials. Germanium demand could become a hidden beneficiary as data centres require faster and more resilient optical connectivity.

SiGe Capacity Expansion Accelerates as AI Data Centres Shift to Optical Networking

GlobalFoundries

SiGe capacity is becoming a critical bottleneck as artificial intelligence data centres move from copper interconnects toward optical networking. GlobalFoundries is expanding silicon germanium capacity to meet rising demand from customers building high-speed optical connectivity systems.

SiGe capacity at GlobalFoundries’ Vermont fabrication plant is already oversubscribed into 2027. The company said demand has reached an inflection point as AI workloads drive higher bandwidth, power efficiency and data transmission requirements.

SiGe capacity matters because silicon germanium technology supports key components in optical transceivers. These devices allow data centres to move information faster, cleaner and with less energy loss across large computing clusters.

The expansion reflects a wider shift in semiconductor materials. AI infrastructure is no longer only a story about graphics processors and advanced logic chips. It increasingly depends on photonics, optical transceivers and specialty semiconductor materials such as germanium.

Optical Networking Pushes SiGe Into a Strategic Role

AI data centres are increasing compute density and power consumption, forcing operators to rethink how data moves across networks. Copper interconnects face limits in reach, bandwidth density and energy efficiency.

Optical networking addresses those limits. It enables higher-speed data transfer across longer distances while improving system efficiency.

This shift is lifting demand for silicon photonics and SiGe technology. These materials are used in pluggable optical transceivers that convert high-speed electrical signals into optical signals and back again.

GlobalFoundries said SiGe is used in limiting amplifiers, transimpedance amplifiers and laser drivers. These components support signal amplification, conversion and cleaner data transmission inside data centre networks.

Transimpedance amplifiers and drivers are required in most data centre connections. As optical networking deployments grow, unit demand for these components is expected to increase sharply.

Satellite communications are also increasing SiGe usage. However, AI data centre optical networking is now the main growth signal attracting market attention.

Customer Prepayments and Government Support Shape Expansion

GlobalFoundries expects to double silicon photonics revenue in 2026. The company is targeting a silicon photonics revenue run rate above $1bn by the end of 2028 and $2bn in 2030.

GF already operates 300mm and 200mm silicon photonics and SiGe manufacturing facilities in New York and Singapore, with additional capacity in Germany. It also has a major US footprint in Vermont and New York.

The company increased annual wafer capacity to 2.7mn 300mm wafer equivalents in 2025 from 2.2mn in 2020. It also has an installed base of 1.6mn 200mm wafers per year.

GlobalFoundries has previously announced plans to invest more than $12bn in its New York and Vermont sites over the next decade. But future capacity growth will be tied closely to customer demand, prepayments and government financing.

That model is important. Semiconductor capacity expansion is capital-intensive, and customers increasingly need to help secure the supply chains they depend on.

Government grants and tax incentives are also becoming essential. AI, photonics, semiconductors and critical materials are now treated as strategic infrastructure, not only commercial technology.

For materials markets, the signal is clear. Germanium demand could gain support from AI-driven optical networking, especially as silicon photonics and SiGe devices become more important to data centre performance.

The Metalnomist Commentary

GlobalFoundries’ SiGe expansion shows that AI supply chains are moving deeper into specialty semiconductor materials. The next bottleneck may not be compute chips alone, but the optical and germanium-linked technologies needed to connect them efficiently.

 

SoftBank Osaka Battery Production Targets AI Data Centre Energy Demand

SoftBank

SoftBank Osaka battery production plans will add a new Japanese platform for next-generation battery cells and battery energy storage systems. The company aims to start production at its GX Factory in Osaka by March 2028.

SoftBank Osaka battery production will focus partly on zinc-halogen battery technology developed with South Korea’s COSMOS Lab. The partners aim to begin mass production during the April 2027-March 2028 fiscal year.

SoftBank Osaka battery production is strategically linked to rising electricity demand from artificial intelligence infrastructure. As AI data centres expand, operators need safer, scalable and more resilient energy storage systems to support grid stability and power management.

The GX Factory is part of SoftBank’s planned AI data centre development at Sakai in Osaka prefecture, on a site formerly owned by Sharp. The wider project also includes the AX Factory, which will focus on AI data centre operations and infrastructure hardware manufacturing.

Zinc-Halogen Technology Targets Safety and Local Supply

SoftBank is positioning zinc-halogen batteries as a safer alternative to lithium-ion systems. The company said the technology removes lithium-ion fire risk by using a halogen-based cathode material, zinc anode and water-based electrolyte.

This chemistry also supports supply-chain resilience. Zinc and halides are available in Japan, reducing exposure to imported lithium, nickel, cobalt or graphite supply chains.

That matters because energy storage is becoming more strategically important as AI data centres, renewable power and grid balancing needs grow together. Battery systems must be safe, affordable and scalable.

Zinc-halogen batteries may be especially relevant for stationary storage, where safety, durability and material availability can matter more than maximum energy density.

SoftBank’s plan shows that AI infrastructure is beginning to shape battery demand beyond electric vehicles. Data centres require large and reliable power systems, and that could create a new demand channel for non-lithium battery chemistries.

BESS Manufacturing Adds Industrial Scale Ambition

SoftBank will also partner with South Korea’s DeltaX to develop and manufacture high-energy-density battery energy storage systems. The partnership will use DeltaX’s cell-connecting system design and cell-to-pack technology.

SoftBank aims to reach 1 GWh/yr of BESS mass production by the 2028-29 fiscal year. That would give the company a meaningful platform for grid, industrial and data-centre storage customers.

The company plans to expand sales into grid-storage, industrial and residential applications. It is also considering overseas markets in the medium term.

SoftBank wants the battery business to generate more than ¥100bn in annual revenue by the 2030-31 fiscal year. That target shows the company sees batteries as an infrastructure business, not only a technology experiment.

For Japan, the project strengthens domestic battery manufacturing around AI infrastructure and energy security. It also diversifies battery chemistry development beyond the lithium-ion supply chain.

The industrial implication is clear. As AI power demand accelerates, battery storage will become a strategic layer between data centres, grids and renewable energy supply.

The Metalnomist Commentary

SoftBank’s Osaka plan shows that AI infrastructure is now pulling battery innovation in a new direction. Zinc-halogen technology may not replace lithium-ion in vehicles, but it could become strategically important for safer, locally sourced stationary storage.

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.

Corning Meta Optical Cable Plant Strengthens AI Data Centre Supply Chain

Corning

Corning Meta optical cable plant construction has started in Hickory, North Carolina, as Corning moves to support Meta’s growing artificial intelligence data centre network. The project is expected to become the world’s largest fibre optic cable manufacturing facility.

The plant forms part of Corning’s $6bn multi-year agreement with Meta, signed in January. Under the deal, Corning will supply next-generation optical fibre, cable and connectivity products for Meta’s expanding data centre infrastructure.

Corning Meta optical cable plant development matters because AI workloads are increasing demand for high-speed, low-latency optical communication systems. As AI clusters grow larger, fibre optic connectivity becomes a critical infrastructure layer alongside chips, power, cooling and storage.

AI Data Centres Drive Optical Fibre Demand

Meta’s fibre connectivity requirements are rising as the company operates or builds 26 data centres across the US. These facilities support the rapid expansion of AI computing capacity, which requires dense and reliable optical networks.

Corning’s optical communications business is already benefiting from this demand. Net sales in the segment rose by 35% year on year in the fourth quarter, driven by stronger AI data centre demand, while total company sales increased by 14% to $4.41bn.

The Corning Meta optical cable plant therefore reflects a wider shift in digital infrastructure. Data centre growth is no longer only a semiconductor story; it is also becoming a materials, glass, cable and connectivity supply chain story.

Germanium Supply Becomes Strategic for Fibre Optic Expansion

Fibre optic cable production has direct implications for germanium demand. Germanium tetrachloride is used to increase the refractive index of the silica glass core in fibre optic cables, making it essential for high-performance optical communication.

Optical communication is the largest downstream consumer of germanium in the US. That makes AI data centre expansion increasingly relevant to minor metals markets, especially as fibre deployment accelerates.

Supply risk remains a key concern. China imposed export controls on germanium metal and other germanium products in August 2023, citing military technology concerns. China accounts for about 60-70% of global germanium output, while its exports of germanium and fabricated products fell sharply to 11,316kg in 2025 from 25,273kg in 2024.

Chinese germanium exports remained weak early this year, with January shipments down 95% on the year and February shipments also lower. This creates a strategic tension: AI infrastructure is increasing optical fibre demand, while germanium availability remains constrained by export controls.

The Metalnomist Commentary

The Corning-Meta project shows that AI infrastructure is pushing demand deeper into specialty materials supply chains. Germanium may be a small-volume metal, but its role in optical fibre makes it strategically important as data centres scale.

Silicon Photonics Capacity Expands as AI Data Centre Demand Accelerates

Silicon Photonics

Silicon photonics capacity is expanding rapidly as artificial intelligence data centres require faster, higher-bandwidth and lower-latency connections between processors. Semiconductor firms are increasing investment as SiPh technology moves from telecoms and enterprise networks into hyperscale AI infrastructure.

The shift reflects a structural change in data centre architecture. Large AI clusters need optical interconnects that can move massive volumes of data with lower energy consumption than traditional copper-based systems.

Silicon photonics capacity growth is therefore becoming a materials story as well as a semiconductor story. While silicon wafers form the base platform, high-performance SiPh components also rely on indium phosphide, gallium arsenide, gallium nitride, germanium compounds and, in some cases, lithium niobate.

AI Workloads Push Optical Interconnects Beyond Copper

AI workloads are increasing data centre scale and network complexity, forcing hyperscalers to adopt technologies that reduce latency and energy use per bit. This is accelerating the replacement of copper in high-speed data communications equipment.

Industry spending on data centre switches for AI back-end networks is now forecast to exceed $100 billion by 2030. The upgraded outlook reflects rising demand from agentic AI, physical AI, humanoid robots, autonomous vehicles and military systems.

This growth increases demand for optical transceivers, modulators, photodiodes, lasers and high-speed detection systems. These components are closely tied to minor metals and compound semiconductor materials that support faster optical transmission.

Tower and STMicroelectronics Scale SiPh Platforms

Tower Semiconductor is working with Coherent on high-speed data transmission using a silicon modulator built through a production-ready SiPh process. The work targets next-generation optical transceivers for AI data centre applications.

Tower is also investing heavily in silicon germanium products that support its SiPh platform. The company raised its 2026 capital expenditure budget for SiPh and silicon germanium by $270 million, in addition to the $650 million announced in late November.

STMicroelectronics is also expanding aggressively. The company plans to quadruple SiPh production capacity by 2027, supported by long-term capacity reservation commitments from customers.

STMicro recently entered high-volume production for its SiPh-based PIC100 platform. The platform is used by hyperscalers for optical interconnection in data centres and AI clusters, and it is designed to reduce signal loss while improving modulator, photodiode and chip-to-fibre performance.

The Metalnomist Commentary

Silicon photonics capacity is becoming a hidden bottleneck in AI infrastructure. As optical interconnects scale, demand for indium, gallium, germanium and lithium niobate-linked materials will become more strategically important to the semiconductor supply chain.

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.

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.

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.

STMicro targets new sources of silicon chip demand

STMicro

STMicro is betting on new sources of silicon chip demand from AI data centres and advanced EV platforms. The company sees silicon and silicon carbide (SiC) devices as core growth engines, even as it trims some near-term capital spending. As a result, STMicro is repositioning its portfolio toward photonics, high-voltage power electronics and next-generation vehicle systems that can unlock new sources of silicon chip demand across several end markets.

Photonics and AI servers anchor new sources of silicon chip demand

STMicro is using silicon photonics to capture new sources of silicon chip demand from hyperscale AI data centres. In the third quarter, the firm reported rising orders for silicon photonics integrated circuit prototypes from its 300mm fabs. This confirms internal expectations that photonics ICs will become a meaningful revenue driver as AI server build-outs accelerate worldwide.

Meanwhile, the company is tightening its integration into the AI infrastructure ecosystem through the Starlight Consortium. The consortium connects substrate suppliers, device makers and system integrators to develop high-speed optical solutions for data centres, telecoms and automotive. In parallel, STMicro is collaborating with Nvidia on an 800V DC AI data centre architecture that combines SiC, gallium nitride (GaN) and silicon technologies. The firm has also demonstrated a GaN prototype with over 98pc conversion efficiency, underscoring how power density and efficiency now drive silicon chip demand as much as raw compute.

SiC, EV power electronics and a more selective capex strategy

STMicro is broadening SiC usage beyond traction inverters and onboard chargers to new power roles in active suspension inverters. This expands the addressable market in EVs just as advanced driver-assistance systems increase demand for sensors and control chips. However, weaker-than-expected EV programmes in Europe and China have delayed the full impact, forcing the company’s main automotive customer to cut orders.

Therefore STMicro is trimming near-term SiC capex as it transitions production from 150mm to 200mm wafers. The company will slow some investments in SiC conversion while maintaining its 300mm expansion plans in Agrate, Italy, and Crolles, France. These fabs continue to see solid order visibility, particularly for data-centre power modules and optical components. STMicro expects EV growth and SiC restocking to resume in 2026, once inventory drawdowns run their course and regional electrification policies translate into firmer demand.

The Metalnomist Commentary

STMicro’s push into photonics and SiC power devices shows how new sources of silicon chip demand are shifting toward AI infrastructure and complex EV systems. For the wider materials chain, this means sustained pull for high-purity silicon, SiC substrates and GaN epitaxy, even if near-term EV softness delays some projects. Suppliers that align with 300mm and 200mm wafer roadmaps and can support AI-class power densities will be best positioned as these new demand waves crystallise from 2026 onward.

Germany Data Centre Capacity Strategy Targets Major AI and Grid Expansion by 2030

Data Center

Germany data centre capacity is set for a major expansion after the cabinet adopted a national strategy targeting at least a two-fold increase by 2030. The plan also aims to quadruple Germany’s AI and high-performance computing capacity over the same period.

The strategy reflects Germany’s push to strengthen digital sovereignty while competing for AI infrastructure investment. It also places data centres directly inside the country’s energy, grid, and industrial planning agenda.

Germany data centre capacity stood at 2.98GW in 2025, more than double the level recorded in 2010. AI and high-performance computing capacity totalled 500MW, while total data centre power consumption reached 21TWh.

Grid Connections Become the Main Bottleneck for AI Infrastructure

Germany’s data centre strategy identifies grid access as one of the biggest constraints on future growth. The country has strong supply security and a renewables-rich power mix, but long connection queues and limited grid capacity could slow new projects.

The strategy calls for data centre demand to be included earlier in grid infrastructure planning. It also supports more flexible connection rules, allowing transmission system operators to reserve capacity for data centres where competition for grid access is intense.

This matters for metals and electrical infrastructure suppliers. Faster data centre growth will increase demand for transformers, switchgear, copper and aluminium conductors, power cables, busbars, cooling systems, and grid reinforcement materials. The Frankfurt metropolitan area, already Germany’s largest data centre cluster, will remain a focal point for these constraints.

Energy Planning and Renewables Must Keep Pace With Digital Demand

Germany data centre capacity growth will only remain sustainable if renewable energy and grid infrastructure expand at the same pace. The strategy highlights the need to use existing infrastructure more efficiently while improving digitalisation at the distribution system operator level.

The new maturity-level procedure for large consumer grid applications is designed to create a clearer queue for major power users. Industry groups also support faster approval processes, early identification of priority areas, and better planning around water requirements.

For industrial supply chains, the message is clear. AI infrastructure is becoming a power-intensive manufacturing and materials story, not only a digital services story. As Germany scales AI and HPC capacity, the country will need more electrical metals, power equipment, cooling infrastructure, and grid-ready industrial zones.

The Metalnomist Commentary

Germany’s data centre strategy shows how AI growth is turning grid capacity into an industrial competitiveness issue. The winners will not only be cloud operators, but also suppliers of power equipment, conductors, transformers, and low-carbon electricity infrastructure.

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.

Yageo AI Demand Lifts Sales as Tantalum Capacitors Gain Strategic Importance

Yageo Group

Yageo AI demand strengthened the Taiwanese electronic components manufacturer’s 2025 performance as high-end electronics and data centre applications supported sales growth. Net sales rose to NT$132.9bn, or about $4.26bn, up 9.3pc from a year earlier and 12.5pc in US dollar terms.

Yageo AI demand now accounts for around 13pc of the company’s sales, showing how artificial intelligence is reshaping the electronic components supply chain. The company said customer inventories have returned to healthier levels, while demand for AI-related products continues to grow despite geopolitical uncertainty.

Yageo AI demand also supported profitability. Earnings before interest, tax, depreciation and amortisation rose to NT$38.8bn in 2025 from NT$32.6bn in 2024. Fourth-quarter sales were particularly strong, rising 19.9pc from a year earlier to NT$35.96bn.

Tantalum Capacitors Benefit From AI Data Centre Growth

Tantalum-based capacitors are becoming more important as AI data centres increase demand for reliable, high-performance electronic components. Yageo is a major producer of tantalum capacitors, which are used across servers, power systems, industrial electronics, and advanced computing hardware.

The company’s tantalum product mix was its second-largest segment in the fourth quarter, accounting for 21.7pc of sales. Magnetics remained the largest segment at 26.4pc, highlighting Yageo’s exposure to several component categories tied to electrification, automation, and high-performance computing.

This product mix matters because AI infrastructure requires dense, stable, and reliable components. Capacitors, magnetic components, sensors, and thermal management devices all sit inside the wider hardware supply chain that supports data centres, power conversion, and electronics manufacturing.

Tantalum Supply Squeeze Adds Cost Pressure to Component Makers

Tantalum concentrate and metal prices have surged to record highs since the start of the year. The increase has been driven by tight supply in central Africa and rising downstream demand from AI-related applications.

This creates a strategic challenge for capacitor producers. Strong AI demand supports revenue growth, but raw material tightness can raise input costs and pressure margins if customers resist price adjustments. For manufacturers such as Yageo, access to reliable tantalum supply is becoming more important as demand shifts toward higher-end applications.

Yageo’s acquisition of Japan’s Shibaura Electronics also broadens its component platform. Shibaura produces thermistors and temperature sensors used in automobiles, home appliances, and industrial applications. The deal strengthens Yageo’s exposure to sensing and thermal control, both of which are increasingly relevant in electronics, industrial systems, and mobility.

The Metalnomist Commentary

Yageo’s results show that AI demand is moving beyond chips and servers into the deeper electronic materials chain. The next constraint may not only be semiconductor capacity, but also specialty components and critical minerals such as tantalum.

Tantalum Prices Surge as AI Capacitor Demand Meets Tight African Supply

Ta (Tantalum)

Tantalum prices have surged across concentrates, metal, and scrap as capacitor demand rises and supply disruption tightens the upstream market. The rally reflects a rare collision between stronger electronics consumption, AI data centre investment, and instability in central African raw material flows.

The price rise began before the latest disruption. However, the February landslide at the Rubaya mine in rebel-held eastern Democratic Republic of Congo intensified the market shock. Tantalum concentrate prices jumped sharply, and the pressure quickly moved into tantalum metal and scrap markets in Europe and the United States.

The supply impact has been especially important because much of the material linked to eastern DRC moves through Rwanda before entering international trade. Any disruption around Rubaya therefore affects more than one mining district. It also exposes how dependent the tantalum supply chain remains on politically fragile and difficult-to-monitor sources.

AI Data Centres Lift Tantalum Capacitor Demand

AI data centres have become a major new demand driver for tantalum capacitors. These components help regulate electricity flow on circuit boards and remain critical in high-performance electronics. As AI servers expand, demand for tantalum and tantalum-polymer capacitors is rising alongside advanced chips, power systems, and server hardware.

This demand is not theoretical. Boards used for Nvidia H100 cards can contain multiple tantalum and tantalum-polymer capacitors, making AI infrastructure a direct consumption channel for tantalum products. As Alphabet, Microsoft, Meta, and Amazon raise capital spending for AI infrastructure, smelters and traders expect stronger orders for next-generation capacitor materials.

The capacitor industry is already responding to cost pressure and higher demand. Manufacturers raised prices across several product ranges in 2025, including tantalum-polymer capacitors and multilayer ceramic capacitors. Higher tantalum powder costs contributed to the increases, but AI-related consumption has become an equally important factor.

Tight Supply Pushes Tantalum Metal and Scrap Higher

Tantalum prices are rising because the market faces pressure at both ends of the value chain. Upstream concentrate availability has tightened, while downstream buyers in capacitors and alloys continue to compete for material. This has lifted prices for concentrates, refined metal, and scrap at the same time.

The alloy sector has added another layer of demand stability. Even as capacitor demand accelerates, industrial users of tantalum metal continue to require reliable supply for high-performance applications. As a result, scrap has become more valuable because it offers an alternative source of tantalum units when mined supply becomes uncertain.

The current rally also echoes earlier technology investment cycles. The Dotcom boom drove strong demand for tantalum capacitors and pushed tantalite prices to historic highs. Today, AI infrastructure may be creating a similar demand shock, but with a more complex supply chain and tighter scrutiny around conflict-linked minerals.

The Metalnomist Commentary

Tantalum is becoming a hidden beneficiary of the AI infrastructure boom. The market risk is that capacitor demand can scale faster than responsible mining, refining, and recycling channels can respond.

Copper Supply Chain Fragility Is Underpriced Despite Price Rally

Ivanhoe

Copper supply chain risk is still being underpriced even after London Metal Exchange prices rallied above $13,000/t, according to Ivanhoe Mines chairman Robert Friedland. He warned that higher prices alone will not quickly unlock new mine investment or solve the operational bottlenecks now shaping copper supply.

The copper supply chain is facing a more complex problem than headline market balances suggest. Friedland pointed to sulphur, sulphuric acid, diesel and other critical inputs as increasingly important constraints for mining operations, especially in Africa.

The copper supply chain is particularly exposed in the Democratic Republic of Congo, where a large share of production depends on acid leaching. If sulphuric acid availability tightens further, Friedland said about half of the DRC’s low-grade leached copper could be at risk unless higher copper prices offset sharply higher acid costs.

This warning comes as the Middle East conflict affects copper markets indirectly. The immediate threat is not concentrate supply, but sulphur-linked cost inflation that can raise operating costs for solvent extraction and leaching operations.

Sulphuric Acid and Diesel Risks Expose Mining Cost Vulnerability

Sulphuric acid has become a central issue for copper supply because much of the DRC’s production relies on acid leaching. A prolonged disruption in sulphur flows could affect roughly 3mn t/yr of DRC copper output, making the country one of the most exposed parts of the global copper market.

The DRC’s vulnerability is different from that of traditional concentrate producers. Concentrate supply depends on mining, milling, logistics and smelter demand. Leached copper also depends on steady sulphur or sulphuric acid access, which creates another layer of supply-chain risk.

Ivanhoe’s Kamoa-Kakula complex is unusually positioned because it produces sulphuric acid as a by-product rather than relying only on external supply. The operation produced more than 100,000t of sulphuric acid in the first quarter of 2026, with annual output expected to reach 600,000-700,000 t/yr once the new smelter is fully ramped up.

That acid production gives Ivanhoe a strategic advantage. It can reduce exposure to imported acid costs while supporting copper output in a market where other DRC producers may face tighter reagent availability.

Diesel is another operational risk. Remote mines depend on diesel for haulage, power generation and logistics, especially where grid access is weak or transport routes are long.

Friedland said highly exposed mining firms should consider securing up to a year of diesel supply. He also argued that the DRC may be less vulnerable than some expect because refined products can arrive through India, Nigeria and southern Africa.

Still, the full operational impact may not yet be visible. Supply-chain shocks often appear first through higher costs, longer lead times and working-capital pressure before they become production losses.

This is why the copper market may be misreading risk. Visible inventories and annual balances can suggest moderate surplus, while the physical supply chain becomes more fragile beneath the surface.

A copper price above $13,000/t helps margins, but it does not immediately create acid, diesel, spare parts, qualified labour or new mine capacity. Mine investment still depends on permitting, capital cost, political risk and long development timelines.

AI, Data Centres and Critical Metals Raise Copper’s Strategic Value

Friedland linked copper’s long-term importance directly to electrification, cooling systems, data centres and artificial intelligence. These sectors are turning copper from a conventional industrial metal into a strategic infrastructure material.

AI data centres need large amounts of power infrastructure. That means more copper for grids, substations, transformers, cooling systems, cabling, backup power and electrical distribution.

The growth of AI also reinforces demand for metals beyond copper. Friedland highlighted gallium, scandium, dysprosium, rhenium and tantalum as thinly traded materials with low liquidity but high industrial dependence.

This is an important market signal. The next phase of industrial competition will not depend only on bulk metals. It will also depend on access to small-volume strategic materials that support semiconductors, aerospace, defence, magnets and high-performance alloys.

Copper remains the anchor metal because it connects electrification, grid expansion, industrial automation and data infrastructure. Friedland described copper as the “king of metals” because no large-scale energy transition can move without it.

However, copper’s strategic value also exposes the market to policy pressure. The US is beginning to understand mining’s national security role more clearly, especially as domestic supply concentration and import dependence become more visible.

Market participants expect moderate global copper surpluses this year, helped by last year’s supply windfall. But US physical balances are expected to remain tight, with the CME-LME arbitrage reopening to encourage flows into the country.

That regional tightness matters. Copper may look balanced globally, while specific markets face procurement pressure because of tariffs, logistics, exchange spreads, domestic manufacturing needs or strategic stockpiling.

The broader lesson is that copper pricing must account for supply-chain resilience, not only mine output. A mine that lacks acid, fuel or logistics capacity cannot deliver metal reliably, even if ore is available.

For investors, this strengthens the value of hard assets with low obsolescence. Mines, smelters, acid plants, power infrastructure and logistics corridors are becoming more valuable as supply chains become less predictable.

For manufacturers, copper procurement is becoming a strategic function. Buyers linked to grids, data centres, defence, cooling systems and energy infrastructure will need more secure supply agreements, not only exposure to exchange prices.

The Metalnomist Commentary

Friedland’s warning cuts through the headline copper rally: the market is pricing metal, but not enough supply-chain fragility. Copper’s next constraint may come less from ore availability and more from acid, diesel, logistics and the minor metals needed to build the electrified economy.