Hanzhong Zinc Indium Capacity Expansion Strengthens China’s By-Product Metals Chain

Indium

Hanzhong Zinc indium capacity has moved higher with the commissioning of a new 30 t/yr facility in Hanzhong, Shaanxi. The project strengthens China’s position in indium by-product recovery from zinc and lead smelting. It also shows how smelters are pursuing more value from existing processing streams. As a result, Hanzhong Zinc indium capacity now matters beyond one plant.

This matters because indium remains a small-volume but strategically important metal. It is mainly used in indium tin oxide for televisions, laptops, and mobile phones. That makes China indium supply relevant to electronics manufacturing and display technology. Therefore, Hanzhong Zinc indium capacity adds importance to the wider minor metals market.

The project also fits the company’s broader operating base. Hanzhong Zinc can already produce 300,000 t/yr of zinc and 65,000 t/yr of lead. Indium is recovered as a by-product during those smelting processes. Consequently, the new unit reflects a value-maximizing approach rather than a stand-alone primary metal project.

Indium By-Product Recovery Is Becoming More Important for Smelters

Indium by-product recovery is increasingly important because smelters want stronger returns from existing material flows. Hanzhong Zinc said the project will extend its production line and turn waste into resources. That message reflects a broader industry trend in which by-products are no longer treated as secondary revenue only. As a result, indium by-product recovery is becoming part of a wider resource-efficiency strategy.

The timeline also suggests focused execution. The company started building the facility in late June 2025 and commissioned it last week. That relatively quick build shows that targeted minor metal projects can move faster than large primary metal expansions. Meanwhile, the company has not yet said when commercial operations will fully begin.

Hanzhong Zinc also recovers sulphate, mercury, and other materials from zinc and lead smelting. That broader recovery profile adds context to the indium expansion. It shows the company is building a more complete by-product model across its metallurgical chain. Therefore, Hanzhong Zinc indium capacity fits a larger strategy of extracting more value from every tonne processed.

The Metalnomist Commentary

This expansion matters because indium is one of those metals that looks small in tonnage but important in technology value. Hanzhong Zinc is using an existing smelting base to move further into strategic by-product recovery. If more producers follow this model, minor metals supply may increasingly depend on smarter smelting rather than new primary mines.

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 Indium Offtake Deal Strengthens US Critical Metals Recycling Chain

Metallium

Metallium Indium offtake deal plans will strengthen the US recycling route for critical metals used in advanced electronics, semiconductors and thin-film manufacturing. Australian metals recovery firm Metallium has signed a binding 10-year offtake agreement with US-based metals refiner and manufacturer Indium.

The Metallium Indium offtake deal covers several recovered metals, including gallium, germanium, copper, tin, indium and gold. Pricing will be formula-based, while final quantities have not yet been disclosed.

The Metallium Indium offtake deal gives Metallium a long-term commercial outlet for metals recovered from its US recycling operations. It also gives Indium access to secondary supply for materials used in solders, fluxes, thermal interface materials, sputtering targets and semiconductor-related products.

Texas Recycling Facility Targets High-Value Electronic Scrap

Metallium expects to recover metals at its recently commissioned Texas facility using flash joule heating technology. The process rapidly heats scrap mixtures in a controlled chlorine atmosphere to recover metals from synthesized LED manufacturing scrap.

The plant was first commissioned in December, with initial recovery focused on copper, tin, gold and silver from printed circuit board feedstock. Metallium later plans to establish gallium and germanium processing lines, which would move the facility deeper into critical minor metals recovery.

This matters because gallium and germanium are strategically important for semiconductors, optoelectronics, infrared systems, LEDs, solar technologies and defense-related applications. Recycling can help reduce exposure to concentrated primary supply and export-control risks.

Indium Agreement Links Recycling to Advanced Manufacturing Demand

Indium’s role gives the agreement direct industrial relevance. The company supplies materials into advanced electronics, semiconductor and thin-film markets, where high-purity and reliable metal supply are essential.

The companies are also discussing feedstock supply separately, which could deepen the partnership beyond offtake. If feedstock and product flows are aligned, the arrangement could support a more integrated recycling-to-refining model.

Metallium’s recent A$75mn capital raise from US institutional investors and earlier US Defense Logistics Agency support add strategic weight to the Texas facility. The funding shows that US critical minerals recycling is becoming a defense, technology and industrial policy priority.

The Metalnomist Commentary

The Metallium-Indium agreement shows that critical mineral security is moving into electronic scrap and advanced recycling. The key opportunity is not only recovering copper and precious metals, but building domestic capacity for gallium, germanium and indium supply chains.

EU funding boosts sustainable indium mining at Germany’s Pohla mine

Saxore Bergbau

EU funding for sustainable indium mining is giving new life to Germany’s historic Pohla mine in Saxony. First Tin subsidiary Saxore Bergbau has secured support to prove that sustainable indium mining can be commercially viable through bioleaching, using micro-organisms instead of traditional smelting. The Tellerhauser project hosts more than 700t of indicated indium, alongside tin, tungsten and fluorspar, making it one of Europe’s largest indium deposits. This combination of scale and low-impact technology positions sustainable indium mining as a core element of Europe’s critical raw materials strategy.

Bioleaching moves sustainable indium mining into the low-emission era

The EU-backed XTRACT project will provide €200,000 to develop bioleaching at Pohla, with pilot operations targeted for 2026. Bioleaching, also called biomining, uses micro-organisms to dissolve metals from ore under controlled conditions. As a result, it avoids the high temperatures and sulphur dioxide emissions associated with conventional smelting. The process stabilises sulphate toxins, reduces local air pollution and allows metal recovery from low-grade tailings that would usually be discarded. If successful at industrial scale, bioleaching could prove that sustainable indium mining can both cut emissions and unlock value from legacy waste streams. This aligns closely with EU climate goals and the push to decarbonise upstream metals production.

Turning legacy mine waste into strategic critical metal supply

Pohla previously produced uranium and tin before closing in 1990, leaving behind waste piles and partially mined resources. Now, the Tellerhauser project aims to convert that legacy into a modern source of indium, tin, tungsten and fluorspar. XTRACT will also test technologies for treating old waste piles and abandoned sites, targeting both environmental remediation and recovery of additional valuable metals. In practice, that means turning historical liabilities into assets while reducing the footprint of new mining. For Europe’s electronics, photovoltaic and advanced materials sectors, sustainable indium mining at Pohla could become a blueprint for securing critical supply without repeating the environmental mistakes of past decades.

The Metalnomist Commentary

This project sits at the intersection of critical minerals security and environmental innovation. If bioleaching at Tellerhauser delivers on its promise, it could accelerate wider deployment of biomining across Europe’s legacy sites and reshape how the region views mine waste. For downstream users of indium and associated metals, the outcome will signal how fast Europe can scale cleaner, home-grown critical metal supply.

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.

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.

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.

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.

China's Indium Exports to US Surge in June Amid Tariff Announcements

China's indium exports to the United States experienced a dramatic increase in June, driven by heightened demand following the US announcement of impending tariffs on Chinese imports. According to customs data, shipments to the US soared to 7,500 kilograms in June, a significant rise from zero during the same month last year. This figure represents 22% of China’s total indium exports of 33,921 kilograms for the month.

- In May, the US Trade Representative (USTR) confirmed the implementation of new Section 301 tariffs on Chinese imports, set to begin on August 1. However, these tariffs were subsequently delayed by two weeks, with the final decision expected later in August 2024. The tariffs will impact a broad range of sectors, including electric vehicles (EVs), critical minerals like indium, and solar cells.

- Meanwhile, exports to South Korea, the largest buyer of Chinese indium, remained stable at 23,991 kilograms in June, slightly down from 23,996 kilograms in the same period last year.

- The surge in US imports underscores the strategic importance of indium, a critical component in various high-tech applications, and reflects the ongoing complexities of the trade relationship between the US and China.

China’s Indium Exports Decline in July Amid Market Caution and Upcoming U.S. Tariffs

China's exports of indium metal experienced a notable decline in July compared to the same month last year, largely due to market saturation and anticipation of new U.S. tariffs. Buyers and traders outside of China had stocked up sufficiently on indium during May and June, leading to a reduction in demand in July. Many chose to halt further purchases and monitor market conditions, particularly ahead of the U.S. imposing new Section 301 tariffs on Chinese indium, which took effect in August.

According to customs data, China exported 32,147 kilograms of indium metal in July, marking an 11% decrease from 35,979 kilograms in the same month last year. From January to July, total exports reached 344,149 kilograms, a slight 1% decrease from the 347,286 kilograms exported during the same period in the previous year.

The market remained relatively stable in July, with only minor price fluctuations. Producers maintained firm pricing aligned with elevated levels on the Changzhou Zhonglianjin trading platform. However, export prices for 99.99% grade indium metal saw a slight dip early in the month, from $360-375 per kilogram (fob) on July 2-4 to $360-373 per kilogram (fob) on July 9, due to a lack of spot purchases.

As the month progressed, prices rebounded to $360-380 per kilogram (fob) by July 23, driven by producer responses to higher prices on the Changzhou Zhonglianjin platform and a tight supply of feedstocks amid local environmental checks. Prices stabilized at this level until the end of July. However, a slight easing of feedstock supply pressures in August led to a modest decline in prices, which fell to $360-375 per kilogram (fob) by August 13, where they remained stable through August 22.

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.

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.

European Bi, In Price Rallies Stall on Profit-Taking

The surge in European bismuth and indium prices has decelerated as sellers capitalize on the substantial gains made in the second quarter, prompting slight declines in the past two weeks. Initially, speculation and constrained feedstock availability in China drove a sharp rise in prices, leading European sellers to elevate their offers in line with increasing replacement costs.

Bismuth prices in Europe saw a remarkable 77% increase from April to June but experienced a modest dip in early July due to profit-taking activities. Traders, seeking to benefit from the recent price rally, sold long-held low-cost materials at discounted rates compared to the higher-cost replacement materials sourced from China.

Similarly, indium prices, which reached a nine-year peak of $373-413/kg in June, have slightly receded to $373-401/kg. This adjustment followed a downturn in the Chinese domestic market, prompting European sellers to lower their offers and secure profits from the 35% price rise seen in the second quarter.

Despite tepid demand from European consumers, both metals experienced rapid price hikes in the second quarter, driven by elevated replacement costs from China. Chinese export prices for bismuth surged by 63% from April to June, remaining stable at $6.14-6.26/lb fob. Environmental inspections in China, which restricted the supply of bismuth concentrates from lead and zinc refineries, and speculative trading further exacerbated this price rise.

Indium supply constraints from China's Hunan, Guangdong, and Guangxi provinces due to environmental checks, coupled with trading activities on the Zhonglianjin platform, propelled prices upward. Although Chinese export prices for indium peaked at $371-391/kg fob in mid-May, they declined to $359-374/kg through June as trading activity slowed.

Speculation Fuels Minor Metal Price Increases

The swift price increases for bismuth and indium have spurred speculation about potential hikes in other minor metals such as selenium, tellurium, and germanium, whose prices are already trending upward.

Selenium prices in Europe were assessed at $10.40-13.10/lb duty unpaid Rotterdam, up from $10.30-12.40/lb at the end of June, marking a 7% rise in the second quarter driven by higher replacement costs from China and consistent demand.

Tellurium prices rose by 13% in June, last assessed at $91-99/kg duty unpaid Rotterdam, reflecting tight supply in European warehouses and rising prices in China.

Germanium metal prices hit a nine-year high of $1,810-2,010/kg cif main airport on July 2, up from $1,620-1,920/kg at the start of June, following an increase in Chinese export prices. The average germanium price in the first half of this year was $1,607/kg, significantly higher than the 10-year average of $1,324/kg, due to export controls limiting supply outside China.

Spot demand for most minor metals in Europe remains sluggish and is expected to stay low over the summer. However, market participants are closely monitoring China for indications of which minor metals might experience the next price spike, given Europe's heavy reliance on Chinese exports for many of these metals.

US Expands Indium Phosphide (InP) Manufacturing Capacity Amid Growing Demand and Supply Chain Challenges

Indium Phosphide (InP)

The US is ramping up indium phosphide (InP) production capacity through private investment and government support to meet increasing demand for optoelectronic devices and secure supply chain resilience in the face of geopolitical tensions.

Indium Phosphide Demand Drives Expansion

US semiconductor and optoelectronic manufacturers are expanding InP production capacity to address a growing supply-demand gap. InP-based technologies, essential for AI infrastructure, data communications, and emerging applications like 6G wireless and quantum technology, are becoming increasingly critical as the demand for data processing and energy-efficient solutions surges.

Geopolitical factors are adding urgency to this expansion. China's restrictions on gallium and germanium exports to the US have spurred American companies to strengthen their domestic supply chains.

Key Investments Underway

1. Coherent:

• $33 million investment under the CHIPS Act to modernize and expand its Sherman, Texas facility.
• Transitioning to 6-inch InP wafer fabrication, enabling 4x device output per wafer to meet high-volume demands.
• Additional plans to construct 6-inch wafer plants in Texas and Järfälla, Sweden.

2. Infinera:

• $93 million federal funding for a new InP photonic IC fabrication facility in San Jose, California, and a test and packaging plant in Bethlehem, Pennsylvania.
• The California facility will expand production capacity 10-fold, while the Pennsylvania plant will support advanced test and packaging for secure communications and emerging technologies.

3. IntelliEPI:

• Received $4.12 million from the Texas Semiconductor Innovation Fund (TSIF) to triple annual wafer production at its Allen, Texas facility.
• Focused on InP and gallium arsenide wafers for optoelectronic and electronic devices.

4. Lumentum:

• Scaling InP optical transceiver and laser production to support cloud computing and AI workloads.
• Investing $74 million in capacity expansions, including at its Thailand manufacturing site, with production capacity fully booked until the end of 2025.

Strengthening Supply Chains and National Security

The new InP production facilities will:

• Enhance energy efficiency for data center communications.
• Secure supply chains for national security agencies, including the Department of Defense and intelligence services.
• Support critical emerging technologies like LiDAR, quantum sensing, and 6G wireless networks.

Federal support, coupled with state initiatives like the Texas Chips Act, underscores the US government's commitment to strengthening its semiconductor and optoelectronics industry.

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.

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.

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.

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.

Tower Semiconductor Expands SiPho and SiGe Capacity to Meet AI Data Center Demand

Tower Semiconductor

Tower Semiconductor accelerates silicon photonics (SiPho) and silicon germanium (SiGe) capacity expansion following record first-quarter revenue from these advanced semiconductor technologies. The Israel-based foundry invests $350 million to repurpose fabrication facilities across Israel, Texas, and Japan to meet surging demand. Tower Semiconductor SiPho and SiGe production ramp directly supports AI data center infrastructure expansion and next-generation optical communications systems requiring specialized semiconductor materials.

Fabrication Facility Utilization Rises Across Global Manufacturing Network

Tower Semiconductor operates multiple fabrication facilities at varying utilization rates to optimize SiPho and SiGe production capacity across its global network. Fab 2 currently runs at 55% utilization while building SiGe capacity, with available space awaiting customer qualification processes. Meanwhile, Fab 3 operates at 80% capacity, Fab 5 reaches 65% utilization driven by high-voltage power management demand, and Fab 7 exceeds its 85% model at full capacity.

The company's Fab 9 facility operates at 70% utilization as SiPho and SiGe expansion continues across the production line. Tower relocated 300mm wafer production for mobile handsets to its shared facility in Agrate, Italy with STMicroelectronics. As a result, this strategic move frees additional capacity at Fab 7 in Japan for new SiGe and SiPho 300mm products targeting data center applications.

AI Infrastructure Drives Silicon Photonics Technology Adoption

Silicon photonics technology increasingly displaces conventional indium phosphide (InP) based electro-absorption modulated lasers in high-speed data communications applications. SiPho solutions now serve 800 gigabit per second speeds and are ramping to 1.6 terabits per second for AI data center requirements. However, some optical component manufacturers develop hybrid SiPho technologies integrating InP materials for enhanced performance capabilities.

Tower Semiconductor collaborates with Chinese data center optics manufacturer Innolight Technology and US-based OpenLight Photonics on advanced SiPho development projects. OpenLight processes InP materials directly on SiPho wafers using Tower's PH18DA platform, reducing costs and time for laser integration. Therefore, these partnerships accelerate Tower Semiconductor SiPho technology advancement while expanding customer applications across global markets.

Radio frequency infrastructure business growth stems from data center and AI expansions requiring SiPho and SiGe technologies for optical fiber communications. SiGe demand increases strongly through continued adoption for transimpedance amplifiers and drivers in optical modules. Consequently, Tower expects significant long-term SiGe adoption in satellite terrestrial receivers and low-noise amplifiers for advanced handset applications.

The Metalnomist Commentary

Tower Semiconductor's strategic capacity expansion for SiPho and SiGe technologies positions the company at the intersection of AI infrastructure growth and advanced semiconductor materials demand. The shift toward silicon-based photonics solutions reduces reliance on traditional III-V materials like indium phosphide while creating new opportunities for specialized semiconductor manufacturing capabilities that support next-generation data center and telecommunications infrastructure requirements.