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.

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.

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.

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.

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.

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.

 

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.

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.

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.

European Stainless Tube Trade Shifts as Policy, Imports and Data Centres Reshape Demand

European Stainless Steel

European stainless tube trade is entering a more selective phase as producers defend margins through higher-value applications, tighter specifications and regional supply advantages. The market remains stable, but it is no longer driven mainly by volume growth.

European stainless tube trade is being reshaped by three forces at once. Imports continue to pressure commodity and process pipe segments. Policy measures such as CBAM and revised safeguards are changing cost structures. At the same time, automotive exhaust demand is declining as electrification advances.

Speakers at SMR’s Stainless Steel Tube and Pipe Market Insights Day in Dusseldorf said Europe is behaving like a mature and cyclical market. Asia remains the main centre of stainless steel consumption and commodity production, while Europe depends more on technical applications, certification and regulatory positioning.

European stainless tube trade is therefore moving away from simple price competition. Producers are increasingly competing on quality, traceability, sustainability, lead times and the ability to serve complex end uses.

Italy-based Marcegaglia Specialties said traditional sectors such as construction, energy, oil and gas, automotive, water and food processing remain the backbone of demand. However, the next stage of competition will depend more on sustainability and product complexity than on basic market expansion.

CBAM and Import Pressure Are Regionalising Stainless Tube Supply

European stainless tube trade is becoming more regional because policy and geopolitics are increasing the value of local supply. CBAM, revised safeguard measures and wider instability are pushing buyers to look more carefully at origin, emissions, delivery risk and compliance.

European producers already operate inside the EU regulatory framework. This gives them an advantage in some higher-value applications where customers require reliable documentation, stable quality and shorter supply chains.

But the policy environment is not simple. Some industry speakers warned that CBAM could become more protectionist than environmental if it raises costs for European downstream processors without fully addressing import competition.

This concern is especially relevant for stainless tube makers. They buy input material under EU cost structures, but still compete with imported finished or semi-finished products in certain market segments.

OSTP chief executive Andrea Gatti argued that CBAM and revised tariff-rate quotas are creating a difficult environment for downstream processors. He said the measures can raise raw material costs for European producers while leaving import pressure unresolved in some product categories.

One concern is the way carbon steel and stainless steel products remain grouped in some quota categories. This can obscure the real level of import pressure in specific stainless segments.

The issue is most visible in process pipe. Overall import penetration in European welded stainless pipe may look moderate, but import pressure is much stronger in process pipe than in automotive or structural applications.

Some imported process pipe is arriving at prices close to European producers’ raw material costs. This creates a serious margin problem for EU producers, especially when they must meet higher regulatory, labour and energy costs.

Asian imports are particularly competitive in pipe and fittings made to ASTM specifications. Around 15-20% of the European market still requires ASTM-based products, often because older engineering standards and end-user specifications remain in place.

This creates an opening for Asian suppliers. Many have long experience producing ASTM-based products and can compete aggressively in segments where buyers focus mainly on price and basic compliance.

Asian producers are also becoming more capable of supplying European-standard material. However, some barriers remain. Hot-rolled feedstock availability, customer qualification and more complex technical requirements still protect parts of the European market.

CBAM adds another layer of uncertainty. Importers and buyers still lack full visibility on the actual carbon values that overseas suppliers will declare. Some emissions disclosures remain incomplete or unreliable.

This creates pricing uncertainty. If importers use default emissions values, CBAM costs may rise sharply. If suppliers provide certified actual data, costs may be lower. But the market does not yet know which overseas suppliers can verify emissions credibly.

For European producers, this uncertainty is both an opportunity and a risk. It may make some imports less attractive, but it also complicates raw material sourcing and customer negotiations.

The broader result is regionalisation. Buyers are increasingly weighing whether cheaper imported material is worth the compliance, delivery and emissions risk. European producers can benefit if they turn regulation into a trusted supply advantage.

However, they cannot rely on regulation alone. Imports will continue to pressure standard grades and process pipe where price remains decisive. Europe’s defence must therefore come from technical capability, service and qualification depth.

Automotive Decline and Data Centres Redefine Growth Applications

European stainless tube producers also face structural demand change in automotive applications. Exhaust-related stainless tube demand is declining as electric vehicle adoption reduces the long-term need for combustion engine systems.

German tubemaker Schoeller Werk said about 40% of its business is still linked to automotive. Around 95% of that automotive exposure is tied to combustion engine applications.

This creates a clear transition risk. Combustion engine exhaust systems have historically used stainless tube because of heat resistance, corrosion performance and durability. Electric vehicles remove much of that demand.

Industry speakers described this shift as irreversible, even if the speed varies by region. Combustion vehicles may remain relevant for some years, but the structural direction is clear.

Marcegaglia also described the shift away from combustion-engine vehicles as a trend that stainless tube producers must manage. The market cannot assume that traditional automotive exhaust demand will return.

This forces producers to find new growth areas. Data centres emerged as one of the clearest near-term opportunities during the Dusseldorf discussions.

Data centre stainless demand is growing because cooling systems are becoming more important. AI workloads, higher server density and larger hyperscale facilities require more advanced thermal management.

Stainless tubes can be used in cooling circuits, heat exchangers and wider water infrastructure. These applications often require corrosion resistance, reliability and long service life.

Gatti said the strongest opportunity may not only sit in outer water infrastructure. Inner cooling circuits also present growth potential as specifications increasingly exclude carbon steel and favour copper or stainless steel.

Copper’s high price is helping stainless steel compete. In some data centre applications, stainless can win substitution from copper on cost grounds while still meeting performance requirements.

This creates a valuable opening for European producers. Data centres are not only a volume market. They require quality, traceability, reliability and tight specifications, which fit Europe’s competitive strengths.

However, Asian competition remains a threat. If data centre projects are specified to ASTM standards, Asian suppliers may still compete strongly. This means European producers need early involvement in specifications and project qualification.

Other higher-value markets may also support growth. Specialist energy systems, premium process pipe, food processing, water treatment and industrial heat exchangers all require more complex tube products.

The key difference is that these markets reward performance rather than only price. European producers are better positioned when customers value certification, documentation, short lead times, sustainability and technical support.

This is why Europe’s competitive advantage increasingly lies in complexity. Producers cannot win every commodity segment against lower-cost imports. But they can defend and grow in applications where failure risk, qualification standards and technical requirements matter.

The next decade will likely reward producers that invest in advanced materials and difficult applications. This includes higher corrosion resistance, special dimensions, better surface quality, stronger traceability and lower-carbon documentation.

Policy could help if it is implemented carefully. CBAM and safeguards may support regional supply, but they must avoid damaging downstream processors through higher input costs or poorly designed quota structures.

The real test for Europe is execution. Producers must turn sustainability and regulation into commercial value, not only compliance costs. That means proving lower carbon intensity, shorter logistics chains and stronger product reliability.

European stainless tube trade will therefore become more segmented. Commodity and ASTM process pipe will remain import-sensitive. Automotive exhaust demand will decline. Data centres and complex industrial applications will become more important.

For producers, the strategy is clear. Europe must compete where technical standards, certification, sustainability and customer proximity matter most.

The Metalnomist Commentary

European stainless tube producers are being pushed out of low-margin commodity competition and into higher-specification markets. The winners will be companies that convert regulation, traceability and technical complexity into pricing power, especially in data centres, energy systems and premium process pipe.

Johnson Matthey PGM Outlook Points to Industrial Demand as Deficits Persist

Johnson Matthey

Johnson Matthey PGM outlook shows that industrial demand will remain a key support for platinum group metals in 2026, even as automotive, investment and jewellery demand weaken. The recycler expects platinum, ruthenium and iridium markets to remain in deficit.

Johnson Matthey PGM outlook also shows a split market. Palladium and rhodium may move into surplus as higher prices encourage more autocatalyst recycling, while mine supply remains constrained.

Johnson Matthey PGM outlook is strategically important because PGMs sit across automotive catalysts, electronics, chemicals, hydrogen, hard disks, jewellery and industrial processes. Demand is changing, but the metals remain deeply embedded in high-value manufacturing.

The report suggests that PGM markets are not moving in one direction. Industrial demand is resilient, recycling is recovering, mine supply is under pressure, and vehicle technology choices are reshaping long-term consumption.

Recycling Rises as Mine Supply Remains Constrained

Autocatalyst recycling increased in 2025 after a long period of weak collection. Low PGM prices had discouraged recycling, while high vehicle costs led consumers to keep cars longer.

Higher PGM prices have now started to unlock hoarded material across the supply chain. Johnson Matthey expects secondary supply to rise by 8% as vehicle scrappage rates improve.

This recycling growth could support palladium and rhodium availability. Both metals are heavily linked to internal combustion engine catalysts, and higher recovered supply may push those markets into surplus.

Mine supply remains less responsive. Johnson Matthey expects PGM mine supply to fall because of lower South African production and a 10% decline in palladium output from Norilsk Nickel.

Producers remain cautious about greenfield projects and mine expansions despite higher basket prices. The industry needs confidence in future prices, not only current price strength, before committing capital.

This is especially important in South Africa. Platinum dominates the country’s PGM production mix, so sustained strength in platinum prices could eventually support investment. But palladium and rhodium remain exposed to the long-term decline of combustion engine demand.

Data Centres, Hydrogen and Electronics Support Industrial PGMs

Ruthenium remains one of the tightest PGM markets. Its deficit reached nearly 300,000oz in 2025, equal to almost a quarter of annual consumption.

Demand from chemicals, electronics and data centre-related hard disk production has strengthened ruthenium use. Strategic buying, especially in China, has also tightened market conditions.

Chinese export controls on ruthenium and ruthenium-containing materials have reduced supply availability outside China. This makes ruthenium a more sensitive critical mineral for industrial buyers.

Data centre construction for artificial intelligence is increasing demand for hard disks that use platinum and ruthenium. Wider electronics and electrical applications also remain supportive, with PGM use in those sectors rising by 8% in 2025 to 1.25mn oz.

Iridium demand is expected to rise slightly because of green hydrogen projects in Europe. This supports its deficit outlook, although hydrogen demand still depends on project execution and electrolyser deployment.

The US-Iran war adds uncertainty. Petrochemical demand for PGMs could weaken if Middle East oil and gas operations remain disrupted, while higher feedstock and operating costs may pressure industrial users.

The conflict could also affect vehicle demand. Higher fuel prices may push consumers toward electrified vehicles, but the impact on PGMs depends on the technology mix. Battery electric vehicles reduce PGM use, while hybrids still require catalysts.

Johnson Matthey expects automotive PGM demand to fall by 4% in 2026, broadly in line with lower global internal combustion engine production.

The Metalnomist Commentary

PGMs are entering a more selective demand cycle. Palladium and rhodium face pressure from recycling and combustion-engine exposure, while platinum, ruthenium and iridium are gaining support from industrial, data-centre and hydrogen-linked demand.

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.

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.

IQE GaSb and GaN strategy pivots business toward AI and power markets amid sale options

IQE

IQE’s GaSb and GaN strategy is reshaping the UK compound semiconductor maker as it explores a potential sale of the company. The IQE GaSb and GaN strategy shifts focus toward high-value sensing, photonics and power electronics while legacy wireless markets remain under pressure. As a result, the IQE GaSb and GaN strategy now sits at the core of IQE’s turnaround and M&A narrative.

IQE has continued to rationalise its footprint while redirecting capital to growth nodes. The firm suspended manufacturing at its Silicon site in south Wales and plans to exit fully by the fourth quarter, with a new operator taking over the facility. This follows the sale of its decommissioned Bethlehem, Pennsylvania site in late 2023, with skills, IP and customers transferred to Greensboro, North Carolina. That larger US site now anchors IQE’s presence in advanced sensing, optical communications, aerospace, defence and wireless markets.

However, the restructuring runs in parallel with a strategic review that has widened from a Taiwan business sale to a possible sale of the entire company. IQE has been approached by at least one potential buyer and has received further early expressions of interest. Any acquirer would gain exposure across all four III-V platforms — GaAs, InP, GaN and GaSb — with particular upside in infrared sensing, AI data communications and GaN power electronics.

GaSb sensor momentum underpins IQE GaSb and GaN strategy

GaSb is emerging as a central pillar of the IQE GaSb and GaN strategy, especially in infrared and space imaging. IQE holds GaSb substrate manufacturing capacity in Spokane, Washington, and in Milton Keynes in the UK, creating a transatlantic supply base. The company has shipped its first commercial 6-inch GaSb epiwafers for large-area sensor products used in advanced space and satellite imaging.

These technology milestones are now backed by tangible orders. IQE secured a first-year $1.7mn purchase order for GaSb epitaxial wafers under a three-year agreement with a long-standing infrared sensing customer. It also landed a $4.1mn purchase order for antimonide substrates, with deliveries running into 2026. These sensors target industrial, aerospace and security applications, where long qualification cycles favour stable, specialist suppliers.

Meanwhile, photonics revenue remained broadly flat at £26.6mn in the first half, compared with £26.8mn a year earlier. Strong InP demand for AI-driven data communications offset delays in US military and defence infrared programmes. IQE also launched a 6-inch foundry platform for silicon photonics, positioning GaSb and InP technologies inside emerging AI and hyperscale data centre architectures.

GaN power growth, AI demand and risks to IQE GaSb and GaN strategy

On the GaN side, IQE is expanding reactor capacity for 8-inch GaN-on-silicon targeted at gesture recognition in AR and VR displays. At the same time, it is developing high-voltage (>1,000V) GaN technologies, including vertical GaN and GaN-on-sapphire, to serve automotive power electronics and radar markets. These developments reinforce how GaN power is becoming a key enabler for AI-era data centre power needs and high-efficiency conversion.

Management sees this GaN power pivot as crucial to long-term growth. Chief executive Jutta Meier highlighted the diversification into GaN power and connectivity as the right strategy, citing surging AI-related infrastructure and communications demand. IQE expects to benefit from the exit of a key GaN foundry player, which could free market share for its expanded platform. Multiple Tier 1 design wins in laser and detector products for AI and hyperscale data centres signal that the IQE GaSb and GaN strategy is already landing important customers.

Yet the investment case also carries risks. First-half group revenue fell to £45.3mn from £66mn, driven by a 52pc collapse in wireless revenue to £18.6mn. Overhang from 2024 inventory builds, tariff uncertainty and weak smartphone demand continue to weigh on handset-linked GaAs volumes. IQE expects wireless inventories to normalise only from 2026 and now guides 2025 revenue at £90-100mn, down from £118mn in 2024. The success of the IQE GaSb and GaN strategy must therefore offset a structurally weaker wireless segment and fund ongoing capacity shifts.

The Metalnomist Commentary

IQE is moving from a broad, handset-heavy portfolio toward a more focused, higher-margin mix centred on GaSb sensing, GaN power and AI photonics. That repositioning strengthens its appeal as a strategic target for buyers seeking exposure to AI infrastructure and defence-linked semiconductors. The key question is whether GaSb and GaN growth can ramp fast enough to stabilise revenues before wireless markets recover.

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.