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.

India Semiconductor Mission Adds GaN Micro-LED and Power Chip Projects

India, Semiconductor

India Semiconductor Mission has approved two additional semiconductor manufacturing projects in Gujarat, strengthening India’s push into compound semiconductors, advanced displays and power electronics. The new projects represent combined investment of about 39.36bn rupees.

India Semiconductor Mission support now includes the country’s first commercial mini/micro-LED display facility based on gallium nitride technology. This moves India beyond conventional chip assembly and into higher-value compound semiconductor manufacturing.

India Semiconductor Mission approvals have now reached 12 projects, with cumulative planned investment of about Rs1.64 trillion. The programme is becoming a central tool for reducing import dependence and building domestic semiconductor capability.

The two new projects will be developed by Crystal Matrix and Suchi Semicon. Their focus areas differ, but both support India’s broader objective of building a more complete electronics and semiconductor value chain.

GaN Micro-LED Facility Moves India Into Compound Semiconductors

Hyderabad-based Crystal Matrix will build an integrated compound semiconductor fabrication and assembly, testing, marking and packaging facility at Dholera. The plant will produce mini/micro-LED display modules and provide GaN foundry services.

The project will include epitaxy on 6-inch wafers, which is strategically important. Epitaxy is a core upstream process for compound semiconductor devices and can determine performance, yield and scalability.

The facility’s planned capacity is 72,000 m²/yr of mini/micro-LED display panels. These products can serve large-format televisions and signage, medium-sized screens for tablets, smartphones and vehicles, and micro-displays for smart glasses, smartwatches and extended-reality devices.

Gallium nitride gives the project industrial significance beyond display manufacturing. GaN is a critical material for high-brightness LEDs, power electronics, radio-frequency systems and advanced optoelectronics.

The Dholera project therefore adds a materials dimension to India’s semiconductor strategy. It links chip manufacturing policy with gallium-based compound semiconductor supply chains, where China, Taiwan, Japan, the US and Europe remain important competitors.

Power Semiconductor Assembly Supports Automotive and Industrial Demand

Suchi Semicon will establish an outsourced semiconductor assembly and test plant in Surat. The facility will focus on discrete semiconductor manufacturing for power electronics, analogue integrated circuits and industrial systems.

The planned capacity is 1.03bn chips/yr. This scale matters because India’s automotive, industrial automation and consumer electronics sectors need reliable domestic access to power and analogue components.

Power electronics are becoming more important as electrification spreads across vehicles, factories, appliances, renewable energy systems and charging infrastructure. Even basic discrete devices can become supply-chain bottlenecks when manufacturing is concentrated overseas.

The approval also strengthens Gujarat’s role as a semiconductor manufacturing hub. Dholera and Surat now join a growing cluster of projects intended to support fabrication, packaging, testing and electronics manufacturing.

Of the 10 projects approved earlier under the programme, two have started commercial shipments and two more are expected to begin operations soon. The government has also approved 104 start-ups to expand domestic chip design capability.

That combination is important. Manufacturing capacity alone is not enough. India also needs design companies, materials suppliers, equipment support, packaging capability and customers willing to qualify domestic semiconductor products.

The latest approvals show that India is trying to build depth across the value chain. GaN micro-LED fabrication brings advanced materials capability, while Suchi’s assembly and test plant supports volume supply for industrial and automotive electronics.

The Metalnomist Commentary

India’s semiconductor strategy is becoming more materials-driven, with GaN now entering the centre of its manufacturing push. The real test will be whether India can connect fabrication, epitaxy, packaging and design into a reliable domestic supply chain rather than isolated projects.

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

DOE(The US Department of Energy)

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

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

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

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

TRACE-Ga Funding Targets Recovery From Existing Feedstocks

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

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

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

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

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

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

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

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

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

Gallium Nitride Demand Raises Strategic Pressure

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

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

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

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

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

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

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

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

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

The Metalnomist Commentary

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

GaN-on-Silicon RF Chips Enter Mass Production as China Expands 6G Supply Chain

CETC

GaN-on-silicon RF chips have entered large-scale commercial production in China after state-owned China Electronics Technology Group delivered more than 5mn units for smart terminal applications. CETC described the product as the world's first commercially mass-produced GaN-on-silicon radio-frequency chip for this market.

GaN-on-silicon RF chips combine the high-frequency and high-power advantages of gallium nitride with the lower cost and manufacturing scale of silicon substrates. That combination could make the technology increasingly attractive for next-generation communications equipment.

GaN-on-silicon RF chips are expected to support high-speed connectivity across integrated space-air-ground communication networks. These systems are becoming important for 6G, commercial aerospace, low-altitude aviation and emergency communications.

The development also strengthens the long-term demand outlook for gallium. As GaN semiconductor production expands, high-purity gallium and advanced processing capacity become increasingly important parts of the electronics supply chain.

6G and Aerospace Drive Demand for High-Performance RF Chips

RF power amplifiers are critical to wireless communications because they influence transmission power, data speeds, coverage and network stability.

GaN offers advantages over conventional semiconductor materials in high-frequency and high-power applications. This makes the material well suited to communications infrastructure, radar, satellites and other demanding electronic systems.

China's 6G development, commercial aerospace sector and low-altitude economy are all expanding. These industries require more RF components capable of operating efficiently at higher frequencies and power levels.

Space-air-ground networks could become a particularly important market. These systems combine satellites, aircraft, terrestrial networks and smart terminals to provide continuous communications coverage.

Lower-cost GaN-on-silicon technology could make such systems easier to deploy at scale. Silicon substrates can also provide a more established manufacturing route than some alternative compound semiconductor platforms.

Mass production therefore matters as much as technical performance. Moving GaN technology from specialised applications into millions of commercial devices represents an important step toward broader adoption.

Gallium Moves Further Down the Semiconductor Value Chain

The expansion of GaN chip manufacturing has direct implications for gallium demand. GaN production requires highly refined gallium that meets stringent semiconductor purity requirements.

This increases the value of processing and refining capacity further upstream. Gallium supply is not only about producing primary metal but also about converting it into materials suitable for semiconductor manufacturing.

China already occupies a dominant position in global gallium supply and has placed the metal under dual-use export controls since 2023. That gives gallium growing strategic importance in both semiconductor and defence supply chains.

Greater domestic GaN production could absorb more high-purity gallium inside China, reducing the amount available for export depending on market conditions and policy.

For overseas semiconductor manufacturers, this reinforces the need to diversify gallium sourcing and processing. Demand growth from 6G, aerospace, radar and power electronics could tighten the market even without major changes in primary production.

The broader industrial trend is clear. Gallium is moving from a niche minor metal toward a strategically important input for multiple advanced technology platforms.

The Metalnomist Commentary

CETC's mass delivery shows that GaN is moving from specialised defence and telecom applications into commercial-scale electronics. The strategic bottleneck may increasingly shift upstream to high-purity gallium and qualified semiconductor materials rather than chip design alone.

Rapidus UK Semiconductor Centre Partnership Deepens Japan-UK Chip Cooperation

Rapidus

Rapidus UK Semiconductor Centre cooperation is expanding after the Japanese chip developer signed a memorandum of understanding with the UK Semiconductor Centre to strengthen advanced semiconductor manufacturing ties.

Rapidus UK Semiconductor Centre collaboration will focus on exchanging information and views on advanced chip technology, manufacturing ecosystems and industry development. The agreement comes as Rapidus advances its Hokkaido pilot line toward mass production of 2nm logic semiconductors.

Rapidus UK Semiconductor Centre partnership also fits a broader Japan-UK push around economic security and supply chain resilience. Both governments are placing greater strategic importance on semiconductors, critical minerals and advanced manufacturing.

The cooperation extends beyond chip fabrication. Japan is simultaneously seeking more resilient supplies of rare earths and other strategic materials needed across semiconductor equipment, electronics and high-technology manufacturing.

2nm Development Strengthens Japan-UK Technology Links

Rapidus is using its Hokkaido pilot manufacturing operation as the foundation for planned commercial-scale 2nm semiconductor production.

That places the company in one of the most technically demanding parts of the global semiconductor industry, where manufacturing capability is concentrated among only a small number of producers.

The UK Semiconductor Centre was established in 2025 to support domestic industry growth and expand international collaboration. Working with Rapidus gives the UK access to a partner directly involved in leading-edge logic manufacturing.

For Japan, cooperation with the UK broadens the technology network supporting its attempt to rebuild advanced semiconductor capacity.

The agreement could also create opportunities across equipment, materials, research and engineering. Leading-edge semiconductor production depends on a complex ecosystem including lithography, specialty gases, photoresists, advanced packaging and high-purity metals.

This makes semiconductor cooperation increasingly relevant to industrial supply chains beyond chips themselves.

Critical Minerals Security Moves Closer to Semiconductor Policy

Japan is also pushing for greater coordination among G7 countries on critical mineral stockpiling.

The proposed framework would create national stockpiling systems and link them across participating countries, improving collective resilience during supply disruptions.

The strategy is becoming more urgent as China increases control over critical mineral exports. Rare earths are especially important for magnets, electronics and semiconductor manufacturing equipment.

Japan is already working with countries including France and Australia to diversify rare earth sourcing and processing.

This creates a broader industrial strategy connecting semiconductors with upstream materials security. Building domestic 2nm capacity has limited strategic value if essential materials remain exposed to concentrated foreign supply.

Japan's approach therefore combines advanced manufacturing investment with allied sourcing, stockpiling and technology cooperation.

The Rapidus-UKSC agreement is another step toward that model, where semiconductor competitiveness is supported by a wider network of trusted industrial and mineral supply partners.

The Metalnomist Commentary

Semiconductor security is no longer only about fabs and chip design. Japan is increasingly linking 2nm manufacturing, allied technology cooperation and critical mineral stockpiling into one integrated industrial security strategy.

Brazil Semiconductor Production Gains BNDES Funding as Industrial Strategy Expands

Zilia Technologies

Brazil semiconductor production will receive new government-backed financing after development bank BNDES approved a R143.3mn loan for Zilia Technologies. The funding will support research, production expansion and modernization of the company's manufacturing facilities.

Brazil semiconductor production is becoming part of a broader industrial strategy aimed at reducing dependence on imported electronic components. Zilia will use the financing to develop semiconductor products for smartphones, computers, vehicles, security equipment and other technology markets.

Brazil semiconductor production also increasingly connects with the country's critical minerals strategy. BNDES is preparing major investment in lithium, cobalt, nickel, rare earths and other strategic materials as Brazil seeks to capture more value from its mineral resources.

The investment strengthens Brazil's ambition to move beyond raw material exports and build more domestic advanced manufacturing capacity.

BNDES Funding Targets Domestic Semiconductor Capability

Zilia will use part of the financing to modernize its facilities in Atibaia, Sao Paulo state. The investment is intended to expand research capabilities and improve semiconductor production.

Brazil currently depends heavily on imported technology components, making domestic manufacturing capacity strategically important for electronics, automotive and industrial sectors.

Semiconductors have become increasingly important to vehicle production as electrification, connectivity and advanced driver systems increase chip content per vehicle.

Consumer electronics and security systems provide additional markets for domestic production.

BNDES sees the investment as a way to strengthen industrial resilience while reducing exposure to overseas component shortages.

The financing also builds on Brazil's wider industrial policy. The country's new industry programme launched in 2024 included plans for annual investment to strengthen domestic semiconductor capabilities.

Critical Minerals Could Support a Broader Technology Value Chain

Brazil's semiconductor ambitions sit alongside a much larger critical minerals investment strategy.

BNDES has indicated plans to deploy R50bn into projects linked to strategic minerals including lithium, cobalt, nickel and rare earth elements.

These materials support wider electronics, battery, magnet and advanced manufacturing supply chains. Brazil's large resource base gives the country an opportunity to connect mineral extraction with higher-value industrial processing.

Brazil holds significant reserves of critical minerals, but much of their economic value can be lost if materials are exported before refining, conversion or advanced manufacturing.

The strategic opportunity is therefore downstream integration. Domestic processing, specialty materials and electronics production could allow Brazil to capture more value from resources already present inside the country.

Semiconductor manufacturing itself also depends on highly specialised materials, chemicals, gases and equipment. Building a competitive domestic industry will therefore require more than mineral availability alone.

Brazil will need technology, skilled labour, infrastructure and long-term private investment alongside government financing.

The Metalnomist Commentary

Brazil's opportunity lies in linking mineral wealth with higher-value technology manufacturing rather than treating the two strategies separately. BNDES funding can provide the bridge, but competitiveness will depend on building the processing, materials and technical ecosystem between mines and semiconductor production.

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.

Rapidus Semiconductor Project Gains New ¥150bn Government Investment

Rapidus

Rapidus semiconductor project funding has increased again as Japan commits another ¥150bn to support domestic advanced chip manufacturing. The new investment will help finance equipment for 2-nanometre semiconductor mass production and research into next-generation 1.4nm technology.

Rapidus semiconductor project support now includes ¥250bn in direct government investment following an earlier ¥100bn injection in fiscal year 2025-26. Japan is also planning substantial additional subsidies over the next two fiscal years.

Rapidus semiconductor project development is strategically important because Japan is trying to rebuild advanced logic chip manufacturing capacity after decades of declining domestic semiconductor production. The company aims to start mass production of 2nm chips in fiscal year 2027-28, followed by advanced packaging production in fiscal year 2028-29.

Japan Builds Domestic Leading-Edge Chip Capacity

The latest ¥150bn investment will support production equipment needed to move Rapidus from development toward commercial-scale semiconductor manufacturing. The company is targeting 2nm technology, placing the project in one of the most advanced segments of global chip production.

Rapidus is also conducting research into 1.4nm technology to prepare for the next generation of semiconductor manufacturing. Advanced chips are becoming increasingly important for artificial intelligence, data centres, automotive electronics, defence systems and high-performance computing.

This gives Rapidus strategic significance beyond the semiconductor industry itself. Domestic leading-edge chip capacity can reduce Japan’s exposure to concentrated overseas manufacturing and improve supply resilience for major industrial sectors.

Advanced packaging will also be important. As transistor scaling becomes more difficult, chip performance increasingly depends on how processors, memory and other semiconductor components are integrated.

Rapidus therefore needs to build capabilities across wafer fabrication, packaging and process technology rather than simply operate a conventional semiconductor plant.

Public Funding Must Unlock Large Private Investment

Government backing is substantial but will not finance the entire Rapidus programme. Japan plans to provide another ¥631.5bn in subsidies during fiscal year 2026-27 and around ¥300bn in fiscal year 2027-28.

Rapidus is also seeking roughly ¥1tn in private equity and more than ¥2tn in additional private financing. That funding requirement highlights the extraordinary capital intensity of advanced semiconductor manufacturing.

Leading-edge fabs require billions of dollars for lithography, deposition, etching, inspection and other highly specialised equipment. The investment also creates demand across advanced materials supply chains.

Semiconductor production relies on high-purity silicon, specialty gases, photoresists, copper, tungsten, cobalt, tantalum and other critical materials. Japan designated semiconductors as a critical material in 2022 and has since expanded support for domestic production.

Rapidus has become a central project in that strategy. The key challenge now is execution, including equipment installation, acceptable production yields, customer qualification and private-sector funding.

The Metalnomist Commentary

Rapidus shows that semiconductor security is becoming a capital-intensive industrial policy race. Japan’s challenge is not only funding a 2nm fab, but building the materials, equipment, packaging and customer ecosystem needed to sustain leading-edge production.

Collins Aerospace Radar Production Expansion Strengthens US GaN Defense Electronics

Collins Aerospace

Collins Aerospace radar production is set to expand in Largo, Florida, as the aerospace and defense supplier invests in higher output for commercial aviation radar and multi-domain security solutions. The company plans to spend $26.5mn on the facility expansion.

Collins Aerospace radar production growth follows a $438mn contract awarded by the Federal Aviation Administration in January. The contract supports the FAA’s radar system replacement programme and gives Collins a major role in modernising US aviation surveillance infrastructure.

Collins Aerospace radar production will include Condor Mk3 and ASR-XM radar systems. These products use gallium nitride technology, making the expansion strategically relevant to compound semiconductors, defense electronics and high-performance radar supply chains.

The Largo facility already produces radars, satellite components and secure communications components. Full expansion operations are expected to begin by late 2026.

GaN Technology Raises Radar Performance and Materials Importance

Gallium nitride is becoming more important in radar and power electronics because it can outperform conventional silicon and gallium arsenide in demanding applications. GaN supports higher efficiency, higher voltage operation, faster switching and stronger high-temperature performance.

These characteristics are critical for aviation radar. Modern radar systems need higher power density, reliability and precision while operating in harsh conditions.

The Condor Mk3 and ASR-XM programmes therefore represent more than an equipment upgrade. They show how advanced semiconductor materials are becoming central to aerospace and defense capability.

GaN-based radar systems also strengthen the strategic value of compound semiconductor supply chains. As defense, aviation, satellite and communications systems become more electronics-intensive, access to qualified GaN materials and manufacturing capacity becomes a national security issue.

For Collins Aerospace, expanding Largo’s production capability improves its ability to support both civil aviation infrastructure and broader security markets.

FAA Radar Replacement Supports Domestic Manufacturing Capacity

The FAA radar replacement programme gives Collins a clear demand anchor for the Largo expansion. Long-term government contracts can support capital investment, workforce planning and equipment upgrades.

This matters because aerospace and defense electronics require qualified production environments, secure supply chains and strict reliability standards. Capacity cannot be added quickly without investment in specialised facilities and skilled labour.

The Largo site’s existing radar, satellite and secure communications work gives Collins an established base for expansion. The new investment should deepen that capability while supporting US domestic manufacturing.

The project also fits the broader reshoring trend in advanced electronics. Governments and major contractors are prioritising local production for systems tied to aviation safety, national defense and critical infrastructure.

For materials suppliers, the key signal is demand growth for GaN-related inputs and processing capability. Radar, satellite communications, power electronics and secure systems are likely to remain important demand channels for compound semiconductor materials.

The Metalnomist Commentary

Collins Aerospace’s expansion shows that GaN is moving deeper into critical aviation and defense infrastructure. The strategic bottleneck will not only be radar assembly, but reliable access to qualified compound semiconductor materials and manufacturing 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.

CETC GaN Chips Push GaN-on-Silicon RF Technology Into Commercial Scale

CETC

CETC GaN chips have reached a major commercial milestone after China Electronics Technology Group delivered more than 5mn silicon-based gallium nitride radio-frequency chips for smart terminals. The state-owned manufacturer described the product as the first commercially mass-produced GaN-on-silicon RF chip for this application.

CETC GaN chips are strategically important because GaN combines strong high-frequency and high-power performance with the cost advantages of silicon substrates. This could accelerate adoption in next-generation communications equipment where performance and scale are both critical.

CETC GaN chips are expected to support integrated space-air-ground communications networks used across 6G, commercial aerospace, low-altitude aviation and emergency communications.

The development also strengthens the long-term demand outlook for gallium. Wider GaN deployment will require more high-purity gallium and more advanced downstream processing capacity.

6G and Aerospace Expand the Market for GaN RF Chips

RF power amplifiers are critical components in modern communications systems because they influence transmission range, signal quality and data throughput.

GaN technology is well suited to these applications because it can operate efficiently at higher frequencies and power levels than conventional semiconductor materials.

That makes GaN increasingly relevant to 6G networks, satellite communications, aerospace systems, radar and low-altitude aviation platforms.

China’s rapid expansion in commercial aerospace, information communications and the low-altitude economy is creating a larger domestic market for high-performance RF chips.

Mass production is therefore as important as technical capability. Delivering more than 5mn units shows that GaN-on-silicon is moving from specialised applications toward broader commercial deployment.

This shift could lower unit costs and make GaN-based systems more practical for large-scale communications infrastructure.

Gallium Moves Deeper Into Strategic Semiconductor Supply Chains

The expansion of GaN production has direct implications for gallium demand. Semiconductor-grade GaN requires highly refined gallium with strict purity and processing standards.

As chip output rises, demand will increasingly shift from basic gallium metal toward higher-value materials suitable for epitaxy, wafers and semiconductor fabrication.

China already dominates global gallium supply and has included the metal in its dual-use export control regime since 2023.

That gives domestic GaN expansion wider strategic importance. More gallium may be consumed inside China as semiconductor demand grows, increasing pressure on overseas buyers to diversify supply.

The development also raises the value of downstream refining and processing. Future competition will depend not only on access to gallium, but on the ability to convert it into qualified semiconductor materials.

For global markets, this means gallium is becoming increasingly tied to communications, aerospace and defence technology rather than remaining a small-volume specialty metal.

The Metalnomist Commentary

CETC’s mass delivery shows that GaN is moving decisively from niche applications into commercial-scale communications. The strategic bottleneck is likely to shift upstream toward high-purity gallium and qualified semiconductor materials as 6G and aerospace demand expands.

AI Drives ICT and Manufacturing Growth in Asia-Pacific: A Look at South Korea and Taiwan

TSMC

The explosive growth of artificial intelligence (AI) infrastructure, particularly in the United States, is significantly shaping the electronics and related manufacturing sectors in South Korea and Taiwan. Government data from both countries highlights the importance of AI and its impact on semiconductors, electronics, and other ICT-related exports.

In South Korea, AI demand is offsetting declines in exports to China, showcasing the country's leading role in the global tech supply chain. The latest figures from South Korea’s Ministry of Trade, Industry, and Energy (Motie) show a 14.8% increase in ICT exports for November, totaling over $20 billion for the fourth consecutive month. Semiconductors, computers, and peripherals were the major drivers of this growth. Despite this, year-on-year growth showed signs of slowing, dipping from 22% in October to 14.8%. This slowdown was partly attributed to a 2.2% drop in exports to China and Hong Kong, primarily due to waning demand for mobile phones and displays.

Notably, South Korea's semiconductor exports skyrocketed, with a 30.3% rise year-on-year, reaching $12.5 billion. Exports to the United States surged by nearly 110%, driven by the increasing need for server equipment and data centers fueled by AI systems. These advancements in AI are rapidly driving the need for upgraded infrastructure, such as high-performance servers and data centers, essential for processing the vast amounts of data generated by AI algorithms.

South Korea’s semiconductor industry is globally influential, with giants like Samsung Electronics and SK Hynix at the forefront, along with smaller players such as DB HiTek and Hana Micron. As the world’s second-largest semiconductor supplier, South Korea is poised to benefit as AI continues to push demand for microchips and computing hardware to new heights.

Taiwan's Semiconductor Boom Fuels AI and Tech Growth

In Taiwan, the demand for semiconductors to support AI infrastructure is also expanding rapidly. Taiwan holds a dominant position in global semiconductor production, accounting for more than 60% of worldwide manufacturing and nearly 90% of advanced semiconductor output. This dominance is largely due to the presence of Taiwan Semiconductor Manufacturing Corp (TSMC), the world’s largest foundry, along with companies like MediaTek, ASE Technology Holdings, and United Microelectronics Corp (UMC).

Taiwan’s Ministry of Economic Affairs reports a 26.6% year-on-year increase in equipment purchases for the manufacturing sector in Q3, amounting to 462.4 billion New Taiwan Dollars (about $14.2 billion). The surge was largely driven by semiconductor factories expanding to meet the needs of emerging technologies, including AI, high-performance computing, and cloud services. The country's semiconductor production continues to boom, fueling revenue growth in both electronics and information technology industries.

The semiconductor-driven demand for AI technologies in Taiwan is evident, with a significant 46.4% increase in purchases of fixed assets in the electronic components sector, which accounts for 65.1% of total manufacturing purchases. This increase reflects the ongoing investments in AI-related equipment, including the expansion of wafer foundries, packaging, testing, and memory factories. Meanwhile, the machinery and equipment sector also reported a 26.6% rise in year-on-year purchases, largely driven by semiconductor companies' capital expenditures for new factory expansions and production lines.

Despite these gains, other sectors like chemical materials and fertilizers saw a decline in equipment purchases, highlighting the uneven impact of AI across different industries.

As Taiwan continues to be a hub for semiconductor production, the country is expected to see sustained investments in high-end production capacity and the introduction of low-carbon, automated equipment. This is set to drive further advancements in AI technologies and their applications, solidifying Taiwan's position as a key player in the global tech landscape.

Tower Semiconductor InP Wafer Deal Secures AI Photonics Supply

iQE

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

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

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

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

AI Data Centres Accelerate InP Photonics Demand

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

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

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

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

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

Supply Commitments Highlight Tight InP Capacity

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

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

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

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

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

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

The Metalnomist Commentary

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

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.

TI Silicon Labs Acquisition Signals a Bigger Push in US Semiconductor Reshoring

Texas Instruments

The TI Silicon Labs acquisition marks a major move in the US semiconductor sector. Texas Instruments plans to acquire Silicon Labs in a deal worth about $7.5bn. The transaction would add a large wireless connectivity portfolio to TI’s business. As a result, the TI Silicon Labs acquisition could strengthen both product scale and domestic manufacturing control.

This deal matters because Silicon Labs brings around 1,200 embedded wireless connectivity products. Those products fit closely with TI’s broader semiconductor footprint. Management said the portfolio integrates well with TI’s manufacturing strategy. Therefore, the TI Silicon Labs acquisition looks like a capacity and product expansion move at the same time.

The industrial message is also clear. TI plans to reshore Silicon Labs manufacturing from overseas foundries. That gives the company more direct control over production, supply security, and long-term cost structure. Consequently, the TI Silicon Labs acquisition supports a wider US semiconductor reshoring trend.

US Semiconductor Reshoring Gains More Strategic Weight

US semiconductor reshoring is becoming a bigger part of TI’s long-term strategy. The company already operates three 300mm wafer fabs in the United States. Two are in Texas and one is in Utah. As a result, TI has a strong domestic production base to absorb future expansion.

The company is also planning more capacity. TI intends to build two additional 300mm fabs in Texas under its $60bn domestic investment plan. That means the Silicon Labs acquisition would sit inside a much larger manufacturing agenda. Therefore, US semiconductor reshoring is not a side theme here. It is central to the deal’s logic.

This matters for supply chains as well. Companies want more stable access to chips used in communications, industrial systems, and connected devices. Domestic manufacturing offers better visibility during geopolitical or logistics disruption. Meanwhile, reshoring can improve alignment between product design and production strategy.

300mm Wafer Fabs and Wireless Products Create a Stronger TI Platform

300mm wafer fabs give TI a meaningful advantage in scale and manufacturing efficiency. Adding Silicon Labs could let TI connect that production strength with a deeper wireless product offering. That combination could be especially valuable in industrial and embedded markets. Consequently, the TI Silicon Labs acquisition may improve both reach and operating leverage.

The transaction structure also shows confidence. TI expects to fund the deal with cash and debt financing. The companies expect the acquisition to close in the first half of 2027, subject to shareholder approval. Therefore, the market now has a clearer timeline for how this strategy may unfold.

The broader takeaway is important. This is not only a portfolio expansion. It is also a bet that domestic semiconductor manufacturing and wireless connectivity will matter more together in the years ahead. As a result, the TI Silicon Labs acquisition may become a notable example of how product strategy and reshoring strategy are starting to merge.

The Metalnomist Commentary

This deal stands out because it combines technology breadth with manufacturing intent. TI is not just buying wireless products. It is using the acquisition to reinforce a longer-term US semiconductor reshoring strategy built around scale, control, and domestic capacity.

Singapore opens GaN semiconductor facility to strengthen global supply

GaN Chip

Singapore has launched the National Semiconductor Translation and Innovation Centre for Gallium Nitride (NSTIC GaN), marking a major step in the nation’s advanced chip manufacturing ambitions. The new GaN semiconductor facility will begin commercial operations in mid-2026 and position Singapore among a handful of global hubs capable of producing GaN on SiC wafers. This Singapore GaN semiconductor facility is expected to support both domestic and international demand for high-efficiency power electronics and communication devices.

Singapore GaN semiconductor facility boosts manufacturing capacity

NSTIC (GaN) will feature production lines for 6- and 8-inch GaN on SiC wafers, offering flexibility for diverse applications. According to Minister Tan See Leng, the facility aims to support companies from start-ups to multinationals with production-grade capabilities. GaN semiconductors can operate at higher voltages, switch faster, and reduce heat, making them vital for telecoms, EV chargers, and aerospace systems. Demand for GaN chips is rising sharply, with the global RF GaN market projected to more than double to $2.7bn by 2028.

Global collaboration and market impact

The Singapore GaN semiconductor facility is a collaboration between A*Star, DSO National Laboratories, and Nanyang Technological University, backed by $123mn in funding. Partnerships include WaferLead, a SiC substrate start-up, which will leverage NSTIC GaN to enhance wafer quality and expand its global market presence. Once fully operational, the facility will offer foundry services to overcome capital barriers and accelerate new product launches. This initiative complements Singapore’s broader semiconductor push, including NSTIC (Photonics) and a $500mn advanced packaging facility announced earlier this year.

The Metalnomist Commentary

The Singapore GaN semiconductor facility reflects the strategic shift toward localized, resilient semiconductor ecosystems. By investing in GaN technology, Singapore not only reduces reliance on foreign supply chains but also positions itself as a critical hub in the global race for next-generation power electronics. The move underscores the increasing geopolitical and industrial weight of semiconductors in clean energy, EVs, and defense applications.

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.

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.