China Restricts Indium Phosphide Exports, 6-Inch Wafer Prices Surge 250%
0xBroomberg
Since China imposed export controls on indium phosphide in February, the average price of a 6-inch InP wafer has jumped from $1,400 to $5,000 — a 250% surge. InP is the irreplaceable substrate for high-speed optical chips powering next-generation AI data centers, and the squeeze is reshaping leverage across the entire photonics supply chain.
What is indium phosphide, and why has its price exploded?
Indium phosphide (InP) is a compound semiconductor substrate used to make high-speed optical chips. Next-generation AI data centers replace copper wiring with light-based data transmission — InP is the physical starting point of that shift.
After China's February 2025 export controls, the average 6-inch wafer price surged from roughly $1,400 to $5,000 — up 250%.
This means → the spike is not a normal supply-demand fluctuation. It is the chain reaction of an upstream chokepoint forcing the entire supply chain to reprice.
Why does China hold so much leverage here?
China is the world's largest indium producer. According to the U.S. Geological Survey, it accounted for 70% of global output in 2024.
The two main InP substrate makers are U.S.-based AXT (the world's second-largest) and Japan's Sumitomo Electric — but most of AXT's InP substrates are manufactured in China. AXT itself said "InP export licenses are the most significant challenge we face today"; its Chinese subsidiary did not receive its first export license until June last year.
In plain terms = the brand is American, but the production line sits in China. When Beijing holds the license, the wafers don't move — the same playbook as rare earths.
How far has the disruption spread?
SemiAnalysis analyst Konrad Wang noted that the impact has rippled outward from AXT and Coherent across the optical supply chain: Lumentum quadrupled capacity, yet its orders are booked through 2028.
Taiwanese optical-component makers VPEC and LandMark Optoelectronics have also seen InP substrate supply cut off due to AXT license delays.
This reflects a single upstream export control amplifying stage by stage — license delays → substrate shortages → device makers pushing back production schedules — all the way to the end customer.
What is Beijing's "materials chokepoint" strategy?
Paul Triolo, partner at Albright Stonebridge Group, noted that Beijing is building a more refined toolkit — not blocking finished products outright, but slowing or conditionally restricting upstream raw materials.
This means → China is not controlling whether you can buy an optical module. It is controlling whether the optical-module supply chain can scale fast enough to meet hyperscale demand. The pacing power sits in Beijing.
The logic mirrors China's earlier rare-earth export controls, which have already caused sustained disruption to global auto, semiconductor, and aerospace supply chains.
Why is Nvidia scrambling, and how are companies responding?
Coherent CEO Jim Anderson joined Trump's delegation to Beijing. According to Reuters, part of the purpose was to push for resolution of InP export-license delays. The issue was also raised in Seoul trade talks ahead of the Trump–Xi summit on May 14–15.
Nvidia invested $2 billion each in Coherent and Lumentum in March. Marvell Technology acquired photonics startup Celestial AI to secure its own position.
Coherent says it is doubling its in-house InP wafer capacity, but whether it can sustain customer deliveries before the license bottleneck clears remains the central uncertainty.
Is there a near-term fix?
U.S. photonics companies are trying to build their own InP substrate capacity and shift to non-Chinese suppliers such as Japan's Sumitomo.
But analysts point out that new capacity typically takes two to three years to come online — too slow to close the near-term gap.
In plain terms = money can flow immediately, but wafer fabs cannot sprout overnight. For the next two to three years, whoever holds InP substrate inventory holds the bargaining chips.
Content is for reference only, not financial advice.