Indium Phosphide Supply-Demand Imbalance Intensifies, Q4 Price Surge Hits Record High
Nashnova编辑部
Surging AI compute demand is pushing indium phosphide to its supply limit — Q4 substrate and epiwafer prices will rise more than 10%, a record single-quarter increase. Suppliers say even paying more may not secure supply.
What is indium phosphide, and why is it suddenly so scarce?
Indium phosphide — a semiconductor that carries optical signals at very high speed — is the core material in optical transceivers. AI data centres rely on it for ultra-fast optical interconnects.
This means → as long as AI compute keeps expanding, optical-transceiver demand rises, and InP consumption follows.
The global telecom industry is accelerating a shift from copper to fibre. InP sits at the chokepoint of that upgrade path.
How much have prices risen, and what is the pace?
InP substrate prices entered an uptrend in Q4 last year and have been raised three times since; Q4 will mark the fourth consecutive hike.
Epiwafers made from those substrates have already seen two price increases; Q4 is on track for a third straight rise.
The hikes are accelerating: from an initial 3–5% to a record above 10% this quarter. In plain terms = each round hits harder than the last.
Why can't supply keep up?
Epiwafer production depends heavily on upstream substrates, and substrate output is constrained by policy restrictions and capacity bottlenecks — expansion lags far behind downstream demand.
Nvidia's new platforms are driving another wave of optical-networking demand. Combined with the seasonal peak, InP epiwafers have become one of the tightest components in the entire AI supply chain.
This reflects a structural reality: the bottleneck is not at the end product but at the raw-material stage — the whole chain moves only as fast as its slowest link.
How are Taiwanese makers responding?
Intellect Electric (全新) is adding equipment to expand capacity, citing high order visibility and projecting month-on-month revenue growth through Q3.
IET-KY broke ground on phase two of its U.S. plant last July; completion is expected this year, adding a significant new capacity stream.
LandMark Optoelectronics (聯亞) is spending NT$1.315 billion on new equipment and has signed a long-term InP substrate supply contract with Japan's Sumitomo Electric, locking in raw-material access.
Will the expansion solve the problem?
Capacity takes time to build; the supply-demand gap will not ease meaningfully in the near term.
This means → for optical-transceiver makers and AI data-centre customers, the core challenge is no longer just rising prices — it is whether they can secure supply at all.
LandMark's move to lock in a long-term Sumitomo contract illustrates the market logic: securing raw-material access now outweighs short-term price negotiation. When new capacity actually delivers usable output will be the key inflection point for this seller's market.
Content is for reference only, not financial advice.