Optical Communications CEO: Indium Phosphide Shortage Will Surpass Memory
N.R. Finch
Lumentum CEO Michael Hurlston says AI data centers have pushed laser demand from hundreds to hundreds of millions, creating an indium phosphide shortage that will surpass memory chips — prompting Nvidia to invest directly to lock in supply.
Why has laser demand exploded?
AI data centers now move so much data that light signals are replacing electrical ones. The core component is the laser.
Hurlston's number: demand has jumped from hundreds of units to hundreds of millions.
This means → This is not fast growth — it is an order-of-magnitude leap that no supply chain was built to handle.
Why is indium phosphide so hard to scale?
Indium phosphide — a semiconductor material that can emit laser light — is the essential ingredient for these lasers. There is no substitute.
The bottleneck: production capacity is extremely difficult to ramp, unlike silicon chips where new fabs can add volume relatively quickly.
In plain terms = combine Lumentum's capacity with its largest competitor's, and the total still cannot fill Nvidia's orders alone.
Why did Nvidia invest directly?
Nvidia has invested directly in Lumentum to secure indium phosphide capacity.
This means → when a single customer's demand exceeds the entire industry's output ceiling, purchase orders are no longer enough — equity investment becomes the tool to lock in supply.
This reflects a shortage potentially more severe than memory chips: memory at least has multiple large fabs that can expand; indium phosphide does not even have that option.
What does this mean for the optical supply chain?
Hurlston frames indium phosphide supply as the critical proof point for the optical communications supply chain.
If capacity cannot ramp fast enough to match AI infrastructure expansion, optical comms becomes the bottleneck for the entire AI hardware stack.
Put simply = no matter how powerful the AI chips are, the data still has to travel — and indium phosphide is the raw material for that transmission path.
Content is for reference only, not financial advice.