China is deliberately choking the global supply of Indium Phosphide (InP), the material that makes every laser in every AI data center work.
Reuters confirmed: US officials have visited China multiple times to resolve this. China is still blocking export approvals on purpose. They want to maintain the bottleneck.
Chinese producers like Yunnan Germanium (
002428.SZ) and Guangdong Xiandao are scaling capacity fast (Yunnan investing $28M to reach 450K wafers/year, shipments up 74% in 2025). But even if export approvals are granted, overseas shipments will be "limited."
Switching InP suppliers requires lengthy qualification cycles. You can't just find a new source overnight. 12-18 months...
This will help explain the recent price action in the below names.
WINNERS:
$SIVE.ST CW lasers ARE InP devices. Policy-duration shortage extends their 14-quarter laser supply constraint indefinitely. Every month China maintains this, SIVE's pricing power widens.
$LITE Substrates come from Sumitomo JX Advanced Metals in Japan. Entirely outside the China export gate. Their competitor's supply gets squeezed while theirs is control-immune. This is the cleanest relative advantage.
Win Semi (
3105.TW) Only pure-play III-V foundry on earth. InP wafer fab capacity is scarce globally. Tighter substrates = their existing capacity commands higher pricing.
$AEHR Sole-source wafer-level burn-in testing for InP and SiPh devices. When every wafer is more valuable because the input material is scarce, the cost of shipping a bad one goes up. Testing intensity rises with scarcity.
AIXA (
AIXA.DE) Makes the MOCVD equipment needed for InP epitaxy. Every country trying to build domestic InP capacity needs their tools. More fragmentation = more equipment orders.
$SOI.PA Photonics-SOI monopoly. InP scarcity makes the entire optical layer more expensive, increasing the value of every component in the stack including Smart Cut SOI wafers.
LOSERS:
$COHR Reuters specifically names Coherent as "mainly supplied by AXT." AXT manufactures IN China, inside the export gate. Even if approvals come, shipments will be limited. COHR carries a substrate risk that LITE does not. And switching requires lengthy qualification cycles.
$AAOI Demand is not the issue; laser/EML/InP component supply is. If AAOI cannot secure enough laser chips, capacity ramp can slow.
$AXTI AXT is a US-listed InP substrate maker that manufactures in China. Their entire equity value is an export-approval question. If approvals flow, massive upside. If they don't, the business model breaks for Western customers.
We are watching real-time supply chain warfare over AI supremacy. The companies that own the physical bottlenecks in this chain benefit every time the world fragments.
Reuters: U.S. officials have visited China multiple times and urged the Chinese side to resolve the InP export controls, but China is still causing delays in export approvals.
As a result, U.S. photonic chip manufacturers that need InP are facing difficulties.
However, China does not appear to be particularly favoring domestic Chinese companies over U.S. companies operating in China. China wants to maintain the bottleneck the U.S. is facing in InP, so most Chinese domestic InP producers are focusing on the domestic market.
Chinese InP manufacturers such as Yunnan Germanium and Guangdong Xiandao are both in talks with Chinese authorities to secure export approvals, but even if approvals are granted, overseas shipments are likely to remain limited.