Overview
- China added indium phosphide to its export control list in February 2025, creating a choke point for the compound used to make high-speed optical transceivers that link servers in AI data centres.
- Export permit delays from Chinese suppliers have produced large backlogs and a reported roughly 250% rise in the price of a 6-inch InP wafer to about $5,000, constraining shipments to key buyers.
- Company leaders raised the issue directly with Chinese officials during a U.S. business delegation in June 2026 as firms warned of immediate shortages and stalled deliveries.
- Industry and investors are reacting by funding and building non-Chinese capacity, including Nvidia’s investments in Coherent and Lumentum and Coherent’s Texas expansions, but new fabs and supplier qualification usually take two to three years.
- Chinese substrate makers are rapidly scaling to meet domestic demand, which could limit exports and slow global relief, a dynamic that may delay AI data-centre rollouts, raise costs for operators, and accelerate onshoring efforts.