InP capacity is being tied up by long-term contracts due to data center optics demand.
China has recently eased some substrate export controls.
The move toward 200G and 400G transmission is driving this shift.
What happened
Long-term contracts are tying up indium phosphide (InP) capacity, driven by demand for optics in AI data centers. China has recently eased some substrate export controls, according to compound semiconductor supply-chain players.
Why it matters
The shift of high-frequency transmission in AI data centers toward 200G and 400G has made optical communications a key technology breakthrough, increasing the strategic importance of InP substrates and related supply chains.
What to watch
The impact of China's eased export controls on substrate availability and how long-term contracts will affect pricing and supply for other buyers of InP capacity.
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The compound semiconductor supply chain is seeing a shift as InP capacity becomes constrained by long-term contracts, a direct response to rising demand from AI data centers. The push toward 200G and 400G transmission speeds elevates optical communications as a critical enabler, putting pressure on substrate supply. China's recent easing of some substrate export controls adds a layer of complexity, potentially easing some supply constraints while long-term agreements lock in capacity. The combined effect points to a market where securing InP supply becomes a strategic priority, with implications for pricing and availability across the supply chain.
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