Indium phosphide prices spike 76% as AI data centre demand strains China supply
Synopsis
Indium phosphide — the compound powering AI data centre optical modules — has surged up to 78% in price since late 2025, with Japan's JX Advanced Metals preparing hikes of 2-3x and further 10% increases expected in Q4 2026, exposing a critical chokepoint in global AI infrastructure.
Key Takeaways
Two-inch InP substrates rose to 880 yuan (US$130.54) per wafer in June 2026 , up from 500 yuan at end- 2025 , a roughly 76% increase , according to Nomura .
Three-inch InP wafers climbed to approximately 3,200 yuan from around 1,800 yuan over the same period — a near 78% rise .
Wind's InP index , tracking more than 20 China-listed firms , gained 4.2% on 17 August 2026 , outperforming lithography and semiconductor materials segments.
JX Advanced Metals of Japan is reportedly preparing InP price revisions of two to three times prior levels, with customer demand exceeding planned capacity, per JPMorgan .
Industry participants are reportedly considering further price hikes of up to 10% in Q4 2026 .
Companies including Coherent , Lumentum , AXT , and Sumitomo Electric face direct exposure to rising InP input costs.
Indium phosphide (InP), the semiconductor compound critical to optical modules powering AI data centres, has seen prices surge dramatically amid a tightening supply chain concentrated in China, with further hikes expected through the end of 2026. The price shock is drawing comparisons to earlier silicon supply crunches and is rippling across Asian materials markets.
The price surge in numbers
According to a recent report by financial services firm Nomura citing industry experts, two-inch InP substrates climbed to as much as 880 yuan (US$130.54) per wafer in June 2026, up from as little as 500 yuan at the end of 2025 — a jump of roughly 76%. Three-inch wafers rose to approximately 3,200 yuan from around 1,800 yuan over the same period, representing a near 78% increase.
An InP index compiled by financial information provider Wind, which tracks stock prices across more than 20 firms listed in mainland China, gained 4.2% on Monday, 17 August 2026 — outpacing high-profile technology segments including lithography and semiconductor materials.
Why it matters
InP is the foundational material used to manufacture lasers that convert electrical signals into light, enabling data to travel at high speed through fibre-optic cables inside AI data centres. As hyperscalers race to expand capacity, demand for optical interconnects — and by extension InP substrates — has accelerated sharply.
The compound sits at a chokepoint in the AI infrastructure supply chain: without sufficient InP, the optical modules that link GPU clusters cannot scale at the pace the industry requires. Suppliers in China, Japan, and Taiwan are all feeling the strain.
Asian suppliers under pressure
JX Advanced Metals, one of Japan's leading InP substrate producers, is introducing a first round of price revisions that could raise prices to two to three times previous levels, according to a report by JPMorgan earlier in August 2026. The investment bank noted that customer inquiries continued to exceed the company's planned production capacity expansion.
The industry was also reportedly mulling further price hikes of up to 10% in the fourth quarter of 2026, according to reports citing Taiwan's Economic Daily News. Other Asian suppliers have followed China's lead in revising pricing upward.
The competitive backdrop
The InP supply crunch mirrors dynamics seen in earlier semiconductor material shortages, where geographically concentrated production created systemic vulnerabilities. China is a major producer of InP substrates, and any policy-driven export restrictions — similar to those imposed on gallium and germanium in recent years — could amplify the price trajectory further.
Companies across the optical module value chain, including names such as Coherent, Lumentum, AXT, and Sumitomo Electric, are among those exposed to input cost pressures as the market tightens.
What's next
With AI infrastructure buildout showing no signs of deceleration, demand for InP substrates is expected to remain elevated well into 2027. Investors and procurement teams alike will be watching whether JX Advanced Metals and Chinese producers can meaningfully expand output — or whether the supply gap widens further, making InP the next critical material flashpoint in the global AI hardware race.
Point of View
And the fact that even Japanese producers like JX Advanced Metals are eyeing 2-3x price hikes suggests the shortage is global, not merely a China-domestic phenomenon. Mainstream coverage tends to focus on GPU scarcity; the compounding bottleneck in photonic materials like InP is underappreciated. If Q4 2026 brings the additional 10% hikes the industry is reportedly weighing, optical module makers and their hyperscaler customers will face margin pressure that could slow data centre interconnect upgrades at precisely the moment AI workloads are accelerating.
NationPress
17 Aug 2026
Frequently Asked Questions
What is indium phosphide and why is it important for AI data centres?
Indium phosphide (InP) is a semiconductor compound used to manufacture lasers that convert electrical signals into light, enabling high-speed data transmission through fibre-optic cables inside AI data centres. Without sufficient InP substrates, the optical modules that link GPU clusters cannot scale to meet the demands of modern AI workloads.
How much have InP prices increased in 2026?
According to a report by Nomura citing industry experts, two-inch InP substrates surged to as much as 880 yuan (US$130.54) per wafer in June 2026, up from 500 yuan at the end of 2025 — a rise of roughly 76%. Three-inch wafers rose to approximately 3,200 yuan from around 1,800 yuan over the same period, a near 78% increase.
Which companies are affected by the InP supply crunch?
Companies across the optical module value chain face exposure, including Coherent, Lumentum, AXT, and Sumitomo Electric on the demand side, and producers such as JX Advanced Metals of Japan on the supply side. JX Advanced Metals is reportedly preparing price revisions of two to three times prior levels, according to JPMorgan.
Will InP prices continue to rise in late 2026?
Industry participants are reportedly considering further price hikes of up to 10% in the fourth quarter of 2026. With AI data centre expansion showing no signs of slowing, demand for InP substrates is expected to remain elevated, and supply capacity expansions have so far failed to keep pace with customer inquiries.
Why is China central to the InP supply crunch?
China is a major global producer of InP substrates, making it a critical node in the supply chain for AI optical modules. A Wind index tracking more than 20 China-listed InP-related firms gained 4.2% on 17 August 2026 alone, reflecting investor recognition of China's outsized role — and the risk that any policy-driven export restrictions could sharply amplify the price trajectory.
