Indium phosphide prices surge due to AI data center demand

The rapid expansion of artificial intelligence is driving an unprecedented surge in demand for indium phosphide (InP) substrates. This chemical compound is essential for manufacturing lasers used in optical modules, which enable ultra-fast data transmission between processors and servers in AI data centers.

Prices for InP substrates have risen sharply, particularly in China, a major producer. Two-inch wafers reached approximately 880 yuan (US$130) per wafer in June, up from 500 yuan at the end of 2025. Three-inch wafers also saw significant increases, rising from roughly 1,800 yuan to 3,200 yuan over the same period. Industry analysts suggest further price hikes of up to 10 percent could occur later this year.

In response to the supply crunch and high demand, Japanese producer JX Advanced Metals has announced plans to invest up to 120 billion yen (approximately $752 million) over four years to expand production. Meanwhile, trade tensions and export controls between the United States and China continue to pose risks to the stability of the global semiconductor supply chain.