Full Breakdown
AI-Driven Data-Centre Demand Sends Indium Phosphide Prices Soaring
8/18/2026, 6:14:00 AM
Core Event: Sharp Rise in InP Substrate Costs
The surge in artificial-intelligence workloads is boosting demand for optical modules that convert electrical signals into light for ultra-fast data transmission. Indium phosphide (InP), the semiconductor material used to make these lasers, has seen its wafer prices climb dramatically. A report from financial services firm Nomura citing industry experts notes that two-inch InP substrates reached 880 yuan (?US$130.54) per wafer in June, up from about 500 yuan at the end of 2025. Three-inch wafers rose to roughly 3,200 yuan, compared with about 1,800 yuan previously.
Background & Context: AI Boom Fuels Material Shortage
The AI boom has intensified the need for high-speed fibre-optic links in data centres, making InP a critical component. China, a major producer of InP, is experiencing a supply crunch that is reflected in market movements. An InP index compiled by financial-information provider Wind, which tracks more than 20 mainland-China firms, gained 4.2 % in a recent trading session, outpacing other high-profile technology segments such as lithography and semiconductor materials.
Data & Statistics: Pricing Trends and Industry Outlook
- Two-inch wafers: 500 yuan -> 880 yuan (June)
- Three-inch wafers: 1,800 yuan -> 3,200 yuan (June)
- InP index: +4.2 % in the latest session (Wind)
- Potential Q4 price hikes: up to 10 %, according to a report by Taiwan’s Economic Daily News.
- Japanese supplier response: JX Advanced Metals, a leading InP substrate producer in Japan, is planning a first round of price revisions that could raise prices two to three times prior levels, as reported by JPMorgan. The investment bank added that customer inquiries continue to outstrip the company’s planned production-capacity expansion.
Why It Matters: Implications for Data-Centre Costs
Higher InP substrate prices translate directly into increased costs for optical modules, which could pressure data-centre operators to absorb higher expenses or pass them on to end-users. The ongoing supply constraints and anticipated further price hikes suggest that the AI-driven demand may continue to tighten the market for this specialized semiconductor material.
