IQE CEO warns of indium phosphide supply crisis from China export controls
In brief
- IQE CEO Jutta Meier warns of indium phosphide supply crisis from China export controls.
- Indium phosphide wafer prices surge 250% to $5,000 per unit since February 2025 controls.
- China produces 70% of global indium, making supply diversification critical for chipmakers.
- IQE reports 43% H1 2026 revenue growth from AI data center optical interconnect demand.
Supply Shock and Price Surge
Average prices for six-inch indium phosphide wafers have climbed roughly 250% since the controls took effect, hitting around $5,000 per wafer. The constraints are biting hard because China accounts for approximately 70% of global indium production. When a single country controls that much feedstock, diversification isn't optional.
Lumentum's CEO has warned that the supply-demand gap for indium phosphide could exceed 30%. Coherent has similarly highlighted vulnerabilities in its supply chain tied to indium phosphide availability. Both firms rely on the material for photonics and compound semiconductors—equipment that data centers need now.
IQE's Response
IQE reported revenue of £64.6 million for the first half of 2026, a 43% increase compared to the same period a year earlier. The growth was driven in large part by surging orders from AI data center operators who need indium phosphide epiwafers for their optical interconnect chips. Adjusted EBITDA came in at £6.0 million.
The company isn't waiting for the crisis to worsen. IQE is converting existing manufacturing capacity to ramp up indium phosphide production during the second half of 2026. It is also pursuing long-term supply agreements to lock in raw material access.
Looking ahead, IQE is planning a move from its current listing to the London Stock Exchange Main Market in the first half of 2027. The shift signals confidence in the company's growth trajectory, even as supply headwinds persist.
Who's Exposed
Firms like AXT, which manufactures indium phosphide substrates, and Sumitomo, a major Japanese supplier, are directly exposed to China's control over indium feedstock. Their ability to source raw materials—and pass through cost increases—will shape how quickly the optical chip shortage resolves.
