IQE CEO Flags Indium Phosphide Supply Crunch as China Tightens Export Controls

IQE Plc CEO Jutta Meier warned that the compound semiconductor indium phosphide (InP) is sliding into a supply crunch, with China's export controls constricting access to a material the industry struggles to substitute. The alert comes as demand for InP substrates accelerates, while available supply moves in the opposite direction. Market pricing is already reacting. Average prices for six-inch InP wafers have risen about 250% since the controls took effect, reaching roughly $5,000 per wafer. China added indium phosphide to its export control list around early February 2025. The move is consequential because China accounts for about 70% of global indium output. InP substrates are a critical input for high-speed optical communications chips, which underpin data transmission in fiber networks and data centers. As AI workloads expand, operators are upgrading interconnect bandwidth between servers, lifting demand for InP-based components. Meier's comments echo warnings across the sector. Lumentum's CEO has said the InP supply-demand gap could exceed 30%. Coherent has also pointed to supply-chain exposure tied to InP availability. IQE reported first-half 2026 revenue of £64.6 million, up 43% year over year, with adjusted EBITDA of £6.0 million. The company attributed much of the growth to rising orders from AI data center customers for InP epiwafers used in optical interconnect chips. IQE plans to convert existing manufacturing capacity to increase InP output in the second half of 2026 and is pursuing long-term supply agreements to secure raw materials. It also intends to move from its current listing to the London Stock Exchange Main Market in the first half of 2027. The strain is broader than IQE. Substrate makers such as AXT and suppliers like Japan's Sumitomo are directly exposed to constraints on indium feedstock. With roughly 70% of global production effectively behind an export-control barrier, the industry is under pressure to diversify sourcing. For AI infrastructure buildouts, the InP constraint can ripple through the supply chain: data centers need optical transceivers; transceiver makers need InP chips; chipmakers need InP wafers; wafer producers need indium. Tightness at any point can push out timelines for deploying new AI capacity.