Coherent CEO raises concerns over indium phosphide export delays as China squeezes critical AI supply chain

There’s a material most people have never heard of that sits at the heart of every AI data center on the planet. Indium phosphide, a compound semiconductor used in the optical transceivers that shuttle data at the speed of light, has become the latest flashpoint in the US-China tech cold war. And the supply is drying up fast.

Coherent Corp. CEO Jim Anderson brought this problem directly to Chinese officials during a US business delegation to China in June 2026, pressing for faster approval of export licenses that have been stalling shipments of the critical material.

The chokepoint nobody saw coming

China placed export controls on indium and related compounds back in February 2025. The impact has been staggering. Global exports of indium have dropped by roughly two-thirds since the controls took effect. Shipments to the US specifically have fallen by 77%.

Indium phosphide is the backbone of high-speed optical components. These are the parts that allow data to travel between servers, switches, and storage systems inside the massive facilities that train and run AI models.

Coherent flagged the problem publicly during its early May 2026 earnings call, warning of impending InP shortages. The company holds approximately 40% of the global market share in InP optical components.

AXT, another company in the InP supply chain, has echoed similar concerns. The company reported that InP export permits represent its biggest operational challenge, with significant order backlogs piling up as Chinese authorities slow-walk approvals.

Scrambling for alternatives

Coherent has plans to double its Texas-based InP wafer production capacity during 2026, with further expansion targeted by the end of 2027.

Nvidia made a strategic investment in Coherent back in March 2026, a move designed to secure its own optical supply chain amid tightening constraints.

What this means for investors

On the risk side, tightening InP supply means higher input costs and potentially volatile pricing for the compound. On the opportunity side, companies with existing InP capacity outside China are suddenly sitting on extremely valuable assets. Coherent’s 40% global market share in InP optical components, combined with its domestic expansion plans, positions it as a primary beneficiary of the supply crunch. The Nvidia investment validates this thesis with real dollars.

China’s export controls on critical minerals and compounds represent a deliberate strategy to maintain leverage over Western technology supply chains. The February 2025 controls on indium followed earlier restrictions on gallium and germanium.

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