IQE CEO warns of indium phosphide supply risks amid China export controls

IQE Plc CEO Jutta Meier is sounding the alarm on what she calls a growing supply crisis in indium phosphide, the compound semiconductor material that quietly powers everything from AI data centers to fiber-optic networks. The culprit: China’s export controls, which have choked off the dominant source of a material the industry can’t easily replace.

The warning lands at a moment when demand for InP substrates is surging and supply is doing the opposite. Average prices for six-inch InP wafers have climbed roughly 250% since the controls took effect, hitting around $5,000 per wafer.

What China controls, and why it matters

Beijing added indium phosphide to its export control list around early February 2025. China accounts for approximately 70% of global indium production.

InP substrates are essential for manufacturing the high-speed chips used in optical communications, the backbone of data transmission. As AI workloads have exploded, so has the need for faster data pipes between servers, which means more InP-based components in data centers worldwide.

Meier’s comments underscore a reality that multiple semiconductor executives have been flagging. Lumentum’s CEO has warned that the supply-demand gap for InP could exceed 30%. Coherent, another major player in photonics and compound semiconductors, has similarly highlighted vulnerabilities in its supply chain tied to InP availability.

IQE’s numbers tell a demand story

Despite the supply headwinds, IQE itself is riding the demand wave. The company reported revenue of £64.6 million for the first half of 2026, a 43% increase compared to the same period a year earlier. Adjusted EBITDA came in at £6.0 million. The growth was driven in large part by surging orders from AI data center operators who need InP epiwafers for their optical interconnect chips.

IQE is converting existing manufacturing capacity to ramp up InP production during the second half of 2026. It is also pursuing long-term supply agreements to lock in raw material access. The company is planning a move from its current listing to the London Stock Exchange Main Market in the first half of 2027.

The broader industry scramble

IQE is far from the only company feeling the squeeze. Firms like AXT, which manufactures InP substrates, and Sumitomo, a major Japanese supplier, are directly exposed to China’s control over indium feedstock. When 70% of global production sits behind an export control wall, diversification isn’t optional.

For the AI infrastructure buildout specifically, the InP bottleneck creates a cascading problem. Data center operators need optical transceivers. Transceiver makers need InP chips. Chip makers need InP wafers. Wafer makers need indium. If any link in that chain tightens, deployment timelines for new AI capacity slip.

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