This AI data center material is facing a price spike
What's the story
The artificial intelligence (AI) revolution is triggering a spike in demand for optical modules, which facilitate rapid data transfer in data centers. The latest beneficiary of this trend is indium phosphide (InP), a chemical compound that has witnessed an unprecedented rise in prices. China, a major producer of InP, has seen its prices soar dramatically over the past few months.
Market impact
InP prices surge amid AI demand
According to a recent report by financial services firm Nomura, two-inch InP substrates saw their prices jump to as high as CNY 880 ($130.54) per wafer in June from just CNY 500 at the end of 2025.
Similarly, three-inch wafers also witnessed a price hike during the same period, rising from around CNY 1,800 to about CNY 3,200.
Market performance
InP index outpaces some tech sectors
An InP index compiled by financial data provider Wind, which tracks stock prices of over 20 companies in mainland China, rose by 4.2% on Monday.
This increase was sharper than that of some high-profile technology sectors such as lithography and semiconductor materials.
The industry is also considering further price hikes that could go up to 10% in Q4 of this year, Taiwan's Economic Daily News reported.
Supplier response
Asian suppliers respond to price surge
Other Asian suppliers are also following the trend of price hikes.
JX Advanced Metals, one of Japan's top InP substrate manufacturers, is introducing a first round of revisions that could double or triple prices.
This was reported by JPMorgan earlier this month.
The investment bank also noted that customer inquiries continue to exceed the company's planned production capacity expansion.