AOI indium phosphide substrate supply secured through 2027; aggressive partnerships with 7 suppliers (Europe, Japan, China) signal 10x capacity ramp needed for 2028-2029.
“we already had two supplier in Europe, two supplier in uh Japan plus three supplier in China... we are very aggressive uh to have some kind of partnership with two sweet supplier even maybe the possible I would say potential joint venture okay because as you can see uh how much this capacity AI would will increase in the next year it's let me say that is much much more than a factor of 10”
Why it matters
Indium phosphide (InP) substrate is a critical bottleneck material for high-speed optical transceivers (800G, 1.6T) and CPO lasers. AOI has secured supply through end of 2027 but is actively negotiating joint ventures with substrate suppliers to support a 10x+ capacity expansion in 2028-2029. This signals extreme scarcity and buyer desperation in the InP supply chain.
Investment implication
InP substrate suppliers (Akhan Semiconductor, JX Nippon, IQE) are positioned to experience sustained demand acceleration and pricing power through 2028. Investors should monitor whether substrate supply becomes the next constraint after equipment lead times. AOI's willingness to negotiate JVs suggests spot market pricing is prohibitive and supply is the binding constraint, not demand.