Coherent breaks ground on Sherman expansion with Nvidia, announces $50M federal funding - KXII

Coherent and NVIDIA have initiated a major expansion at their Sherman, Texas facility, aiming to quadruple wafer production capacity. The project, supported by a $50 million federal grant from the U.S... Read original →

Coherent’s Sherman expansion in indium phosphide isn’t just capacity scaling—it’s a strategic lock-in of the AI optical interconnect stack. This move pressures upstream suppliers for ultra-pure InP substrates and forces downstream 800G/1.6T transceiver makers to adopt InP-based EMLs faster. While the $50M CHIPS grant eases CapEx, any restriction on EUV tools could drastically inflate yield ramp costs. Competitors like Lumentum now face an asymmetric race; Taiwan, China-based firms such as AXT may pivot to silicon photonics to sidestep supply chain exposure. Within 18 months, a U.S.-centric ecosystem—architected by NVIDIA, enabled by Coherent, and assembled domestically—will solidify, closing the window for foreign photonic IC vendors and making 'optical over copper' in AI infrastructure not just preferable, but mandatory.