Taiwan's IntelliEPI warns of severe indium phosphide supply shortage

The indium phosphide (InP) shortage is not an isolated bottleneck but the inevitable collision of surging AI-driven optical interconnect demand and inherent material scarcity. Technologically, the shift from 800G to 1.6T optical modules hinges on InP-based lasers; substrate shortages will delay co-packaged optics adoption, as silicon photonics can't fully compensate for high-frequency performance gaps. Regulatory pressures—from tighter Taiwanese export controls to U.S. CHIPS Act traceability mandates—will force hyperscalers to requalify secondary suppliers, inflating costs by over 15%. Competitively, Sumitomo Chemical and AXT are poised to lock in long-term agreements, while Chinese players like Yunnan Germanium struggle with crystal yield and defect density at scale. Within 18 months, InP will emerge as the next geopolitically sensitive compound semiconductor after SiC, accelerating industry-wide shifts toward heterogenous integration or thin-film transfer techniques that bypass bulk substrate dependency.