China has plenty of indium but not enough InP wafers for AI data centers

While China dominates primary indium production, it lags significantly in indium phosphide (InP) wafer manufacturing, creating a critical gap in the AI data center optical component supply chain. This imbalance limits the country's ability to leverage raw material advantages into technological self-sufficiency, increasing reliance on foreign suppliers, especially in high-end wafer fabrication. The technical bottleneck affects downstream optical module manufacturers, raising production costs and delaying innovation cycles. Compliance risks intensify as U.S. export controls tighten, forcing companies to seek alternative production bases, possibly in Southeast Asia or Taiwan, China. In the next 12 months, rising demand for InP wafers will exacerbate global shortages, accelerating supply chain realignment. Domestic firms must overcome core material and equipment constraints to reduce dependency and secure long-term competitiveness.