Sumitomo Electric raises InP substrate capacity target to 4.5 times 2024 levels by FY2029

Sumitomo's 4.5x InP substrate expansion is not a capacity play—it is a positional lock on the AI optical interconnect chokepoint. At 800G and 1.6T, EML laser chips remain the only viable architecture where silicon photonics cannot match the bandwidth-to-power ratio. By scaling aggressively, Sumitomo compresses the strategic window for AXT, Yunnan Germanium, and other substrate suppliers, while structurally eroding the procurement leverage of InnoLight, Coherent, and Lumentum heading into 2026-2027. The hidden vulnerability sits upstream: indium reserves and refining are heavily concentrated in China, accounting for over 60% of global supply. The more aggressively Sumitomo scales, the deeper its raw-material exposure becomes. A single tightening of export controls could convert 4.5x capacity from a strategic asset into stranded liability. The 12-to-24-month wildcard is the pace of co-packaged optics (CPO) adoption. If CPO accelerates, InP wafer formats will migrate from 4-6 inch toward 8 inch. Whether Sumitomo's new production lines were engineered with that geometry upgrade in mind will determine whether this expansion represents a genuine technology lead or a premature, locked-in sunk cost.