IQE Plc chief executive Jutta Meier has warned of what she describes as a growing supply crisis in indium phosphide, the compound semiconductor material behind the optical chips that move data inside AI data centres and across fibre-optic networks. In comments reported on 7 September 2026, Meier identified China's export controls as the cause, arguing they have choked off the dominant source of a material the industry cannot easily replace.
The price signal is stark. Average prices for six-inch indium phosphide wafers have climbed roughly 250 per cent since the controls took effect, reaching around $5,000 per wafer, according to the report.
What Beijing controls
Beijing added indium phosphide to its export control list around early February 2025. China accounts for approximately 70 per cent of global indium production, so the pool of alternative suppliers is small. InP substrates are essential for manufacturing the high-speed chips used in optical communications, the backbone of data transmission. As AI workloads have expanded, demand for faster links between servers has risen with them, and that means more InP-based components in data centres worldwide.
A warning with company behind it
Meier is not alone in raising the issue. The chief executive of Lumentum has warned that the supply-demand gap for InP could exceed 30 per cent. Coherent, another major photonics and compound semiconductor firm, has highlighted vulnerabilities in its own supply chain tied to InP availability. These are assessments from executives with direct visibility of the market, though they remain company statements rather than independent measurements.
IQE's results show the demand side
IQE's own numbers capture the demand surge even as supply tightens. The company reported revenue of £64.6 million for the first half of 2026, an increase of 43 per cent on the same period a year earlier, with adjusted EBITDA of £6.0 million. It credited the growth largely to orders from AI data centre operators that need InP epiwafers for their optical interconnect chips.
The company is responding on two tracks. It is converting existing manufacturing capacity to raise InP production during the second half of 2026, and it is pursuing long-term supply agreements to lock in access to raw material. IQE also plans to move from its current listing to the London Stock Exchange Main Market in the first half of 2027.
A chain with no spare links
The exposure runs well beyond IQE. AXT, which manufactures InP substrates, and Sumitomo, a major Japanese supplier, are both directly exposed to China's control over indium feedstock. The dependency is linear: data centre operators need optical transceivers, transceiver makers need InP chips, chip makers need InP wafers, and wafer makers need indium. Tightness at any point in that chain can push back deployment timelines for new AI computing capacity.
For the wider technology sector, the episode underlines that the AI buildout depends on materials supply chains as much as on chip design or model development. The most advanced accelerator is of limited use if the optical links between servers cannot be built.
What is established and what is merely claimed
Established or on the record:
- Beijing added indium phosphide to its export control list around early February 2025, as reported by the cited source.
- IQE reported first-half 2026 revenue of £64.6 million, up 43 per cent year on year, and adjusted EBITDA of £6.0 million. These are the company's own reported figures.
- IQE has stated plans to convert capacity for InP production in the second half of 2026, to pursue long-term supply agreements, and to move to the London Stock Exchange Main Market in the first half of 2027.
Claimed, projected or estimated:
- The description of a supply crisis is Meier's characterisation, not an independently verified finding.
- The reported 250 per cent rise in six-inch wafer prices, to around $5,000 per wafer, comes from the cited report rather than an official pricing body.
- The figure of roughly 70 per cent for China's share of global indium production is a reported estimate.
- Lumentum's warning that the InP supply-demand gap could exceed 30 per cent is a company forecast, not a measured outcome.