Sinotrans Securities: AI demand drives tight supply and demand of indium phosphide and indium metals

The research report of Zhongtai Securities pointed out that with the increase in AI capital expenditures and the growth in demand for optical communications, there is a high growth in demand for indium phosphide substrates. Indium phosphide is a compound semiconductor material, and in the field of optical communications, indium phosphide has always been a core chip material. According to Omdia and Yole, the total global demand for indium phosphide substrates is estimated to be around 2-2.1 million pieces by 2025, with global effective compliant production capacity only around 600-700 thousand pieces, resulting in a continuous increase in industry prosperity due to a supply-demand gap of close to 70%. Lumentum predicts that by 2030, the compound annual growth rate of AIDC's demand for indium phosphide will reach 85%. The certainty of growth in indium phosphide demand and downstream inventory accumulation will drive indium demand upwards. With high concentration of supply, enterprises are doubling production to meet the high demand. Due to the high technical barriers in the growth equipment and technology of indium phosphide single crystals, there are few participants in the indium phosphide substrate market, with foreign manufacturers dominating. The concentration of major enterprises is high, and the monopoly pattern is obvious, with the domestication process accelerating in recent years. Since 2026, core indium phosphide substrate companies have been continuously expanding production to meet the high demand.