en.Wedoany.com Reported - Japan's Sumitomo Electric has announced an additional investment to expand production of indium phosphide (InP) optical communication substrates, planning to invest 18 billion yen to increase capacity to 3.1 times that of fiscal 2024 by fiscal 2028, a larger expansion than originally planned. The company will upgrade its Itami plant production line in Hyogo Prefecture, Japan, to meet the growing demand for optical components in data centers driven by artificial intelligence (AI).

Sumitomo Electric's original plan in November 2025 was to expand capacity to only 2.4 times that of fiscal 2023, but the additional investment was prompted by market demand growth exceeding expectations.

InP substrates are core compound semiconductor materials for high-speed optical modules, used for electro-optical signal conversion in optical transceivers. Currently, the global InP substrate market is highly concentrated, with Sumitomo Electric and JX Metals collectively holding about a 40% share. Market research firm Straits Research predicts that the global InP substrate market will reach $507.21 million by 2034, 2.7 times the size in 2025.

A wave of capacity expansion is simultaneously unfolding across the industry chain. On June 16, JX Metals announced plans to invest up to 120 billion yen by fiscal 2030 to increase InP substrate capacity by 7 to 10 times compared to 2025, while also raising prices for downstream customers. On July 2, industry leader AXT announced that its subsidiary Beijing Tongmei had signed a three-year agreement with Coherent for the development and supply of 6-inch InP wafers, with Coherent prepaying $22.2885 million to secure capacity.