en.Wedoany.com Reported - Sumitomo Electric Industries plans to invest approximately 18 billion yen to expand its indium phosphide (InP) substrate production capacity to 3.1 times that of fiscal 2024, in response to the rapid growth in demand for optical communication components in data centers driven by the proliferation of artificial intelligence (AI). The company will also enhance existing production equipment at its Itami Works facility in Itami City, Hyogo Prefecture, Japan, with the expansion target expected to be completed by fiscal 2028.

Sumitomo Electric had previously announced in November 2025 that it would increase capacity to 2.4 times that of fiscal 2023, but due to market demand growing faster than expected, the company decided to further raise its investment scale. Indium phosphide substrates are a compound semiconductor material used in high-speed optical communication components, and due to their excellent electro-optical signal conversion performance, they are primarily applied in key components such as optical transceivers.

In the global indium phosphide substrate market, Sumitomo Electric and JX Metals together hold approximately 40% of the market share. According to a forecast by Indian research firm Straits Research, the global indium phosphide substrate market size will reach $507.21 million by 2034, approximately 2.7 times that of 2025.

Previously, on June 16, JX Metals announced plans to invest up to 120 billion yen (approximately $750 million) by fiscal 2030 to increase indium phosphide substrate capacity by 7 to 10 times compared to fiscal 2025, while also requesting price increases from customers. On July 2, AXT, the world's largest supplier of indium phosphide substrates, announced that its subsidiary Beijing Tongmei (AXT-Tongmei) had signed a three-year development and supply agreement with Coherent for 6-inch indium phosphide wafer substrates. Under the terms of the agreement, Coherent will prepay $22,288,500 to AXT-Tongmei to secure committed capacity supply.