Wire & cable: Optical devices, InP substrates

Research evidence excerpt

Wire & cable: Optical devices, InP substrates

Wire & cable: Optical devices, Global Markets Research 30 July 2026

InP substrates

EQUITY: JAPAN STEEL, NONFERROUS METALS, WIRE & CABLE

Research AnalystsAXT announces long-term agreement with

Japan steel, nonferrous metals,Lumentum wire & cable

Yuji Matsumoto - NSCQuick Note yuji.matsumoto@nomura.com

+81 3 6703 1220

InP substrates remain a seller's market Japan chemicals & textiles

On 29 July, AXT announced that it had signed a long-term agreement (LTA) with Daiki Ban - NSC

Lumentum Holdings (LITE) for the supply of indium phosphide (InP) wafer substrates daiki.ban@nomura.com

through end-2031. In consideration for the reservation of production capacity, LITE has +81 3 6703 1124

agreed to pay AXT $870mn in deposits. LITE has already announced seven-year long-

term agreements with Japanese suppliers for InP substrates, but at an investor briefing in

June it said it needed to add new suppliers because of robust demand (see our 10 June

2026 Quick Note report Wire&cable:Opticaldevices).

We see this announcement as fresh evidence that InP substrate supply/demand is likely

to remain tight over the medium term. These conditions are advantageous for the optical

device business at Sumitomo Electric Industries [5802] (Buy), which has integrated

production from InP substrates through to optical devices, a setup that enables it to ramp

up production without constraints on materials while securing high margins.

AXT announced on 2 July that it had signed a three-year LTA with Coherent. AXT is a US

company, but all of its InP substrate production facilities are in China. The Chinese

government's export controls on InP substrates had been considered a risk for stable

procurement by optical device companies in the US and Japan.