JX Advanced Metals (5016.T): Sumitomo Electric to expand InP substrate capacity

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JX Advanced Metals (5016.T): Sumitomo Electric to expand InP substrate capacity

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02 Jul 2026 09:12:48 ET │ 10 pages

JX Advanced Metals (5016.T)

Sumitomo Electric to expand InP substrate capacity

CITI’S TAKE

The Nikkei reported on July 2 that Sumitomo Electric will invest ¥18bn to

Buy expand InP substrate production capacity 3.1x from FY3/25 through

Price (02 Jul 26 15:30) ¥4,048.0 FY3/29. The company announced in November 2025 that it had

expanded capacity 2.4x from FY3/24 to November 2025, but demand Target price ¥5,100.0

exceeded expectations, prompting still greater expansion. The company Expected share price return 26.0%

uses InP substrates internally for its optical transceivers and also sells Expected dividend yield 0.5%

externally. Compared to JXAM’s June 15 expansion announcement Expected total return 26.5%

(capacity up 10x from FY3/26 to FY3/31, with total capex including Market Cap ¥3,849,018M

buildings of ¥145bn), the Sumitomo Electric plans appear relatively small-

US$23,821M scale.

Implications — The news reconfirms that there is strong demand for InP substrates.

As we have previously reported, JXAM currently sees demand at c2x production Yuta NishiyamaAC

capacity and seemingly expects it to reach approximately 4x-5x current levels by +81-3-6776-4643

2029-2030 (approximately 8x-10x current production capacity), even conservatively yuta.nishiyama@citi.com

accounting for risks such as dual ordering. Requests for long-term contracts appear

strong, coming from the customer side rather than JXAM. Additionally, as we note

above, Sumitomo Electric consumes a certain percentage of the InP substrates it

produces internally. Given these factors, oversupply risk appears low, despite

proactive capacity expansion by many companies.