Indium phosphide prices have surged sharply due to unprecedented demand for optical modules driven by the artificial intelligence boom, with major suppliers in China and Japan hiking wafer costs.
The FCC's potential ban on Chinese optical transceivers highlights the slow and costly nature of US-China tech decoupling, impacting AI hardware and data centers despite security concerns over data theft and service disruption.
Ahead of President Xi Jinping's planned Washington visit, US-China tensions escalate over Chinese AI models, advanced robotics, and forced labour claims.
Zhongji Innolight, a Shandong-based AI innovation leader, tops the CSI 300 Index with a 5% weighting, driven by soaring demand for its high-speed optical modules used in AI data centers, supplied to global hyperscalers like Alphabet, Amazon, and Huawei.
Demand for multilayer ceramic capacitors (MLCCs) is surging due to the AI boom, with AI servers requiring significantly more MLCCs than traditional ones. Manufacturers are prioritizing high-end supply, leading to price increases.
Three Chinese optical module manufacturers have seen their stock prices surge 5-10x in the past year, with combined market capitalisation now exceeding baijiu giant Kweichow Moutai. Zhongji Innolight, the world's largest optical module producer, saw shares jump tenfold, while peers Eoptolink and TFC Optical gained more than five times. The firms, which produce components for high-speed data transmission in AI infrastructure, became the second and third most popular stocks among actively managed equity funds in Q1 2026.
