China’s Dominance in AI Material: A Warning from IQE’s CEO
Jutta Meier, CEO of Welsh chipmaker IQE, has warned in an interview with Bloomberg that China’s control over indium phosphide, a crucial material for AI data centers, poses a significant risk to the semiconductor industry. China holds a staggering 70% of the world’s supply of this material, according to the US Geological Survey.
Meier highlighted the increasing demand for indium phosphide, which is essential for the chips that generate and amplify light signals in AI data centers, leading to a supply-demand gap. Chinese export controls have added further uncertainty to the situation.
Key Points:
- Supply Uncertainty: Access to indium phosphide substrates is a critical risk factor for the entire semiconductor industry, Meier stated. Chinese export controls have made the supply of this material unpredictable.
- Market Impact: In June, TNW reported a surge in wafer prices, attributed to the delay in export licenses from Beijing. The market movement preceded any official disclosure, indicating a potential underestimation of the situation’s severity.
- IQE’s Performance: Despite the challenges, IQE has seen a significant boost in its share price, up 849% this year, and reported a 40% revenue jump. The company’s forecast for 2026 sales growth has also been raised from a previous 20% to over 30%.
- Diversification: Meier mentioned IQE’s strategy of engaging with various suppliers to mitigate the risk of export control licenses being revoked. However, she acknowledged the limit of this approach given China’s dominant position in the market.
- Geopolitical Factor: The CEO revealed that the export license risk is already factored into IQE’s second-half 2026 outlook, demonstrating the company’s attempt to price in geopolitical uncertainties.
The peculiar situation arises from AI data centers, smartphones, wireless technology, and defense applications driving the demand for indium phosphide, while the supply bottleneck benefits IQE’s business in the short term. However, sustained scarcity could eventually impact the company’s raw material sourcing.