Coating Technician

Lumentum says AI laser demand exceeds supply by more than 30% as InP capacity lags. Key points * Lumentum told investors in May that demand for its EML laser chips exceeded supply by more than 30%, corroborating the core of CEO Michael Hurlston's later warning at the RAISE Summit.[[1]] [[2]] * Lumentum said its immediate constraint was primarily its own manufacturing ramp, while the wider industry also faces equipment constraints, export licensing and lengthy substrate-qualification cycles.[[2]] [[6]] [[9]] * Coherent plans to double internal InP output in 2026 and more than double it again by the end of 2027, but Lumentum's new North Carolina fab is not expected to contribute significantly until 2028.[[4]] [[7]] * LightCounting expects the current shortage to ease by the end of 2026, presenting a more moderate outlook than Hurlston's comparison with the memory-chip crunch.[[8]] Lumentum CEO Michael Hurlston's warning that the indium-phosphide shortage could become more acute than the memory-chip crunch rests on a supply gap the company had already disclosed to investors. On Lumentum's May 5 earnings call, Hurlston said the imbalance between demand and supply for its electro-absorption modulated lasers had widened to "somewhere greater than 30%," even as the company expected to increase EML output by more than 50% from December 2025 to December 2026.[[1]] [[2]] The comparison with memory came during July's RAISE Summit in Paris, according to Tom's Hardware, which reported that Hurlston said hyperscalers were seeking hundreds of millions of lasers. He added that Lumentum and rival Coherent could not currently satisfy the requested volume. MLQ did not locate a primary video or transcript of the summit remarks, so the comparison remains attributed to that report.[[1]] The warning matters because indium phosphide, or InP, is used to make lasers for high-speed optical connections. Silicon photonics can route and modulate light, but silicon is inefficient as a light source and generally requires a laser made from a compound semiconductor. Growth in 800-gigabit and 1.6-terabit transceivers, followed by near-packaged and co-packaged optics, is increasing demand for InP-based EMLs and continuous-wave laser sources.[[5]] [[7]] Discover more Data Management Stocks & Bonds Business & Corporate Law Lumentum's earnings confirm the supply gap. Lumentum's fiscal third-quarter results provide the clearest confirmation of the underlying shortage. The company reported revenue of $808.4 million for the quarter ended March 28, up 90% from a year earlier. It shipped twice as many laser chips as in the comparable quarter, yet management said it still could not fulfill requests from customers seeking additional output.[[2]] [[3]] Hurlston drew an important distinction between Lumentum's immediate production constraint and the availability of substrates. He told analysts that long-term supply agreements had left the company in relatively good shape on substrates in the near term, making its own capacity ramp the primary limitation. He cautioned that Lumentum would need to keep working on substrate supply as laser volumes rise in 2027.[[2]] That means the shortage is not simply a lack of raw indium. It spans substrates, qualified manufacturing lines, fabrication equipment, yields and packaging. Veeco, which supplies equipment used in InP laser production, disclosed more than $250 million in orders, with deliveries beginning in 2026 and accelerating in 2027 - evidence of investment that will not translate immediately into finished lasers.[[9]] China adds an upstream constraint. The broader industry faces an additional risk from China's export-licensing system. China accounted for about 70% of global indium production in 2024, while AXT and Sumitomo Electric together controlled almost 80% of InP substrate manufacturing, Reuters reported. Switching substrate suppliers can require lengthy qualification, limiting manufacturers' ability to respond quickly.[[6]] AXT said in January that fewer Chinese export permits than expected prevented it from fulfilling more InP substrate orders in December. In April, the company said it had completed a $632.5 million capital raise to support Tongmei's InP expansion and development of six-inch substrates.[[10]] [[11]] Reuters reported that the average price of a six-inch InP wafer had risen 250% to about $5,000 following the introduction of Chinese restrictions. Lumentum relies primarily on Japanese suppliers Sumitomo and JX Advanced Metals, according to the report, reducing its direct exposure to AXT's permit delays but not insulating the wider optical supply chain.[[6]] Discover more Engineering & Technology Health Foundations & Medical Research Mathematics Capacity is coming on different schedules. Nvidia moved to reserve future supply in March, investing $2 billion each in Lumentum and Coherent. Its nonexclusive Lumentum agreement includes a multibillion-dollar purchase commitment and future access rights for advanced laser components.[[12]] Coherent said in May that it was on track to double internal InP output by the end of 2026 and more than double it again by the end of 2027. Its six-inch line is producing EMLs, continuous-wave lasers and photodiodes, with yields above its older three-inch lines.[[7]] Lumentum's largest addition will take longer. The company is converting a 240,000-square-foot former Qorvo facility in Greensboro, North Carolina, to manufacture InP products using six-inch wafers. Hurlston said significant production contributions were expected in early 2028.[[2]] [[4]] Forecasts consequently diverge. LightCounting estimated in April that optical-component demand exceeded supply by about 30%, but predicted shortages would largely disappear by the end of 2026 as production expands. It also warned that stronger-than-expected accelerator shipments could extend tightness into 2027.[[8]] The confirmed evidence supports Hurlston's warning about a severe current supply gap. Whether it becomes worse than memory depends on how quickly equipment installations, six-inch wafer lines and qualified substrate capacity translate into usable laser output. Coherent's expansion is scheduled through 2027; Lumentum's largest new fab will not materially contribute until 2028.[[4]] [[7]] Companies mentioned. Discover more Financial market forecasts Tech stock investment At the intersection of AI, tech, and markets. The stories that matter, in one email. Free - unsubscribe anytime.

Coherent is benefiting from surging demand for AI infrastructure, positioning itself as a key supplier to hyperscale cloud providers and enterprises investing in AI computing. The company's Datacenter & Communications segment now accounts for 75% of fiscal Q3 2026 revenues, growing 41% year-over-year. This shift is transforming Coherent's business model. Unlike traditional hardware manufacturers facing cyclical demand and short product lifecycles, the company is securing longer-term commitments tied to multi-year cloud expansion plans. This provides greater revenue visibility and stability. Coherent's optical transceivers and photonic technologies enable AI clusters to transfer massive data volumes efficiently. Compared with peers Lumentum and Fabrinet, Coherent demonstrates stronger exposure to AI infrastructure through manufacturing expansion and improved backlog visibility. The company is translating robust demand into profitable growth whilst maintaining an attractive valuation.

Coherent's stock has surged 350% since Jim Anderson became CEO in June 2024, pushing the optical technology company's market value above $60 billion. The Pennsylvania-based firm recently secured a $2 billion investment from Nvidia and up to $50 million in CHIPS Act funding to expand its Texas manufacturing facility. Anderson found the 55-year-old company "messy" upon arrival, with 24 different business software systems and inconsistent execution. His focus has been improving operational performance to match the company's technology capabilities. The CEO emphasises speed and calculated risk-taking, encouraging employees to start production earlier even if customer testing isn't complete. "If you're so averse to any sort of failure, that makes you much more conservative and slower-moving," Anderson says. Coherent manufactures photonics technology essential for AI data centres, though production faces constraints from limited indium phosphide supplies.