China’s tightening restrictions on export of indium phosphide (InP), a critical mineral used in manufacture of advanced optical chips was one of the focal points discussed during the recent Trump-Xi meet in Beijing.

According to a Reuters report, the curbs put by Beijing on export and licensing of indium phosphide emerged as a significant threat to the US AI industry, with fears of delay in building next-gen AI data centers.

The Reuters report states that Coherent CEO Jim Anderson, who was part of the U.S. business delegation that travelled with President Donald Trump to Beijing in late May, had raised the issue of delays in Chinese export licenses.

During the meet, Chinese counterparts were directly confronted with concerns over delays in Chinese export licenses for indium phosphide.

As companies move towards Photonics-based systems that utilize light (rather than traditional electrical signals) to transmit high volumes of data in AI infrastructures, indium phosphide has gained a lot of relevance. 

Many professionals in this industry believe that there is no practical alternative available at this time for the type of high-speed optical networking that includes indium phosphide, and export restrictions from China earlier this year have disrupted international supply chains.

While many major photonics manufacturers, such as Coherent and Lumentum, are working on expanding their capacity to produce in the United States and seeking to locate alternate supplies of indium phosphide outside of China, it will be years before any of these options become available.

At the same time, there has been a significant increase in output from Chinese manufacturers (including new investments and expansion efforts), which will further disrupt supply lines to the US until new alternatives come online.

Though several businesses continue to seek (and receive) the requisite permissions to import large quantities of goods, industry insiders suggest that China’s ruling government will continue to impose a high degree of oversight on every shipment sent abroad, thus retaining its ability to control the source for many materials that are essential to the development of artificial intelligence. 

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