Lumentum is investing heavily in new domestic Indium Phosphide (InP) production capacity to support AI infrastructure demand, as China enforces strict dual-use export controls on InP. This strategic move positions Lumentum as a localized powerhouse for high-speed optical components, with raw Indium prices exploding north of 5,500 CNY/kg and lead times for cleanroom equipment stretching 9 to 12 months.
Indium Phosphide capacity is now a binding variable for AI optical networking, forcing Western tech giants to onshore supply chains and driving aggressive capital deployment.