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AXT faces potential AI growth constraints due to Chinese export licenses on Indium Phosphide substrates
Tuesday, February 24, 2026 at 01:55 AM
AXT, a US company with manufacturing operations in China, may face challenges in capitalising on AI infrastructure demand due to Chinese export controls on Indium. This material is essential for Indium Phosphide (InP) substrates used in optical components for AI server data transfers. Despite regulatory hurdles, the company's management reports long-term order visibility extending through 2030.
Context
US-based AXT, Inc. (AXTI) faces a strategic bottleneck as Beijing’s export controls on Indium Phosphide (InP) substrates threaten its position in the AI infrastructure chain. Although the firm is US-headquartered, its manufacturing is entirely China-based. This exposure recently forced AXT to lower its Q4 2025 revenue expectations to roughly $23 million after permit delays stalled shipments. These substrates are vital for high-speed optical interconnects used in AI data centers, making regulatory navigation a critical factor for near-term growth.
Despite this friction, management reports a record InP backlog exceeding $60 million and order visibility extending through 2030. To capture accelerating demand from the ecosystem including NVIDIA and Lumentum, AXT aims to double its manufacturing capacity by the end of 2026. For investors, the core risk remains administrative; while the long-term AI outlook is robust, the company’s ability to convert its massive backlog into realized revenue depends heavily on the pace of Chinese export approvals.
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