Photonic Chip Market Projected to Reach $48 Billion
The transition to larger indium phosphide wafers aims to scale production for AI data center infrastructure by 2036.
Updated on Sept. 28, 2026 in Semiconductors
Live Poll
Should your country prioritize domestic sourcing for critical materials used in advanced technology?
The market for photonic integrated circuits is projected to reach $48 billion by 2036, driven by an expected 21.9% compound annual growth rate. These chips transmit data using light and are essential for scaling modern AI data center connections.
Why it matters
As silicon does not lase, these circuits must integrate materials like indium phosphide to function, creating a critical bottleneck in AI infrastructure. Increasing wafer sizes is a necessary step to meet demand while navigating global supply constraints.
Photonic integrated circuits offer 10 times better data transfer efficiency and 100 times higher bandwidth than electronic counterparts. Manufacturers are moving from standard 2, 3, and 4-inch indium phosphide wafers to 6-inch platforms to address supply shortages.
The players
IDTechEx
An independent market research firm that provides technical intelligence and data analysis on emerging technologies.
China
The nation that controls approximately 70% of the global indium supply and currently enforces export restrictions on the material.
The details
Photonic integrated circuits transmit data using photons, which provide significant advantages in speed and capacity over electronic signals. Because silicon is not a natural laser material, foundries must integrate III-V semiconductors—a class of materials like indium phosphide used for high-frequency electronics—by growing crystalline layers on substrates using metal-organic chemical vapor deposition or molecular beam epitaxy.
Timeline
April 2025: China imposed export controls on indium.
2026: Indium phosphide remains the dominant material choice.
2036: The market is projected to reach $48 billion.
The Tech Race
The adoption of 6-inch indium phosphide wafers marks a critical departure from the smaller 2 to 4-inch standards previously used in the industry. This shift is a direct response to the supply pressures introduced by the 2025 Chinese export controls on indium.
Users will primarily experience these gains through faster and more efficient cloud-based AI services as data centers upgrade their interconnects. While individual hardware availability remains indirect, this transition enables the throughput required for next-generation computing workflows.
The takeaway
The race to scale photonic chip production is dictated by the ability to transition wafer manufacturing processes away from supply-constrained raw materials. Monitor the adoption rates of 6-inch indium phosphide wafers as a key indicator of whether the industry can meet its 2036 market targets.
Further reading
For more on the latest trends in hardware design, visit Semiconductors.
Source note: This article includes information reported by Semiconductor Today.
Live Poll
Should your country prioritize domestic sourcing for critical materials used in advanced technology?
