Indium Phosphide, Polysilicon Become US-China AI Battleground, Splitting Global Stocks
The US government has invoked additional tariffs and a minimum import price system on polysilicon, a key material for semiconductors and solar power, following its move to threaten a new import ban on Chinese optical transceivers for data centers over eavesdropping and hacking concerns. As bandwidth expansion for artificial intelligence (AI) data centers and core materials for infrastructure power and semiconductors emerge as a new battleground in the US-China trade war, competition to find the “real leading stocks” is expected to unfold.
According to the financial investment industry on the 8th, related materials and components stocks all showed strength immediately after news broke that the US Federal Communications Commission (FCC) was reviewing a draft rule banning imports of new Chinese optical transceivers on the 4th. Optical transceivers are drawing attention as a key component for expanding AI chip bandwidth. As a result, Oe Solution and Kwang Jeon Electronics surged in the domestic stock market, while US firms Coherent and Lumentum also emerged as direct beneficiaries.
Stocks related to indium phosphide (InP), a key material for optical transceivers, also surged. In Japan, Rasa Industries, which supplies high-purity red phosphorus and indium as InP raw materials, jumped 16.07% on the 5th, rising more than 30% this week alone. AXT, a leading US InP wafer company, also rose nearly 10% on the New York Stock Exchange on the 6th.
Related stocks stirred after US President Donald Trump signed a proclamation applying a 15% additional tariff and a minimum import price system (21 dollars per kg for polysilicon, 100 dollars for ingots and wafers) on polysilicon and derivative products (ingots and wafers). In the domestic market on the 7th, OCI Holdings and Hanwha Solutions were cited as companies with non-Chinese supply chains, drawing a large influx of buying.
In contrast, supply chain-leading companies on the Chinese and Hong Kong stock markets could not avoid the impact. Zhongji InnoLight, which had recorded the top net buy (44.83 million dollars) among Korean investors in overseas and Chinese markets over the past month (July 6 to August 5) after listing on the Hong Kong stock market, plunged 7.27% the previous day and fell another 3.68% on the 7th, bringing its decline over the past month to more than 18%. Eoptolink on the Shanghai market was also weak, with a one-month return of -17.48%.
However, since much of the raw materials for indium phosphide and polysilicon depend on China, some point out that even Korean and US listed companies could see divergent benefits depending on their reliance on China for materials or processing. According to Taiwanese market research firm TrendForce, Chinese companies’ share of the global optical module contract manufacturing market will reach 56% as of 2026, and China also accounts for more than 80% of the global supply chain for key solar and semiconductor materials such as polysilicon and wafers. In fact, although AXT is a US listed company, concerns remain that it is exposed to Chinese production risk because its main processing base is located in Beijing.
The securities industry believes short-term supply chain disruption will be difficult to avoid, as these regulatory measures materialize with a time lag. A securities firm official said, “There are significant concerns about supply and demand disruptions because China holds an overwhelming share in the optical module and polysilicon markets,” but added, “As regulations take concrete shape, such as the tariff taking effect on December 4, the reshaping toward independent supply chain companies with complete non-Chinese raw material procurement and origin tracking systems will accelerate further.”
