China controls 70 percent of the world's indium supply, and the U.S. just bet $2 billion on a Texas facility to secure the optical chips that move data inside AI data centers. The groundbreaking on June 16, 2026, in Sherman, Texas, was a victory lap for American reindustrialization. But the numbers behind the ceremony expose a raw vulnerability that no amount of patriotic rhetoric can obscure.
Jensen Huang Showed Up to Lock Down a Supply Chain
NVIDIA CEO Jensen Huang stood alongside Coherent CEO Jim Anderson to break ground on a massive expansion of the world's first and largest high-volume 6-inch Indium Phosphide (InP) semiconductor fabrication facility. The plan is specific: double manufacturing production space and quadruple wafer production capacity. The project is fueled by a $2 billion strategic investment from NVIDIA in Coherent Corp., a proposed $50 million grant under the CHIPS and Science Act, and roughly $20 million in prior state and local support from the Texas Semiconductor Innovation Fund and the Sherman Economic Development Corporation.
Huang stated the facility will quadruple its output in one year's time. More than 1,000 jobs are expected, including over 550 direct advanced manufacturing and engineering roles. The press releases frame this as a manufacturing renaissance. They are wrong. This is not a generic factory expansion. This is NVIDIA locking down a supply of a material that has become a strategic choke point for the entire AI industry.
The Material You've Never Heard Of
Indium phosphide is not silicon. It is a compound semiconductor that does one thing exceptionally well: it converts electrical signals into light and back again with extreme speed and efficiency. InP-based photonic devices are the physical layer of the high-speed optical interconnects that shuttle data between processors, memory, and systems inside advanced AI data centers.
Without these optical interconnects, a rack of NVIDIA's most powerful GPUs is a cluster of isolated islands. Data movement becomes the bottleneck that starves the compute engines. You can buy all the Blackwell or Rubin Ultra GPUs you want. If you cannot connect them with sufficient bandwidth and low enough latency, they sit idle. Coherent's Sherman facility already supplies the lasers and transceivers inside NVIDIA's most advanced photonics networking switches. The expansion does not just add capacity. It secures the optical backbone that makes scaled AI training and inference physically possible.
A $1,400 Wafer Became a $5,000 Wafer
Here is the crisis that the groundbreaking ceremony was designed to solve.
China produces around 70 percent of the world's indium. In early 2025, Beijing began tightening export controls on the material and its refined products. The price of a six-inch InP wafer responded with brutal efficiency. It climbed from roughly $1,400 to about $5,000, a 250 percent increase. A single component in the optical networking stack just got 3.5 times more expensive because one country decided to squeeze the supply.
The Sherman facility is the world's first and largest 6-inch InP fab, but its current output is not enough to meet the exploding demand from AI infrastructure buildouts. The expansion is not ambition. It is triage.
The 40% Price Collapse That Will Split the Market
This is where the story accelerates. The Sherman expansion will quadruple output within 12 months. That scale changes the economics. Fixed capital costs get spread across four times the wafers. Process yields improve with volume. The result, based on standard semiconductor manufacturing curves, is an estimated 40 percent reduction in InP wafer costs for U.S. buyers.
But China will not sit still. Beijing tightened export controls once already to strangle supply. A successful U.S. ramp that drives prices down will trigger a predictable response: further export restrictions, tighter quotas, and a deliberate bifurcation of the global market. Cheap InP for the U.S. and its allies. Expensive or unavailable InP for everyone else.
The hyperscalers have already done this math. Google, Amazon, and Microsoft are not waiting for a press release. They are now racing to secure long-term InP supply agreements outside China. The optical interconnect, not the GPU, is becoming the new strategic bottleneck in AI scaling. The second-order effect is a procurement panic that will lock up available supply years in advance.
The Countries Sitting on the Next Flashpoint
The third-order effect is geopolitical. Indium is not rare in the Earth's crust, but it is almost never found in concentrated deposits. It is a byproduct of zinc mining. The countries with significant zinc production—Canada, Peru, Bolivia—now sit on a strategic reserve they may not have fully priced in. Expect diplomatic attention, investment deals, and export policy debates in all three within 18 months. The U.S. will almost certainly impose its own export controls on InP manufacturing technology, mirroring the semiconductor equipment bans already in place for silicon.
The predictive call: within 18 months, at least two major hyperscalers will announce their own direct InP supply agreements, and the U.S. will impose export controls on InP fabrication technology. If neither happens, the premise is wrong. But the trajectory is already set.
What This Means If You Run AI Infrastructure
If you are building or operating AI infrastructure, the ground has shifted. Optical interconnect costs will drop in the near term, but supply agreements are now a strategic priority, not a procurement afterthought. Plan for 12-to-18-month lead times on InP-based components. Monitor China's export policy changes and U.S. countermeasures. The era of cheap, abundant optical interconnects is over. Treat them like compute silicon in your procurement strategy.
A Line in the Texas Dirt
NVIDIA's commitment to produce up to $500 billion of AI infrastructure in the U.S. through partnerships in Arizona and Texas is the larger frame. The Sherman fab is a microcosm of a strategy that goes beyond reshoring compute. It reshore the entire optical supply chain. China still controls 70 percent of the world's indium. But the U.S. just drew a line in the Texas dirt. The race to own the light has begun.
