The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that indium is a scarce strategic small metal, mostly a by-product of lead-zinc-tin smelting, and the supply is relatively rigid. Indium phosphide is indispensable in high-speed optical communication. The explosive growth in high-speed optical communication is expected to drive demand for indium phosphide, which in turn will drive demand for indium. The short-term price of indium will rise markedly. Downstream demand-side optical communication has exploded, and demand for indium phosphide is growing rapidly. Short-term indium phosphide consumes little indium, but indium phosphide is expected to become the core incremental engine of indium under long-term continuous emission of optical modules. It is recommended to focus on indium and indium phosphide related companies.
Cathay Pacific Haitong's main views are as follows:
Indium supply is relatively rigid, global growth space is limited, and indium prices have risen significantly since the beginning of the year
Most of the world's native indium is associated with lead-zinc-tin ores, and there are no independent indium ores with economic mining value. According to USGS data, the world's annual production of native indium has maintained 1,100 tons for a long time, of which China's native indium accounts for about 70% of the world; recycled indium mainly comes from ITO waste target recycling, and there is limited room for global indium growth.
In terms of price, indium prices have risen sharply since the beginning of the year
According to SMM data, the average price of crude indium rose from 2,725 yuan/kg to 5,350 yuan/kg, and the price of refined indium rose from 2,825 yuan/kg to 5,450 yuan/kg, with increases of 96% and 93% respectively, the highest increase among strategic small metals. The bank believes that the main reason for the price increase is that, under supply rigidity, demand growth expectations for indium phosphide in the segment are driving indium prices to continue to rise.
Demand for indium phosphide exploded. Under the mismatch between supply and demand, indium phosphide prices continued to rise, and the tightening of indium exports exacerbated overseas shortages
AI computing power has spawned large-scale deployment of high-speed optical modules. The core optical chips inside optical modules are based on indium phosphide, and the explosive growth of optical modules has driven up demand for indium phosphide. Currently, there is a mismatch between supply and demand for indium phosphide, and prices continue to rise. According to SMM data, since the beginning of the year, domestic 3-inch and 4-inch indium phosphide have increased by 31% and 36%, respectively. Furthermore, in terms of exports, the Ministry of Commerce and the General Administration of Customs announced export controls on indium and other related items. Indium phosphide, trimethylindium, and triethyl indium are included in the export control of dual-use items. Exports must obtain a license, which directly restricts the core precursor materials of optical chips; in 2026, indium and indium products will be included in the export license management catalogue, domestic exports to indium will be tightened, and overseas indium phosphide production capacity may be limited.
In the long run, indium phosphide is expected to become the core growth engine driving demand for indium, but in the short term, indium phosphide does not account for a high proportion of indium consumption. We need to pay attention to the future release rate of optical modules and the increase in indium phosphide yield
Currently, the mainstream indium phosphide product specifications in the market are 2 inch, 3 inch, and 4 inch. The bank calculates the amount of indium phosphide used according to the different specifications of indium phosphide. Without considering loss and yield, the mass of a 3-inch piece of indium phosphide (according to the thickness of 625 microns) is 13.7 g, of which the mass of indium is about 10.8 g. If loss and yield are taken into account, the total amount of indium consumed is about 10.8 tons, accounting for less than 1% of native indium phosphate. If loss and yield are taken into account, the proportion will increase accordingly. Overall indium phosphide consumption of indium The ratio is not high, and it is difficult to shake the dominant position of ITO targets in indium consumption. Continued attention should be paid to the release rate of optical modules and the improvement of the yield of indium phosphide substrates.
Risk warning: changes in downstream demand, fluctuating inventory levels, progress in the indium phosphide process.