Those who can supply, win.

Gaetano · Gaetano · June 25, 2026 at 12:01 · ⏱ 6 min read  | Read on Substack ↗
Summary
The article argues that the critical competitive advantage in AI optical components is the ability to ramp 6-inch indium phosphide (InP) wafer production at high yield, with Coherent ($COHR) leading the transition. This creates a structural capacity edge for Coherent, while competitors Lumentum and AAOI are behind, and Nokia takes a different integrated-PIC approach. The real money is in volume production at high yield, not just capability or qualification.
  • •6-inch InP wafer has ~4x area of 3-inch and ~2.25x area of 4-inch, enabling more die per wafer and better automation.
  • •Coherent is already producing EMLs, CW lasers, and photodiodes on 6-inch with yields higher than its mature 3-inch lines.
  • •Coherent's CEO stated each new 6-inch line provides 4x the capacity of a 3-inch line, and the ramp is ahead of schedule—doubling internal InP capacity by end of CY2026 one quarter early, and doubling again by end of CY2027.
  • •Coherent has over five substrate suppliers with long-term agreements, securing raw wafer supply.
  • •Lumentum shifted from calling 6-inch risky to admitting its future line is fully spoken for in three weeks, indicating a late pivot.
  • •AAOI pivoted from not discussing 6-inch to setting a hard 2027 target backed by record equipment orders.
Read time 6 min
Length 6,083 chars
Category finance
Ideas
Gaetano Substack author, Gaetano
Coherent is the clear leader in 6-inch InP production, with yields already above its 3-inch lines, capacity doubling ahead of plan, and multiple qualified devices. This gives it a structural advantage
Coherent is the clear leader in 6-inch InP production, with yields already above its 3-inch lines, capacity doubling ahead of plan, and multiple qualified devices. This gives it a structural advantage in supplying AI optical components during a supply-constrained period. Risk: Execution risk remains—any yield or capacity ramp issues could erode the lead. Customer concentration and dependency on substrate suppliers are also risks.
COHR
Gaetano Substack author, Gaetano
Lumentum went from calling 6-inch a 'risky proposition' to admitting its future line is entirely spoken for within three weeks, suggesting it was late to commit and may be scrambling to catch up with
Lumentum went from calling 6-inch a 'risky proposition' to admitting its future line is entirely spoken for within three weeks, suggesting it was late to commit and may be scrambling to catch up with Coherent's lead. Risk: If Lumentum cannot quickly qualify and ramp 6-inch production, it may lose market share in high-value AI optical links.
LITE
Gaetano Substack author, Gaetano
AAOI pivoted from not discussing 6-inch to setting a 2027 target, indicating a late start. The article implies Coherent is already shipping qualified volume, putting AAOI years behind in a race where
AAOI pivoted from not discussing 6-inch to setting a 2027 target, indicating a late start. The article implies Coherent is already shipping qualified volume, putting AAOI years behind in a race where capacity and yield determine winners. Risk: Execution risk is high—AAOI must invest heavily and achieve high yields quickly to avoid being shut out of the hyperscaler supply chain.
AAOI
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This newsletter, published June 25, 2026, features Gaetano discussing COHR, LITE, AAOI. 3 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Gaetano  · Tickers: COHR, LITE, AAOI