Ideas
Author highlights Coherent's 6-inch InP platform as a structural cost advantage (4x chips per wafer, half cost, higher yields) and shows they are doubling capacity ahead of schedule. However, the CEO'
Author highlights Coherent's 6-inch InP platform as a structural cost advantage (4x chips per wafer, half cost, higher yields) and shows they are doubling capacity ahead of schedule. However, the CEO's trip to China and the 250% substrate price surge indicate supply risk. The net implication: Coherent's economics give it pricing power and differentiation, but substrate availability is a monitor risk.
Risk: Geopolitical permit delays or substrate shortages could limit the capacity ramp despite the platform advantage.
AAOI has built a massive inventory buffer (~1 year), diversified to 4-5 suppliers (mostly outside China), and has people on-site at suppliers to manage capacity. Their aggressive wafer-size transition
AAOI has built a massive inventory buffer (~1 year), diversified to 4-5 suppliers (mostly outside China), and has people on-site at suppliers to manage capacity. Their aggressive wafer-size transition to 6-inch and plan to become a top-3 laser supplier indicate strong execution. The author quotes management saying they feel 'incredibly comfortable' on substrate.
Risk: Their 6-inch transition is not complete until end of next year; any delays could cap near-term laser output. Also, the geopolitical situation could disrupt even non-Chinese sourcing.
Lumentum's early LTA with Japanese suppliers provided initial coverage, but now they 'need alternate sources' and use a creative UK routing to access Chinese capacity. This proactive supply chain mana
Lumentum's early LTA with Japanese suppliers provided initial coverage, but now they 'need alternate sources' and use a creative UK routing to access Chinese capacity. This proactive supply chain management suggests they can navigate the bottleneck better than peers without such routes, but the statement 'uncomfortably comfortable' signals ongoing tightness.
Risk: If the UK routing faces its own regulatory hurdles or if Japanese suppliers cannot scale fast enough, Lumentum's laser output could lag demand.
IQE is a pure-play epi house and a critical middle-layer in the InP chain. The author notes that IQE sees 'significant increase' in demand and is actively dual-sourcing substrates. As a merchant epi s
IQE is a pure-play epi house and a critical middle-layer in the InP chain. The author notes that IQE sees 'significant increase' in demand and is actively dual-sourcing substrates. As a merchant epi supplier, they benefit from both demand growth and the ongoing substrate shortage that forces customers to seek epi capacity.
Risk: IQE is dependent on blank substrate availability; if they cannot secure enough wafers, or if MOCVD/MBE capacity is insufficient, their growth could be gated.
AXT is the only public pure-play InP substrate maker discussed. The article details their doubling of capacity and the fact that they hear from hyperscalers directly. However, the company's revenue is
AXT is the only public pure-play InP substrate maker discussed. The article details their doubling of capacity and the fact that they hear from hyperscalers directly. However, the company's revenue is gated by Chinese export permit timing. The bottleneck thesis makes AXT a key leverage point in the supply chain, but the permit uncertainty is a real headwind.
Risk: If Chinese export permits remain difficult for US direct shipments, AXT's revenue growth may lag despite strong demand, and the stock could be volatile on geopolitical news.
This newsletter, published June 11, 2026,
features Gaetano
discussing COHR, AAOI, LITE, IQE, AXTI.
5 trade ideas extracted by AI with direction and confidence scoring.
Speakers:
Gaetano
· Tickers:
COHR,
AAOI,
LITE,
IQE,
AXTI