A Welsh chipmaker has just posted a 40% jump in revenue. Its shares are up 849% this year. And its chief executive has told an interviewer that the industry has a supply problem it cannot fully solve.
Sofia Gerace reported the interview for Bloomberg. Jutta Meier runs IQE, based in Cardiff. She said access to indium phosphide substrates is becoming a key risk for the whole semiconductor industry. Chinese export controls have made the supply uncertain.
Indium phosphide is the material behind photonics. Those are the chips that generate and amplify the light signals moving data around an AI data centre. Demand is rising faster than supply.
China holds 70% of it
That figure comes from the US Geological Survey, and it is the whole problem in one number.
Meier said the company is managing the risk through what she called broad engagement with different suppliers. She then added the caveat herself: export control licences will still affect IQE if the policies behind them are revoked.
Both halves of that are worth taking seriously. Diversifying suppliers is the correct response. It also has a ceiling, and the ceiling is 70%. An executive saying so on the record, with her share price up 849%, is being more candid than the situation requires.
We reported the choke point in June
This is the same material TNW covered when Beijing began slow-walking export licences. At that point wafer prices had risen around 250%. The constraint showed up in pricing months before it showed up in anyone’s commentary.
Three months on, the chief executive of a company that buys those substrates has put her name to it. That is the sequence worth noticing. The market moved first and the disclosure followed, which is the usual order and the reason prices are worth watching more closely than statements.
The company is a beneficiary and a hostage of the same trend
IQE’s numbers are the strange part.
In July the company forecast 20% sales growth for 2026. That followed a 2025 in which revenue fell 18%, to £97.3m. It has now reported a 40% jump and reaffirmed guidance of more than 30% growth for the full year.
So the July forecast has been beaten and then raised, inside two months. Nothing in the interview suggests the company saw that coming when it set the original number.
AI data centres are driving it, along with sensors in smartphones, wireless and defence work. The wireless side recovered in the first half after a weak 2025, when photonics overtook it as the largest part of the business for the first time.
Which produces an odd position. The shortage threatening IQE’s inputs is the same phenomenon inflating its order book. Scarcity is good for a supplier right up until the supplier cannot buy its own raw material.
Meier said the export licence risk is already built into the outlook for the second half of the year. That is a company telling investors it has priced in a geopolitical variable it does not control.
Her hedge against that is breadth. IQE’s exposure to AI runs beyond data centres, into robotics and sensing, which she said limits its reliance on the current infrastructure boom. That is a reasonable hedge to describe. It does not change where the substrate comes from.
What this says about European industrial policy
Europe has very few compound semiconductor firms of any scale. IQE is one of them, it is in Cardiff, and it cannot source its own substrate.
That is dependency in miniature, and it is more specific than the sovereignty debate usually gets. The argument is normally about fabs and chip design. This is about a raw material, upstream of both, where one country holds most of the world’s supply. It has already shown it will use licensing as leverage.
The continent’s vulnerability in this sector is not only commercial. A Belgian researcher has been held since May over gallium nitride secrets allegedly passed to China, in another corner of the same compound semiconductor industry.
Export controls keep producing the opposite of what they promise
There is a symmetry here that neither side seems to enjoy.
US controls on chip exports pushed Chinese firms towards custom silicon rather than stopping them. Chinese controls on indium phosphide are now pushing Western buyers to hunt for alternative suppliers. Eventually that means alternative sources being developed outside China.
Both moves are rational on their own terms. Both accelerate the thing they were meant to prevent, which is a second supply chain owned by the other side. The difference is timing. Substrates take years to bring online, and the AI build-out is not waiting for anyone.
The listing detail nobody has picked up
IQE also intends to move from AIM to the Main Market of the London Stock Exchange, to reach institutional capital and improve liquidity in its shares.
That is a small line in a story about supply chains, and it points somewhere else. A company on an 849% run deciding it wants institutional money is a company that thinks the run has further to go.
It is also a European technology firm choosing to move up within a European exchange rather than out of one, at a moment when the traffic runs the other way. France’s Pasqal listed on Nasdaq in August rather than at home.
What to watch
Whether the indium phosphide licensing tightens further, which would show up in wafer prices before it shows up in any announcement, exactly as it did in June.
Whether IQE’s second-half results hold the guidance, given that the company has already told the market the licence risk is inside the forecast.
And whether anyone outside China moves to build substrate capacity. That is the only structural answer, it takes years, and nobody has announced it.
