(Yicai) Nov. 4 -- Shares of Yunnan Lincang Xinyuan Germanium Industry surged by the exchange-imposed daily trading limit after the leading Chinese supplier of indium phosphide said it received a large order from Applied Optoelectronics, a US designer and manufacturer of fiber optic networking products.

Yunnan Germanium [SHE: 002428] closed up 10 percent at CNY75.38 (USD11.28) in Shenzhen today.

Yunnan Germanium’s subsidiary Yunnan Xinyao Semiconductor Materials recently signed a deal with AOI to supply the client with 180,000 four-inch N-type indium phosphide substrates a year from 2027 to 2031, for a total of 900,000 units, the parent company announced yesterday.

Indium phosphide substrates have excellent optoelectronic conversion properties and serve as the core substrate materials for high-speed optical communication lasers, radio frequency devices, and infrared optoelectronic chips, which are key components packaged inside high-speed optical modules.

Indium phosphide is listed in the 2025 dual-use export control catalog issued by China’s Ministry of Commerce. Exports of such products require a dual-use export license issued by the ministry, including an item-specific license valid for no more than one year and a general license valid for no more than three years. Yunnan Germanium did not specify which type of export license it holds.

The transaction value for the first year was set at USD194 million, accounting for about 122 percent of the company’s operating revenue last year, Yunnan Germanium said. The purchase prices and actual delivery volumes for the following four years will be subject to the orders the pair will sign in the subsequent years and the approval status of the product export licenses.

This order deepens the strong cooperation between Yunnan Xinyao and AOI and shows the customer’s recognition of the company’s product quality and bulk supply ability, Yunnan Germanium noted, adding that this will help enhance its global market reputation and overall competitiveness and positively impact its operating results over the next five years.

The sharp increase in demand from artificial intelligence data centers and the optical communications market has driven rapid growth in demand for compound semiconductor materials, such as indium phosphide. China’s southern Yunnan province is rich in crude indium resources, a key raw material for indium phosphide.

Due to strong product demand, Yunnan Germanium announced in April that it would invest CNY189 million (USD28.3 million) to build new four-inch and six-inch high-quality indium phosphide single-crystal production lines at its existing indium phosphide plant. The project, expected to be built in 18 months, will add an annual capacity of 300,000 equivalent four-inch wafers.

Once the project is put into operation, Yunnan Germanium’s total indium phosphide single-crystal capacity, if converted into four-inch products, will reach 450,000 wafers. Indium phosphide substrates are made from indium phosphide single-crystal wafers through processes such as grinding and polishing.

AOI is a Nasdaq-listed optical communications company headquartered in Texas, mainly engaged in designing and manufacturing optical communication products for the data center, cable television, and telecom markets. AOI’s stock [NASDAQ: AAOI] closed 2.4 percent up at USD63.97 yesterday.

Editor: Futura Costaglione