AI Data Center Supply Chains & Indium Phosphide: A Look at Oxford Instruments

In this episode, CSI is cutting through the social media noise to bring you a vintage Chip Stock Investor breakdown of the semiconductor supply chain. Today, we are putting the spotlight on Oxford Instruments, a small-cap UK company that might be a critical bottleneck in the AI data center networking boom.

We explore how the industry is scaling up production for compound semiconductors and specifically look at Coherent's breakthrough with six-inch indium phosphide (InP) wafers. From there, we map out the players making this transition possible and detail why Oxford Instruments' plasma deposition and etch systems are moving out of the R&D lab and onto the commercial manufacturing floor.

Episode Chapters & Key Takeaways:

• The Indium Phosphide Breakthrough: The industry has long been stuck at two- to four-inch wafers due to manufacturing defects, but Coherent has successfully transitioned to six-inch InP wafers.

• Mapping the Supply Chain: A breakdown of the companies involved in this ecosystem, including Sumitomo Electric for substrates, KLA Corp and Onto Innovation for inspection, and Applied Materials for deposition.

• Oxford Instruments' Critical Role: Oxford Instruments supplies the plasma deposition and etch technology used by Coherent to create features like laser sources and waveguides.

• A Shift to Commercial Scale: Historically an R&D business spun out of Oxford University, the company is now seeing its advanced technologies group transition into early-stage commercial production.

• Strategic Divestitures: Oxford Instruments recently sold its quantum computing and cryogenics segment to Quantum Design to focus heavily on AI data centers and compound semiconductors.

• Financials & Valuation: Despite recent headwinds like tariffs and US R&D funding delays, the company holds a clean balance sheet and is expecting a return to growth in fiscal 2027.

Special thanks to our sponsor, fiscal.ai! Get 15% off any paid plan using our special link: fiscal.ai/csi. Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.CSI doesn't own shares of Oxford Instruments.