# Optical Chip Makers Expand Capacity for AI Data Centers > Source: > Published: 2026-06-19 11:08:39.426219+00:00 # Optical Chip Makers Expand Capacity for AI Data Centers Multiple companies across the optical-photonics supply chain announced capacity expansions in mid-June 2026, driven by AI data center demand. Coherent Corp. (NYSE: COHR) signed a letter of intent on June 16 to receive up to $50 million under the CHIPS and Science Act from the U.S. Department of Commerce, funding a doubling of floor space and quadrupling of wafer production capacity at its 6-inch indium phosphide (InP) fab in Sherman, Texas - the world's first volume-production 6-inch InP platform (Coherent press release). In March 2026, NVIDIA invested $2 billion in Coherent and committed a multibillion-dollar purchase of laser and optical networking products (NVIDIA blog). Nokia plans a tenfold increase in photonic chip testing and packaging capacity at its Allentown, Pennsylvania facility by Q3 2026, backed by $30 million in investment (Nokia newsroom). JX Advanced Metals announced up to 120 billion yen in investment through fiscal 2030 to expand InP substrate capacity by up to tenfold (TrendForce). IQE and Tower Semiconductor announced a multi-year InP epiwafer supply agreement on June 15 targeting 200 Gb/s-lane transceivers and next-generation 400 Gb/s modulators (GlobeNewswire). ### What happened Multiple companies across the optical-photonics supply chain announced capacity expansions in mid-June 2026, driven by AI data center demand for high-bandwidth optical interconnects. ### Coherent and NVIDIA Coherent Corp. signed a letter of intent on June 16 to receive up to $50 million under the CHIPS and Science Act from the U.S. Department of Commerce, funding expansion of its 6-inch InP manufacturing facility in Sherman, Texas. The expansion doubles floor space and quadruples wafer production capacity, and is expected to create over 1,000 jobs, including 550-plus direct advanced manufacturing and engineering roles (Coherent press release). In March 2026, NVIDIA invested $2 billion in Coherent to support R&D, future capacity, and U.S.-based manufacturing, alongside a multibillion-dollar purchase commitment for advanced laser and optical networking products (NVIDIA blog). NVIDIA CEO Jensen Huang and Coherent CEO Jim Anderson attended the Sherman groundbreaking. Huang said, "AI factories are the infrastructure of the new industrial revolution. Connecting millions of GPUs into one thinking machine requires optical technology built for scale, speed, and energy efficiency" (Coherent press release). Anderson explained the technical necessity: "AI runs on compute, but it scales on connectivity - and Sherman is where that connective tissue gets built" (NVIDIA blog). The $50M CHIPS Act award is a letter of intent; a binding funding agreement must be separately negotiated before funds disburse. ### Technical context InP enables the high-speed lasers and optical engines that move data between GPUs, servers, and data centers. When NVIDIA systems such as the Vera Rubin Ultra NVL576 link 576 GPUs across eight racks, copper-based signaling cannot carry data at the required distance and signal integrity; optical interconnects pay a one-time electrical-to-light conversion cost and then scale distance with minimal power overhead. Moving from 3-inch to 6-inch InP wafers roughly quadruples usable area per run, reducing per-component cost. Expanding testing and packaging capacity alongside wafer output is equally critical for moving from prototype to volume 200 Gb/s and 400 Gb/s transceivers. ### Nokia, JX Advanced Metals, and IQE-Tower Nokia announced a tenfold increase in photonic chip testing and packaging capacity at its Allentown, Pennsylvania facility by Q3 2026, backed by $30 million in investment and state support from Pennsylvania and the federal CHIPS Act tax credits (Nokia newsroom). JX Advanced Metals plans up to 120 billion yen in investment through fiscal 2030 to expand InP substrate capacity by up to tenfold at two Ibaraki Prefecture facilities (TrendForce, June 2026). On June 15, IQE and Tower Semiconductor announced a multi-year InP epiwafer supply agreement targeting 200 Gb/s-lane pluggable transceivers and next-generation 400 Gb/s modulators for AI data center optical connectivity, alongside settlement of an IP dispute over porous silicon patents (GlobeNewswire). ### What to watch Upstream InP substrate supply is concentrated among a small number of suppliers, giving hyperscalers and system vendors leverage via direct investment and long-term agreements. Monitor Coherent's expanded Sherman line ramp timeline, Nokia's Q3 2026 testing capacity target, Tower's InP-based silicon photonics 200 Gb/s product qualification, and whether announced capex converts to shipped modules in volume. ## Scoring Rationale Multiple confirmed supply-chain expansions - NVIDIA's $2B investment in Coherent, $50M CHIPS Act LOI, Nokia's 10x photonics capacity, and JX Advanced Metals' 120B-yen InP substrate build - represent a coordinated effort to address optical interconnect bottlenecks critical for AI cluster scaling. This is a notable infrastructure story for hardware and networking practitioners, below the paradigm-shift tier. Practice interview problems based on real data 1,500+ SQL & Python problems across 15 industry datasets — the exact type of data you work with. [Try 250 free problems](/problems)