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Illiquid On this subject, new article today from Nikkei Asia on blunting China's rare earth's weapon. TOKYO -- Japan should work with the U.S. and Europe to build a supply chain for rare earths and stop China from using the critical minerals as an economic…

st week, news flow around “critical minerals” and “dual-use material” export reviews has intensified meaningfully. The market has quickly stitched together several fundamentally different signals into a single narrative: escalating geopolitics will materially raise supply risk across the optical module value chain—first expressed in the sharp pullback of leading optical component equities. As of the U.S. market session on January 9, Lumentum (LITE) and Coherent (COHR) were down approximately 11% and 9.6%, respectively. Over the same period, upstream materials supplier AXT (AXTI) guided down its 4Q25 revenue outlook, explicitly attributing the revision to fewer-than-expected export licenses for indium phosphide (InP) granted by China’s Ministry of Commerce. Because InP is a core input for EMLs, CW lasers, and tunable lasers used in long-haul communications, investors have extrapolated this development into a broader negative read-through for global optical communications.

The market’s concerns about China’s rare-earth/critical-materials export restrictions largely fall into two buckets:

-Indium is the key precursor for InP substrates. China accounts for more than 65% of global indium exports, which could constrain non-China InP substrate manufacturers—primarily Sumitomo, JX Advanced Metals, and Coherent—and thereby disrupt the broader optical communications supply chain.

-Another major InP substrate manufacturer, AXT, manufactures substrates inside China. While AXT is not constrained in sourcing indium domestically, its exports may be affected, which could in turn impact global optical communications.

However, based on our supply-chain checks, China’s recent change “rare-earth export policy” has a very limited practical impact on the optical ecosystem overall. We frame the analysis along two dimensions: Indium and InP substrates. $LITE $COHR $CIEN

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