(Yicai) Nov. 9 -- Optics Technology Holding, a leading Chinese supplier of germanium single-crystal, said its subsidiary has agreed to supply semiconductor-grade indium phosphide substrates for the European factories of US optical component supplier Coherent over the next three years, in a deal likely worth no less than USD601 million.

Guangdong Xianrui Technology signed a letter of intent with Coherent to supply six-inch InP substrates to its plants in Switzerland and Sweden from next year through 2029, Harbin-based Optics Technology announced late on Nov. 6. The pair may mutually agree to extend the deal for another year.

Xianrui Tech and Coherent will move forward with signing a final agreement covering product technical specifications and pricing, export licenses, payment methods, after-sales service, and other details based on the letter of intent, Optics Technology noted.

After rising by as much as 6.9 percent at one point, shares of Optics Technology [SHE: 300489] ended 1.1 percent higher at CNY197.08 (USD29.52) apiece in Shenzhen today.

Pennsylvania-based Coherent is a vertically integrated manufacturer operating in more than 20 countries and regions, Optics Technology said. It mainly focuses on researching, developing, producing, and selling lasers, optical transceiver modules, and other optical and optoelectronic devices, components, systems, and specialty engineered materials, with its products primarily used in data centers and communications.

InP substrates have excellent photoelectric conversion properties and serve as the core base material for high-speed optical communication lasers, radio frequency devices, and infrared optoelectronic chips, which are key components packaged inside high-speed optical modules. The sharp increase in demand from artificial intelligence data centers and the optical communications market has also driven rapid growth in demand for compound semiconductor materials such as InP.

The latest was the second long-term supply letter of intent signed within a week between a Chinese InP supplier and a foreign optical components giant for a product the Ministry of Commerce added to its dual-use items list last year. Late on Nov. 3, Lincang Xinyuan Germanium Industry inked a five-year deal to supply InP substrates to Applied Optoelectronics, worth USD194 million in the first year.

Exporting InP products requires a dual-use items export license issued by the ministry, either individual licenses valid for no more than one year or general licenses valid for no more than three years. Optics Technology did not disclose which export license type it holds.

Editor: Martin Kadiev