Grows rare semiconductor crystals in Chinese factories into the only wafers that make 5G radios and high-speed fiber optics work.
At a glance
- Depends onUpstream position: supplies 4 industries, depends on 0
- ScaleMarket cap is above the global median
Grows rare semiconductor crystals in Chinese factories into the only wafers that make 5G radios and high-speed fiber optics work.
AXT grows Indium Phosphide and Gallium Arsenide crystals inside Chinese furnace facilities into the wafers that RF amplifiers above 6 GHz and 400G optical detectors are built around — silicon cannot do the same job at those frequencies, so there is no generic substitute. Each crystal takes 48 to 72 hours to grow in a single furnace, and that cycle cannot be shortened without fracturing the crystal, which means total wafer output is capped by how many furnaces are running rather than by how fast wafers can be sliced or polished downstream. The furnaces sit inside Chinese subsidiaries that also draw indium from domestic zinc refining and gallium from domestic aluminum smelting, compressing the entire chain from raw metal to finished wafer into one jurisdiction — and because customers must spend 6 to 12 months re-qualifying any new supplier against their existing amplifier or detector designs, they are slow to leave once they have locked in. That same concentration is the business's central vulnerability: a US export control action targeting the Chinese subsidiaries would simultaneously cut off incoming feedstock and block outbound wafer shipments, collapsing production at the only point in the chain that cannot be quickly replicated elsewhere.
How does this company make money?
The company charges per wafer sold to telecommunications equipment manufacturers and compound semiconductor device producers. The price of each wafer depends on how wide it is, how pure and defect-free the crystal is, and how large the order is.
What makes this company hard to replace?
Before a customer can buy wafers from a new supplier, it must run 6 to 12 months of device testing to prove the new wafers work in its existing amplifier or detector designs — a mandatory process that cannot be skipped. Those designs are also built around the specific electrical and physical properties of the current wafers, so a different substrate is not a simple drop-in. On top of that, many customers are locked into multi-year supply agreements with minimum volume commitments, which create a financial cost to leaving early.
What limits this company?
Every furnace is tied up for two to three days per crystal, and only one crystal comes out per cycle. No amount of money or extra workers can make the crystal grow faster — speeding it up breaks the lattice. So the total number of wafers the company can ship in a year is locked directly to how many furnaces it owns and runs, not to anything else downstream.
What does this company depend on?
The company cannot run without four things: indium metal sourced from zinc refining byproducts, gallium metal sourced from aluminum smelting residues, vertical gradient freeze furnaces with precise temperature control systems, and Chinese manufacturing licences for compound semiconductor processing. It also uses germanium substrate material for specialized optoelectronic applications.
Who depends on this company?
5G base station manufacturers depend on Gallium Arsenide wafers for the radio amplifiers that work above 6 GHz — without them, those amplifiers cannot be built. Silicon photonics module producers use Indium Phosphide wafers inside optical transceivers to hit 400G+ data rates — no substitute material gets them there. Satellite communication equipment makers rely on the same compound semiconductor performance for their high-frequency receivers, which silicon cannot match.
How does this company scale?
Slicing, polishing, and testing finished crystals can grow relatively easily — add machines and workers and throughput rises. But crystal growth itself does not stretch that way. Each furnace still needs 48 to 72 hours per boule, still needs a dedicated technician watching the temperature the entire time, and still cannot be rushed. So as the business grows, the furnace count remains the one thing that must physically expand to keep up.
What external forces can significantly affect this company?
US-China trade restrictions are the largest threat — they could raise the cost of raw materials coming into the Chinese facilities or make it harder to operate the subsidiaries at all. The supply of indium and gallium is heavily concentrated in Chinese aluminum and zinc refining, so any disruption to those industries ripples directly into feedstock availability. On the demand side, the pace and geography of 5G network buildouts around the world drive how urgently telecommunications equipment makers need RF substrates, creating swings in orders that are hard to predict.
Where is this company structurally vulnerable?
If the US government placed export controls or trade restrictions on the Chinese subsidiaries — blocking metal feedstock from coming in, finished wafers from going out, or the operating licences the facilities need to run — the entire production chain would stop at once, because the furnaces, the indium, the gallium, and the manufacturing permits are all inside the same jurisdiction the restriction would hit.
Sign in to view price data.
Sign inStructural observations derived from financial data, industry benchmarks, and supply chain position.
Companies that share the same coordination system — how they create, deliver, or capture value.
Companies that share active interpretations — structural patterns currently present in both stocks.
CompanyGraph