Soitec Secures Long-Term Deals as Demand Surges for AI Wafers and Photonics
Soitec's Strategic Moves Amid Surging AI and Photonics Demand
(Corrects paragraph 15 to clarify the 6- to 12-month timeframe applies to the decision on Singapore building, not to when capacity would be added.)
By Nathan Vifflin
Aug 31 (Reuters) - French chip materials maker Soitec is locking customers into multi-year supply agreements with deposits and fixed pricing as demand surges for the wafers used in AI data centre optics, its chief executive told Reuters.
"We are using the current situation to find the right balance between the value we bring and the price we can ask," Laurent Remont said.
Soitec told investors last month that photonics-SOI revenue would more than double this financial year from slightly above $100 million, without saying whether that was a base case or a ceiling. That implies more than $200 million, which Remont now calls "absolutely a floor."
Demand for silicon photonics has surged as hyperscalers increasingly use optical connections to move data inside AI infrastructure, where copper links are becoming less attractive because of power and performance constraints.
Soitec supplies the substrate underpinning almost all silicon photonics chips. UBS estimates it holds a 95% share of the market. The stock has almost quadrupled this year as demand for AI-related optical networking has accelerated.
Securing Supply: Deposits and Contracts
DEPOSITS AND CONTRACTS
Multi-Year Agreements and Customer Commitments
Around 80% of Soitec's capacity reservation agreements with photonics customers, more than 10 in total, should be signed within a week or two, with the remainder expected within a month, Remont said. The cash deposits have not yet been paid and will arrive in stages as customers ramp production.
The contracts fix a price and require a deposit tied to committed demand. Customers that take the agreed volume get the deposit back; those that fall short forfeit it. Volumes above the agreed level trigger new pricing discussions.
"That's a way for us to have our customer with skin in the game," Remont said.
Inventory Transparency and Market Protection
Customers must also share inventory data, a requirement aimed at preventing companies from over-ordering capacity to keep wafers away from competitors, he added.
Capacity Expansion: Three Levers Before a New Fab
THREE LEVERS BEFORE A NEW FAB
Maximizing Existing Facilities
Soitec does not expect to need a new plant until around 2029, Remont said.
The company is pursuing two expansion levers already: shifting output between businesses using shared underutilised facilities and installing additional tools in existing cleanroom space.
"With that we will cover easily this year and next year," he said.
The cleanroom capacity includes part of a French facility originally built for silicon carbide production, which was written down by 41 million euros ($47.7 million) last year.
Soitec produced photonics-SOI only in France until five months ago. Since then, it has qualified customers at a facility in Singapore.
Singapore Expansion and Future Decisions
A third lever, an unequipped building in Singapore, could be equipped instead of building a new fab, with a decision whether to do so expected within six to 12 months.
"We can increase quickly without building a completely new fab, just equipping a building," Remont said.
Global Production Considerations
He sees no need for a U.S. plant "at this stage."
Customers, he said, are "more desperate to get wafers than being too picky about where the location for production is."
($1 = 0.8590 euros)
(Reporting by Nathan Vifflin in Gdansk; Editing by Matt Scuffham)
