Soitec locks customers into multi-year deals as AI wafer demand surges
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."
French chip materials firm Soitec is utilizing multi-year supply contracts and fixed pricing with deposits to capitalize on surging demand for silicon photonics wafers used in AI data centre optics, its CEO informed Reuters. Laurent Remont explained that the company is seeking a balance between the value it provides and the price it can charge.
Soitec disclosed last month that photonics-SOI revenue would more than double this financial year, a figure Remont now views as the minimum. The demand for silicon photonics has skyrocketed as hyperscalers rely on optical connections to transfer data within AI infrastructure, surpassing the power and performance benefits of copper links.
Soitec is the sole supplier of the substrate for almost all silicon photonics chips, holding an estimated 95% market share. UBS predicts the firm's stock has nearly quadrupled this year due to the heightened demand for AI-related optical networking. Around 80% of Soitec's capacity reservation agreements with photonics customers should be finalized within a week or two, while the remaining contracts are anticipated within a month.
The deposits and contracts require a deposit tied to committed demand, with customers receiving the deposit back if they meet their volume commitments. If they do not, they forfeit the deposit. Volumes exceeding the agreed-upon level initiate new pricing discussions. Soitec also seeks to prevent customers from over-ordering to reserve wafer capacity for competitors by requiring customers to share inventory data.
Soitec does not anticipate needing a new plant until around 2029. The company is implementing two expansion strategies: reallocating output between businesses using shared underutilized facilities and adding more tools in existing cleanroom space. With these measures, Soitec believes it can easily meet the demand for this year and the next.
The cleanroom capacity includes a portion of a French facility previously dedicated to silicon carbide production, which was written down by €47.7 million last year. Soitec previously produced photonics-SOI solely in France until five months ago, after which it qualified customers at a facility in Singapore. A third expansion lever, an unoccupied building in Singapore, could provide additional capacity within six to 12 months if needed.
Remont believes a U.S. plant is unnecessary at this stage, as customers are more eager to receive wafers than to be choosy about the production location.
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