Coherent CHIPS grant $50M for indium phosphide fab expansion; quadruples Sherman wafer output for AI optical networking

Coherent Corporation signed a letter of intent on June 16 to receive up to $50 million in direct CHIPS Act funding from the U.S. Department of Commerce to expand its 6-inch indium phosphide (InP) manufacturing facility in Sherman, Texas. The expansion, which broke ground the same day with NVIDIA CEO Jensen Huang in attendance, will double manufacturing production space and quadruple wafer production capacity, creating more than 1,000 jobs (550+ direct advanced manufacturing roles). Coherent's Sherman site is the world's first and largest volume-production 150mm indium phosphide fab.

Indium phosphide is a III-V compound semiconductor essential for AI optical interconnect infrastructure. Unlike silicon, InP enables high-speed lasers and photodiodes that operate at 1310nm and 1550nm wavelengths, the standards for fiber-optic data center communications. Coherent's InP-based photonic devices—including lasers, modulators, and photodetectors—are used in NVIDIA's pluggable optical transceivers and co-packaged optics switches. The expansion moves beyond historical 3-4 inch wafer production to 6-inch wafers, roughly quadrupling usable area per wafer and driving down per-unit optical interconnect costs. NVIDIA has deepened its partnership with Coherent as optical networking emerges as the next potential bottleneck in AI infrastructure.

For architects building hyperscale AI clusters, this expansion directly addresses the optical interconnect supply chain. As GPU counts scale and data center densities increase, bottleneck shifts from compute to networking; NVIDIA's push for co-packaged optics makes Coherent's InP capacity a strategic constraint. The CHIPS Act funding validates U.S. policy intent to secure photonics supply chains. The Sherman facility, once a quiet Texas operation, now sits at the center of national AI infrastructure strategy.