A severe shortage of indium phosphide substrates and epi-wafers is intensifying as AI data center and optical transceiver demand outpaces supply, with fourth-quarter prices set to rise more than 10%, the biggest single-quarter increase on record for the material. Industry sources cited by Economic Daily News said substrate prices have already risen in three consecutive rounds since the fourth quarter of last year and are heading for a fourth increase, while epi-wafer prices have climbed twice and are moving toward a third hike in Q4. The squeeze reflects a structural bottleneck in upstream substrate supply, where policy restrictions and limited capacity expansion have lagged fast-growing demand for ultra-high-speed optical interconnects. Taiwanese epi-wafer makers including Visual Photonics Epitaxy, LandMark Optoelectronics and IET-KY are expanding capacity, while LandMark has also signed a long-term supply agreement with Sumitomo Electric Industries to secure raw materials. Even so, the market remains seller-dominated, and participants say the near-term challenge is not only higher prices but whether supply can be secured at all.