Soitec locks in AI wafer clients with multi-year contracts as demand surges

French chip materials maker Soitec is shifting to multi-year supply agreements with deposits and fixed pricing as demand for wafers used in AI data centre optics accelerates. Chief Executive Laurent Remont said the company is leveraging the current market conditions to strike a balance between the value it delivers and the price it can command.

Around 80% of Soitec's capacity reservation agreements with more than ten photonics customers are expected to be signed within a week or two, with the rest following within a month. The contracts require cash deposits, paid in stages as customers ramp up production, and fix a price tied to committed demand. Customers who meet the agreed volume get their deposit back; those who fall short forfeit it. Volumes above the agreed level trigger fresh pricing discussions.

"That's a way for us to have our customer with skin in the game," Remont said. The agreements also require customers to share inventory data, a measure aimed at preventing over-ordering of capacity to keep wafers away from competitors.

Demand for silicon photonics has surged as hyperscalers increasingly adopt optical connections for moving data inside AI infrastructure, where copper links face power and performance constraints. Soitec supplies the substrate underpinning nearly all silicon photonics chips, with UBS estimating its market share at 95%. The company's stock has nearly quadrupled this year.

Soitec told investors last month that photonics-SOI revenue would more than double this financial year from slightly above $100 million. Remont now calls that figure "absolutely a floor."

The company does not expect to need a new plant until around 2029. It is currently pursuing two expansion levers: shifting output between businesses using shared underutilised facilities and installing additional tools in existing cleanroom space. This capacity, Remont said, "will cover easily this year and next year."

The cleanroom capacity includes part of a French facility originally built for silicon carbide production, which was written down by 41 million euros last year. Soitec produced photonics-SOI only in France until five months ago, when it qualified customers at a Singapore facility. A third lever, an unequipped building in Singapore, could add capacity within six to 12 months if required.

Remont sees no need for a U.S. plant "at this stage," noting customers are "more desperate to get wafers than being too picky about where the location for production is."