China Increases Export Scrutiny on Indium Metal Amid AI Chip Demand

China tightens oversight of critical metal exports

China has intensified scrutiny over exports of indium metal, prompting concerns among international buyers that the material may soon join Beijing's formal export control regime. The development comes as demand surges for indium phosphide, a compound derived from indium that is essential for manufacturing high-speed optical chips used in AI data centers.

According to Reuters, which first reported the development, China produces nearly 70% of the world's indium supply. The metal is primarily a byproduct of zinc refining and has traditionally been used in displays and solder. However, its role as the raw material for indium phosphide has elevated its strategic importance as AI infrastructure expands globally.

New requirements signal potential restrictions

Multiple buyers told Reuters they have encountered increased due diligence from Chinese customs authorities this year. A European buyer reported being asked to disclose end-user information for the first time in 2026, including details about where those end users are located. A major North American buyer described approval times extending from same-day processing to several days, characterizing the atmosphere as "tense."

The scrutiny is not uniform across all transactions. Two additional buyers said they had heard of enhanced checks but had not experienced them directly. Reuters has not identified any shipments that have been blocked to date.

China already placed indium phosphide on its export control list in February 2025. Those restrictions have created significant obstacles for next-generation data center development. The issue reached high-level diplomatic channels when the CEO of Coherent, a chipmaker backed by Nvidia, traveled to Beijing with President Donald Trump in May specifically to address the export controls.

Why it matters

Indium represents a critical chokepoint in the AI supply chain where a single country controls the majority of global production. If China adds indium metal to its formal export control list, it would gain another lever in technology trade disputes while potentially disrupting the supply chain for AI infrastructure. The U.S. Defense Logistics Agency has already moved to mitigate this vulnerability, issuing a request for proposals earlier in 2026 to stockpile up to 403 tons of indium over three years.

Industry fears prelude to formal controls

One North American buyer told Reuters they suspect the new reporting requirements represent "a precursor to restrictions or outright bans on exports." Export control regimes typically use end-user disclosure requirements to map global supply chains and identify strategic pressure points before implementing formal restrictions.

The indium industry remains relatively small, but its strategic importance has grown substantially as AI computing demands increase. High-speed optical chips made with indium phosphide are critical for the data transmission speeds required in advanced AI data centers.

China's Ministry of Commerce did not respond to Reuters' request for comment, which was submitted on a public holiday. All buyers who spoke to Reuters declined to be named due to the sensitivity of the topic.

The details were first reported by Reuters correspondent Solomon Cefai.