Coherent signs LOI for up to $50M CHIPS Act grant to expand Texas indium phosphide fab
What's the deal? Coherent Corp, the optical and semiconductor technology company, has signed a letter of intent to receive up to $50 million in grant funding from the U.S. Department of Commerce under the CHIPS and Science Act. The money will go toward expanding its 6-inch indium phosphide manufacturing facility in Sherman, Texas.
The company said the investment will boost production capacity for components essential to artificial intelligence technologies and create high-value jobs in the region.
Why now? The grant arrives as demand for advanced semiconductor components — particularly those powering AI infrastructure — continues to surge. Coherent's indium phosphide chips are used in optical and optoelectronic devices like lasers and transceivers, which form the backbone of high-speed data communications.
The CHIPS and Science Act, designed to reshore semiconductor manufacturing to the US, has been steadily disbursing funds to companies that can strengthen domestic supply chains. Coherent, with a market capitalisation of roughly $81 billion, fits squarely into that mandate.
What could go wrong? The funding is still at the letter-of-intent stage, meaning final terms have yet to be negotiated. Coherent also trades at a P/E ratio of about 198, suggesting the market has priced in aggressive growth expectations. Insider activity adds a note of caution: executives sold $3.2 million worth of shares over the past three months, with no insider buying reported.
The signal: The CHIPS Act's funding pipeline increasingly targets specialised compound semiconductors — like indium phosphide — rather than just silicon fabs, underscoring Washington's recognition that AI infrastructure depends on the full photonics supply chain. For Coherent, whose GF Score of 81/100 reflects strong growth momentum (a perfect 10/10 on that metric), the grant is a modest but strategic validation of its role in high-speed optical communications at a moment when data centre bandwidth demands are outpacing traditional capacity.
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