Nokia Acquires NXP Fab for InP Optical Chips

According to Nokia’s announcement, the company has signed a definitive agreement with NXP Semiconductors to acquire a semiconductor manufacturing facility in Chandler, Arizona, USA. The facility will be converted into a production line for indium phosphide (InP) optical chips, supporting Nokia’s expansion in high-speed optical communication technologies driven by growing AI data center demand.

Nokia plans to transform the facility into an InP chip manufacturing site and begin initial mass production in early 2027 by leasing part of the factory space. The full acquisition transaction is expected to be completed in the first quarter of 2029. Nokia said the acquisition will further strengthen its semiconductor manufacturing capabilities and improve its control over key optical component production.

InP is a critical compound semiconductor material widely used in optical communication applications. Unlike traditional silicon-based chips, InP chips enable high-speed conversion between electrical and optical signals, making them essential components in optical transceivers and networking equipment. As AI data centers continue to expand, rising computing workloads are driving significant increases in data traffic, while traditional copper interconnects face growing limitations in bandwidth and power efficiency. This trend is accelerating demand for optical communication technologies and InP-based solutions.

Currently, only a limited number of companies, including Coherent and Lumentum, have large-scale InP chip manufacturing capabilities. The market remains constrained by limited production capacity and a shortage of high-volume manufacturing resources. Nokia CEO Justin Hotard said the acquisition will provide “additional capacity to support Nokia’s own requirements and increase supply options in a market with limited availability.”

Industry research indicates that demand for optical modules has already exceeded supply capacity due to tight InP chip availability. NVIDIA has also increased investment in the optical communications ecosystem, investing $2 billion each in Coherent and Lumentum while signing strategic supply agreements. Lumentum previously warned that InP chip shortages could become more severe as AI data center construction accelerates worldwide.

The acquisition represents another major step in Nokia’s strategy to strengthen its position in AI infrastructure. In 2025, Nokia completed the acquisition of optical networking company Infinera, gaining access to its InP wafer manufacturing facility in California. The company also plans to expand capacity at its optical packaging facility in Pennsylvania to enhance its optical chip manufacturing and packaging capabilities.

Driven by the rapid growth of AI data centers, optical communications has become a key growth area for Nokia. According to Nokia’s second-quarter 2026 financial results, its optical networks business revenue increased 20% year over year, while sales from AI and cloud customers surged 105% compared with the previous year. The company’s latest investment highlights the increasing importance of InP optical chips in next-generation AI data center infrastructure.