Thank you, Tracy, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, our plan to list our subsidiary Tongmei in China, our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity.

We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. In addition to the matters just listed, these uncertainties and risks include, but are not limited to, the financial performance of our partially owned supply chain companies and increased environmental regulations in China.

In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations.

This conference call will be available on our website at axt.com through April 30th, 2027. Also, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter of 2026.

This information is available on our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our first quarter results.

Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the first quarter of 2026 was $26.9 million, compared with $23.0 million in the fourth quarter of 2025 and $19.4 million in the first quarter of 2025 last year.

To break down our Q1 '26 revenue for you by product category: indium phosphide was $13.6 million, primarily from data center applications. Gallium arsenide was $5.4 million; germanium substrates were $200,000.

Finally, revenue from our consolidated raw material joint venture companies in Q1 was $7.6 million. In the first quarter of 2026, revenue from Asia Pacific was 78%, Europe was 21%, and North America was 1%.

The top five customers generated approximately 32% of total revenue, and no customers were over the 10% level. Gross margin showed a substantial improvement in the first quarter.

Non-GAAP gross margin was 29.9%, compared with 21.5% gross margin in Q4 of 2025 and a negative 6.1% gross margin in Q1 of 2025 last year. For those who prefer to track results on a GAAP basis, gross margin in the first quarter was 29.6%, compared with 20.9% in Q4 and a negative 6.4% in Q1 of 2025.

Moving to operating expenses: total non-GAAP operating expense in Q1 was $8.6 million, compared with $7.5 million in Q4 and $8.5 million in Q1 of 2025. On a GAAP basis, total operating expenses in Q1 was $9.6 million, compared with $8.7 million in Q4 of 2025 and $9.0 million in Q1 of 2025.

Our non-GAAP operating loss for the first quarter of 2026 was $550,000, compared with a non-GAAP operating loss in Q4 of 2025 of $2.6 million and a non-GAAP operating loss of $9.6 million in Q1 of 2025. For reference, our GAAP operating line for the first quarter of 2026 was a net loss of $1.6 million, compared with an operating loss of $3.8 million in Q4 of 2025 and an operating loss of $10.3 million in Q1 of 2025.

Non-operating other income and expense and other items below the operating line for the first quarter of 2026 was a net loss of $35,000. The details can be seen in the P&L included in our press release today.

In Q1 of 2026, we made substantial progress towards profitability. We had a non-GAAP net loss of $585,000, or 1 cent per share, compared with a non-GAAP net loss of $2.3 million, or 5 cents per share, in the fourth quarter and non-GAAP net loss in Q1 of 2025 of $8.2 million, or 19 cents per share.

On a GAAP basis, the net loss in Q1 was $1.6 million, or 3 cents per share, compared to a net loss of $3.6 million, or 8 cents a share, in the fourth quarter and $8.8 million, or 20 cents per share, last year in Q1 of 2025. The weighted average basic shares outstanding in Q1 of 2026 was 53.3 million.

Cash, cash equivalents, and investments decreased by $5.1 million to $123 million as of March 31st. By comparison, at December 31st, it was $128.4 million.

Accounts receivable increased by $5.2 million, almost exactly the same as the change in cash. Depreciation and amortization in the first quarter was $2.4 million.

Total stock comp was $1.0 million. Net inventory was up approximately $8.5 million for the first quarter to 90.2.

This concludes the discussion of our quarterly financial results. Turning to our plan to list our subsidiary Tongmei in China on the STAR Market in Shanghai, we remain very interested in completing the IPO, particularly in light of the rapidly evolving AI infrastructure build-out in China and China's development of its semiconductor supply chain, which is fueling increased China-based demand for indium phosphide substrates.

We have continued to keep our IPO application current and Tongmei remains in process as a part of a much more selective and smaller group of prospective listings than a few years ago. Though the current geopolitical environment is dynamic, Tongmei is considered a Chinese company and continues to be regarded in China as a good IPO candidate.

We will keep you informed of any updates. With that, I'll now turn the call over to Dr.

Morris Young for a review of our business and markets. Morris?

Thank you, Gary. This is a incredibly exciting time for AXT.

As many of you are aware, last week we completed a capital raise for $632.5 million in support of Tongmei's indium phosphide capacity expansion, as well as R&D investment in new products like 6-inch indium phosphide and other working capital needs. With our backlog of orders and customer forecast achieving record levels, we are laser-focused on adding capacity to support customer requirements.

I'm pleased to report that we are running ahead of our plan to double our indium phosphide capacity this year from Q4 of 2025 levels. Our capability to scale up quickly is unique among our peers.

Unlike our competitors, AXT designs and builds our own crystal growth furnaces, has our own supply of critical raw materials, and has the manufacturing space in place to achieve our expansion goal this year. As you can imagine, longer-term capacity planning is one of the most important discussions we're having today with customers and major supply chain players in our space.

The message we're having for them is this: AXT is stepping up. Beyond our 2026 capacity expansion, we're planning to double our indium phosphide capacity again in 2027 with a new facility near our current one that will be dedicated to indium phosphide wafer production.

Our 2028 planning is also underway, and we expect to expand again meaningfully. This is an industry in which scale matters, the barrier to entry are high, even for most skilled manufacturers.

As the market continue to grow, capacity is become a critical enabler. What we are hearing from the industry sources and echo from our customers is the expectation that the market for optical components will increase significantly in the coming years, driving a 4 to 6 times increase in substrates market overall in the next 3 to 5 years, driven by both scale-out and scale-up applications.

Beyond pluggable transceivers, we're seeing a very large developing market for CPO, co-packaged optics. We are actively engaging in discussions with customers about their technical and timing requirements, and believe this could represent another inflection point in our business beginning in late 2027 and beyond.

With this massive growth cycle ahead of us, we're actively working with a multitude of players from our direct customers to the end customers, with whom we have not historically had direct relationships. We are there to understand their longer-term requirements and to align our growth and innovation plans accordingly.

This will be a thoughtful and measured process, but we believe we are in a best position competitively to support and enable our industry in meeting its current and future needs. Over the last few quarters, the expansion of our indium phosphide customer base has been gratifying.

We're now supporting nearly all leading customers in the optical space. This includes Tier 1 laser manufacturers and optical transceiver module makers, both around the globe and in China.

In alignment with our customer technical requirements and roadmaps, we're making important progress on our 6-inch indium phosphide product for both iron-doped and sulfur-doped specifications. A significant part of our capacity expansion will be focused on 6-inch crystal growth technology to support the planned roadmap of 6-inch capability by our customers.

We're excited to be able to demonstrate the technological advantage of our low-EPD wafers as the market moves to optical devices with higher speeds and greater sophistication for both scale-up and scale-out applications. Now turning to Q1.

Export permits in our first quarter came in slightly better than our guidance and are off to a solid start in Q2. Gary will take you through our full guidance in a few minutes, but we're expecting to achieve sequential revenue growth in Q2, driven primarily by growth in indium phosphide.

In fact, Q2 will be expected to be our largest quarter for indium phosphide in AXT's history. This derives from a indium phosphide backlog that has now reached a new high of over $100 million.

As we mentioned last quarter, customers are giving us more visibility into their expected demand and working closely with them in this supply-constrained environment to meet their need as we continue to expand our capacity. From a geographic demand perspective, the massive AI infrastructure build-out and planned capex spending by cloud services and AI platform providers in the US is the primary driver for EML and silicon photonics-based optical transceivers, as well as high-speed photodetectors.

We believe that today our material are being used in multiple US hyperscalers. We expect that end-customers use will continue to broaden.

We're also seeing significant growth in China as China moves to accelerate its capability throughout the AI supply chain. Our revenue related to indium phosphide-based laser market in China more than doubled in Q1 from the prior quarter, and we expect them to double again in Q2.

This highlights China's increasing investment in AI infrastructure supply chain for the global market. This is a great opportunity for AXT, as there's no permit required to ship our product within China.

Turning to gallium arsenide. In Q1, demand for semi-conducting wafers for industry, robotics, and data center lasers applications all held steady from the prior quarter.

We continue to see demand for semi-insulating wafers for wireless RF devices, and believe that we have a strong opportunity for market share expansion. However, this is gated primarily by our ability to obtain export license, which came in light in Q1.

Finally, our raw material business continue to be a crown jewel in our growth strategy. We're pleased to report that our subsidiary Jinmei has begun to refine high-purity indium, which gives us direct control of a guaranteed supply of another critical material for our indium phosphide substrates.

We're also investing to help Jinmei expand its capability so that our AXT's demand grows, Jinmei will continue to provide a meaningful portion of our raw material requirements. Globally, there continued to be a greater awareness of the importance of raw materials, and we are decades ahead of the curve in developing our unique integrated supply chain.

We continue to invest in our portfolio as we believe it's a major competitive differentiator. In summary, we believe AXT is entering one of the most consequential chapters in our company's history.

The investments we are making today in capacity, in technology, and in our unique integrated supply chain positions us to meet the extraordinary demand we see building across the optical and AI infrastructure markets. Our customer engagement is deepening, our visibility is improving, and our competitive differentiation is strong.

While we remain disciplined and thoughtful in our execution, we're confident that the groundwork are laying out now will enable us for meaningful growth in the years to come. With that, I turn the call back to Gary for our second quarter guidance.

Gary?

Thank you, Morris. To reiterate a couple of key points from Morris's commentary, we are seeing a strong increase in our indium phosphide wafer demand related to AI and the ongoing data center upgrade cycle.

Given the geopolitical complexity surrounding this market trend, our customer base is diversifying and expanding, and customers are placing longer-term orders and providing greater visibility into their needs. With all of these positive market and AXT-specific growth drivers, the most significant single factor to our growth in Q2 and beyond is the success and timing of getting export permits.

Therefore, guiding for future revenue is somewhat tricky for us right now, as we cannot predict future timing of permits or our success in obtaining them for any customer or individual order. Drawing on what we know and what we've experienced thus far in the export permitting process, we can offer the following insight into our expectations for Q2.

As of today, we have approximately $34 million in revenue that can be realized in Q2 across our substrate product lines and raw materials, for which we either already have a permit to ship or for which an export permit is not required. We have a high degree of confidence in recognizing this revenue in Q2.

We could see upside, even significant upside, to this number in Q2 should we receive permits for additional orders for which we have the inventory to support. We do want to stress that the timing for permit issuance is not predictable, nor in our control, and doesn't align with our quarterly reporting.

We continue to focus on gross margin improvement. Further improvement depends on a number of factors, including total revenue as it relates to revenue mix by product, absorption of fixed costs, and our ability to continue to drive better manufacturing efficiency.

With regards to opex, we expect that it will be approximately $9.3 million in Q2 on a non-GAAP basis and approximately $10 million on a GAAP basis. With these factors in mind, we expect to achieve profitability on both a GAAP and non-GAAP basis in Q2.

We believe our non-GAAP net income will be in the range of 6 to 8 cents, and our GAAP net income will be in the range of 5 to 7 cents. We estimate share count for Q2 will be approximately 63.5 million shares.

This concludes our prepared comments. We'll be glad to answer your questions now.

Tracy?

Hey, good afternoon and congrats on the step-up in backlog and the strong guidance for next quarter in indium phosphide. Guess my first question: you mentioned backlog and customer forecast at record levels, and we certainly saw that with a $100 million in backlog.

With regards to long-term capacity planning with customers, are you at the point of coming to any sort of long-term supply agreements with various customers, and if so, what sort of timing might you expect on that? Thanks.

No

follow-up.

Thanks, Tim. Yes, we're talking to a number of customers right now on long-term supply agreements as we build our capacity out and try and understand where their demand is going.

Nearly all of the larger customers in this space are talking about long-term supply agreements with us. We expect to come to resolution with some of those in the very near future.

Great. Just following up on that, sorry, go ahead.

Oh, no. I was just saying it's your turn, Tim.

Tim S.

Okay. Roger that.

Just an update. You'd mentioned last quarter that you were developing some relationships with Tier 1 customers or Tier 1 suppliers who hadn't necessarily been close relationships or customers over time.

I wonder if we can get an update on that. I have one more follow-up after that.

Thanks. That's going really well, actually.

We've got qualification wafers in with a lot of customers and we're finding paths and avenues to get wafers into a lot of these Tier 1 customers. As we see this market grow, there's a lot of opportunity for us.

We've said in the past that we've really been focused on these next-generation technology products that require high-quality material that frankly only AXT can build and can supply. Of course, with emerging supply chain constraints with indium phosphide, we are in the strongest position to grow capacity.

We're qualifying and we're supplying wafers to a lot of new Tier 1 customers in this field. It's exciting times for us.

I want to add one point, because I think, Tim, you're the frontline soldier, you're talking to them. From my perspective, I started to hear, let's say, 3 months ago was some of the Tier 1 customers, but now I'm starting to hear even add on to it is the end hyperscalers we're hearing.

In other words, the customers' customer, the end users, are also interested in seeing how we develop the supply chain guarantee for their growth plan.

That's correct, Morris. That's a good point.

There's been a lot of press releases out about long-term supply agreements into our customers from the hyperscalers and from the hardware companies. There's been a lot of encouragement from those hyperscalers and hardware companies for their suppliers to enter into long-term supply agreements with AXT.

That is actually driving a lot of the discussions, I think, that we're having on long-term supply agreements. Of course, it's given us a lot more visibility into what the market demands are at the hyperscaler side of things and how that trickles down to demands for AXT.

It also gives us a lot of visibility into technical demands as we move forward into high-end lasers and detectors in these new products.

Great. That makes sense and maybe somewhat related to those discussions, I'd be interested in an update on what you're seeing in terms of pricing for indium phosphide substrates.

That's a good question. Again, thanks, Tim.

What we are doing is we are raising some of our prices. We're seeing some recent price increase in raw materials, and specifically with indium.

We're having conversations with our customers to align our costs and maintain or grow gross margins. We're also starting to globalize, or we've been globalizing, our pricing.

Obviously, certain geographical regions have been more aggressive in the past on price targets, especially when we're looking at the lower-end markets such as GPON. We're starting to globalize our markets so that it is more standardized across those geographical regions.

Let me add on to that. Nevertheless, I think the pricing opportunity for us, I believe, is also the fact we're migrating more towards larger size.

As some of the smaller size, they are more traditional, they are more price-sensitive, and they are more competitors who can fill that shoes. When you get to 4-inch and 6-inch, and then as well as higher specification requirement, that's where our product shines.

Great. Thanks very much.

Appreciate it.

Thanks, Tim.

Hey, thanks for taking my question, and great results. I just wanted to hone in on gross margins a bit.

Obviously, you saw pretty big uptick in Q1. I'm not quite getting to the peak you had in Q2, or in Q2 I'm not quite getting to the peak back in the COVID timeframe, but I'm getting pretty close.

I guess, could you talk a little bit about how much of that is higher utilization levels versus how much of it is increased pricing, and whether my math is roughly accurate?

For Q1, there is some that's the result of increased pricing, but the primary drivers are the traditional two drivers that we highlight: one is volume is up, and the other is the mix is rich towards indium phosphide. As a matter of fact, if you look at it percentage-wise, indium phosphide was just a tad north over 50% of total revenue, it's really helped in that.

The pricing effects are being put in place, but we'll see the impact from your viewpoint, Matt, your eyes shall see that later this year.

Got it. Just Q2, Gary, if I said that the gross margins are coming in roughly around 40%, is that in the ballpark, and again, could you just talk to how much that's mix versus utilization versus pricing?

I don't have your forecast in front of me, but I think that's too aggressive. Us, we like to be a little bit more conservative.

We're definitely going to be crossing the 30% threshold, which we've said for several years, if we can get to $30 million in revenue and have a good mix, then we could be above 30% in gross margin. I think you're probably, it's up to you, but I'd encourage you to maybe knock that down a bit.

We can talk about it maybe later, so. Having said that, we're both on the right direction.

Gross margins should go up, and we feel very confident that they will. How fast and what we calculate is to be determined, but all the indicators are exactly what I've been saying for many years now.

The mix is rich for indium phosphide, and the volume is up, and so it's a unique sort of transition for us that inside the company, we're very pleased, very pleased. So.

I do want to add another point about this. Obviously, Gary, you own the gross margin calculation, but I would argue the supply chain strategy will start to shine.

I always say the AXT's like a choo-choo train, we're the locomotive. We're chugging along.

When we are accelerating, all the box behind us, such as our Jinmei, BoYu, which makes our crucibles, high-purity materials, etc., they are all going to chug along with us. When we slow down, of course, they all crash against us.

Right now, it's a good time. We're chugging along very strongly.

You're going to see their contribution to our ability to make profit will grow, too.

Got it. Then just my one follow-up is, I noticed going back to the last filing that you'd gotten export licenses, I think, for every geography except for the US.

Just any more thoughts on getting licenses for shipping in the US and how important is that in terms of being able to fully utilize that additional capacity you're bringing on?

I don't think we're giving up United States. No.

It's still pending.

Right. Matt, we're still being encouraged to apply for export permits for US customers both in the US and in other global regions.

At the moment, obviously, we are getting permits pretty readily for US customers based in other global regions. As Morris said, that doesn't mean that we are completely stopping any work on trying to obtain permits for the US.

We've been contacted by the Ministry of Commerce in China on a number of US applications right now to submit more data, that gives us an encouraging sign that they're still looking at US-based permits and there's still a possibility to get a permit for the US in the near future. As I say, we are definitely looking at that avenue.

In the meantime, we are supplying wafers globally to other regions as well. This is a very global supply chain and it's a very global market, and I think we're taking advantage of all the avenues that we can.

Thanks. I didn't mean to intimate that you weren't going to get a US permit or weren't still working on it.

I just wanted an update, and that was an awesome update. Thanks again, guys.

No problem.

Hi. Thanks for taking my question.

Want to ask more about the capacity and the capacity build plan here. I think your last COVID high for indium phosphide quarterly record was $17.7 million.

That was achieved in second quarter 2022. You are basically implying you're going to be at or above that level in this coming Q2.

I recall back in 2022, you probably also built above that $17.7 million because back then you thought you would have indium phosphide demand from the premium electronics company for smartphone applications. Want to ask you this: what's the max factory output for your existing factory today?

How utilized is the existing factory, and what's the expected factory output once you add the next two factories? I think that's something you talked about after the follow-on offering.

If you can provide any color on the numbers, that would be great.

I usually take the last digit out. We usually say our highest indium phosphide revenue per quarter was $17 million.

You have a very good memory. Okay.

We did say in Q4, we said we have increased our capacity by about 25% in Q4 of 2025, and in 2026, we're going to double that. Okay.

In my calculation, our own capacity planning, we think we're going to get about $35 million per quarter capability by the end of 2026. Okay.

Don't forget, that's the end of 2026. In other words, the capacity are increasing every month, every time as we talk about.

Look, in the next quarter, indium phosphide revenue is going to be above and beyond the $17 million per quarter.

That'll be a new record.

Will be a new record in Q2. Okay.

The other capacity we also mentioned about is that we are acquiring another piece of land near our existing factory in Beijing right now, which we're in the process of negotiating buying the land and doing the design, and we probably going to start building it. Because it's a greenfield, it will probably take us about a year, maybe a year and a half, to complete that expansion.

Okay. However, our capacity expansion is sort of in stages.

For instance, sometimes the clean room is the most critical, because if you don't have a clean room, you don't have no space to put in your machine. That's very digital.

Some of the crystal growth capacity is more incremental. Okay.

Right now, the clean room capacity is greater, much greater than our crystal growth capacity. As we speak now, we're increasing our capacity sort of gradually.

I think in the next year or so, once the greenfield is up for construction, then I think it would be more digital to expand our clean room capacity. Do you have anything to add, Tim?

I just wanted to add a little bit. Morris talked about doubling our capacity to a rate of $35 million per quarter on indium phosphide by the end of this year.

Remember, that's in a brownfield site that was once a crystal growth facility used for gallium arsenide, and as we relocated gallium arsenide, we've been able to move into that. We've been extremely fortunate that we're in a position, I think, that nobody else in the indium phosphide world is in, that we can double our capacity so quickly.

Looking into the next growth, as Morris just mentioned, we're acquiring a facility which is right next door to us. Again, extremely fortunate, building is already there, and that allows us to double yet again.

By the time we've completed that expansion, which should be by the end of 2027, maybe early 2028, we should be at the region of somewhere in the region of $65 to $70 million of capacity per quarter. That really takes us to the type of capacity that we're expecting to see in our existing locations.

Then as Morris mentioned again in his call or in his script as we talked earlier, we're now looking at where we need to go from here. We're looking at other opportunities and other ways to expand beyond that, probably in a greenfield site somewhere else.

That's for 2028.

Correct.

Yeah.

Let me be a bit more specific. I'm sort of the detailed guy, but $17 million, which we've already achieved, by the end of this year, we'll be at $35 million.

Per quarter.

Per quarter. That's times four, 35, $140 million.

Per quarter.

Per year.

Per

year.

We'll have that capacity at the end of 2026 to do $140 million.

You cannot do that because the capacity is continually increasing. You cannot use that.

Yeah.

Not digital, it's analog. A year later, it'll be $280 million, so.

It's double, double, double.

Thanks. Maybe a follow-up on the capacity expansion, right?

I think this is not like I come up with a question, but investors do ask this question. When you think about your capacity expansion, why can't you do the China plus one type of a strategy like many companies in the global electronic supply chain?

Like maybe you should continue to build in China to satisfy China demand, but can you build outside of China maybe to supply to the rest of the world? I know that this is easier said than done.

There are policy reasons that may stop you from doing that, but is anything you think from the business perspective that is preventing you from doing that, and why? Thank you.

There's certainly a lot of opportunity both within China and outside of China for us to consider that. As I said just now, we're looking to build more capacity in 2028 and beyond, which is going to be meaningful capacity expansion in 2028 and beyond.

As part of that plan, we are working closely with our customer base to understand the long-term requirements and aligning the plans globally, right? Our recent capital raise will be fundamental to expanding as we enter this next growth plan, which could include more capacity within China, potentially also capacity outside of China.

Yeah. I do want to add one point.

I know you don't want me to say this, okay. I tell you.

Important thing to answer to investors is that adding capacity versus able to deliver wafers is two different things. You're going to hear a lot of people is going to say, "I'm going to add capacity."

Look, indium phosphide, I tell you, is not easy. One question a lot of investors asking me is, "You're going to double your capacity.

Why don't you triple or quadruple? Our need is 10 times."

It's not easy.

Morris, that's a really good point. That's really why our focus on the next 2 years has been focused on Beijing,

and

increasing the capacity on our existing Beijing Tongmei site. That is the minimum risk that we can absolutely take to get wafers out, not just to increase capacity.

Not only that, it's also for the good of our customers. Their demand is so aggressive, the better way or the guaranteed way to satisfy that capacity, and we're working very hard to answer their demand, is to do now, okay?

Do we have other plans? You bet, we do.

We're stepping up, don't forget.

Thanks, Morris. Like I said, easier said than done.

Just felt like that's a question so common that I have to ask. Maybe last question.

You talk about 6-inch versus maybe 4-inch or below. What's the shipment or maybe shipment is a bad metric here, but what's in the backlog that you're seeing the mix between 6-inch and 4-inch or below right now?

Want to get some thoughts around that. If you can, also we kind of curious about the mix between iron-doped and sulfur-doped, that we know one is for laser, the other is for photodetector.

Want to get some thoughts on what's the mix, if expect a mix within that $100 million-plus backlog. Thanks.

That's the last question.

Okay. Iron-doped is coming up big time.

We used to see about 10 to 1 in favor of sulfur-doped prior to this. Right now, I would say the mix, especially the large diameter, is almost like iron-doped is 40%, 60%.

Correct, Tim?

Yeah. When we look at backlog and we look at customer demand over the next few quarters into next year and beyond, what we can see is there's still a lot of 3-inch out there, specifically for the laser.

Sulfur-doped is still going strong on 3-inch. There is a transition to 4-inch on n-type material for the laser, whereas the high-speed detector frankly has pretty much all transitioned to 4-inch already.

We're seeing still a lot of 3-inch coming along, a lot of transitioning over to 4-inch, and as we look into the future, of course, 6-inch is incredibly important and there's a lot of interest and a lot of opportunity out there for 6-inch. I'll say at this moment in time, a lot of the production that we're seeing and a lot of our capacity that we're seeing is still focused on the 3 and the 4-inch, with a longer-term plan to transition to 6-inch within the next probably year or so.

The signal is obviously very strong. A lot of customers are telling us, "Can we get more 4-inch?"

Okay. And 6-inch is actually a little bit more out, but people are warning us, "It's coming, it's coming," okay.

But 4-inch is real. I would say the ratio for 6-inch 3-inch and 6-inch right now is maybe 4 to 1 in favor of 3-inch.

I think going out in about 6 months to a year, it could be, as far as wafer number is concerned, it becomes probably 2 to 1 in favor of 3-inch. 3-inch is still the majority, the larger the numbers.

Because 4-inch is actually at a lower number right now, it's going to grow very rapidly in the coming quarters.

Thanks. Great color.

Appreciate that. Thank you.

Thank you, Charles.

Hi guys, thanks for letting me ask a couple questions here. Love to understand how do we think about the capex requirements here for these capacity builds?

You've talked about a brownfield one this year that's doubling, and then a greenfield one, I think that's going to happen in '28 or maybe in 2027 maybe going into '28 here that's more greenfield. Wonder if you could give us some numbers or at least some statistics to think about what that's going to require and over what period of time.

Okay. For this year, it's mostly adding high-tech growth equipment for crystal growth.

Furnaces, some back-end stuff for polishers. As Tim and Morris have said, we have an existing footprint.

That's one reason we think we have an advantage. Our current indium phosphide crystal growth site has room for more furnaces, and as Tim explained, we're repurposing our gallium arsenide crystal growth that was in Beijing for even more.

This year, compared to the future years, it's probably going to be $35 million in capex, maybe 30, maybe 40, somewhere in that range. To be honest, we'll spend as much as we can as fast as we can, because we're uniquely positioned to be able to add capacity quickly.

Next year, let's see. It's depend on which things we're talking about.

Tim, You've got it split up in your paperwork there, but.

I think as we go into next year and we look at building out this facility next door to us, obviously buying a new facility, doubling our capacity again there, and also building some capacity through our supply chains as well, I think we're looking somewhere in the region of about $100 million or so. Then beyond that, if we were to build a greenfield site somewhere else, I think we're looking at somewhere in the region of $220 to $250 million bucks.

Depending on obviously what capacity we put in that greenfield site. Again, I'm thinking if we're putting a meaningful capacity there, you're looking at $200-plus million.

Fair enough. Thanks for that detail here.

Want to ask on indium phosphide business here by geography. You made a couple interesting comments here.

Last call, you said China was going to grow by 60% this first quarter, and then you said it actually was up 100%, and if I caught you correctly, going to double again here in the second quarter. What kind of percentage of your indium phosphide business in the second quarter is China going to be?

That's a great question. I think we're seeing a lot of growth in China, and it's not just because we're seeing data center growth in China, but we're seeing China enter the global supply chain market for optical transceivers and potentially co-packaged optics as we go forward.

Again, remember, this is fully globalized, and a lot of those transceiver companies that manufacture their transceivers within China are driving to a Chinese supply chain of laser diodes and photodetectors. In Q2, we estimate that the Chinese demand is probably about 30% of the overall indium phosphide global market demand that we're seeing.

We're seeing that increasing certainly through Q3 and Q4 as well. As we get into Q4, it could even be as high as something pushing up to 40% share of the total indium phosphide market.

That is helpful, Tim. I'll ask one last question and jump out of line here, and that's on the topic of gross margins.

Gary, you've talked about in the past here with hoping to get to 35% with kind of an upside goal of looking at 40%. When you're talking about the pretty strong mix shift towards indium phosphide here, and even about price increases here, I would imagine you'd maybe help us think about whether that could go higher at some point in time.

I'm not asking for anytime soon, but are you looking for a kind of a ceiling of gross margins that get us above that 40% level? Thank you.

Internally as a management team, we're definitely going to be targeting something that begins with a four. It's far out, we don't know yet.

I'd still stick with my sense that somewhere in the 35% range is very, very reasonable. That's for the outside world.

It's a safe landing point. That doesn't mean that we're satisfied with it, and we think we can do better.

We need to get it further down the road and prove that first, so.

Okay. That's all I wanted to hear.

That's all for me, Gary. Thank you.

You're welcome, Richard. Good to hear from you.

Thank you, Tracy, and thank you all for participating in our conference call. We will be participating in the B.

Riley Securities 2026 Annual Investor Conference and the Craig-Hallum Institutional Conference in May, as well as the Northland Virtual Conference in June. We hope to see many of you there, and as always, feel free to contact us if you'd like to set up a call.

We look forward to speaking with you all in the near future. Thanks.