China's Xiandao Tech Group is expanding its compound semiconductor substrate capacity in Quzhou, Zhejiang Province. According to a plan TrendForce reported on July 23, 2026, its subsidiary Zhejiang Xiandao Microelectronics Technology Co., Ltd. will invest a total of 2 billion yuan to produce 3 million gallium arsenide (GaAs) substrates and 3 million indium phosphide (InP) substrates a year. Combined, that comes to 6 million wafers a year, but the construction period runs three years, from August 2026 to August 2029. The company has been building out its site locally since 2023, and the 2 billion yuan is an additional expansion that uses existing facilities. The planned wafer count needs to be read separately from the volume that will actually be supplied.
Building up to 6 million wafers over three years
According to TrendForce, Zhejiang Xiandao Microelectronics will renovate and expand its existing manufacturing facilities and install equipment for crystal growth, precision polishing and defect inspection. The targets are 4- to 6-inch single-crystal GaAs and InP substrates. At completion, planned capacity is 3 million wafers a year for GaAs and 3 million a year for InP, intended for supply to makers of optical chips, optical modules and radio-frequency (RF) devices.
The equipment being introduced covers the process from crystal growth through precision polishing to pre-shipment defect inspection. Zhejiang Xiandao Microelectronics will need to tune these processes to produce substrates reliably to the dimensions and electrical characteristics its customers specify. This is not a business that is finished once the equipment is installed.
August 2029 is the end point of the announced construction period. It has not been stated that all equipment will reach planned capacity by that date. After adjusting crystal growth conditions, improving processing yields and completing qualification with each customer, shipment volumes would reasonably be expected to rise in stages.
The Quzhou site buildout began in 2023
An environmental impact report dated March 2025 and published by Quzhou City says Zhejiang Xiandao Microelectronics is a subsidiary of Guangdong Xiandao Rare Materials Co., Ltd., which was established in March 2023. The company has factories in Quzhou's Donggang and Gaoxin districts. In Donggang it launched the "New-Generation Semiconductor Materials and Devices Production Base Project" in April 2023 with a 2.5 billion yuan investment. After the product mix was changed, the environmental impact report for that project was approved on July 25, 2024.
The same report recorded four approved projects across the Donggang and Gaoxin factories as all under construction and not yet accepted as of March 2025. Separately, a Zhejiang provincial high-end new materials industry fund says it invested 2.205 billion yuan in 2023 and, together with Guangdong Xiandao Rare Materials, is developing an integrated circuit materials, high-end compound semiconductor and device module base in Quzhou with a total investment of 11 billion yuan. The plan called for operations to start in stages from the second half of 2024, with full operation expected in 2026.
The substrate project is not a plan to build a separate new factory from scratch outside this base. TrendForce states explicitly that it expands existing facilities, layering GaAs and InP crystal growth and processing equipment onto the buildings and infrastructure developed since 2023. Seen as the next step in turning earlier investment into volume substrate production, the use of the 2 billion yuan becomes easier to understand.
The main uses of GaAs and InP
GaAs and InP are both III-V compound semiconductors, but they excel in different applications. Xiandao Tech's official product information lists uses for GaAs substrates including RF devices for 4G and 5G base stations, satellite communications and Wi-Fi modules, as well as LEDs and high-efficiency solar cells. InP, by contrast, is used in high-speed optoelectronic devices such as lasers, photodiodes, modulators and optical amplifiers. Inside an optical module, it is the material for components that convert between electrical and optical signals.
Product sizes are not identical either. Xiandao Tech handles GaAs in 2- to 8-inch sizes and InP in 2- to 6-inch sizes, while the Quzhou project targets 4 to 6 inches for both materials. However, the share of 4-inch versus 6-inch products within the 3 million wafers a year has not been disclosed.
A 6-inch-diameter circle has 2.25 times the area of a 4-inch one. Even for the same 3 million wafers, a different size mix would significantly change the amount of crystal processed and the number of devices obtainable downstream. The "6 million wafers a year" figure, adding GaAs and InP, therefore indicates the scale of the equipment plan, but it is not a direct measure of material supply or device-equivalent capacity.
What to watch before 2029 to judge supply capacity
What the public information does not yet reveal is the production ratio of 4-inch to 6-inch wafers and the yields by product. Progress on customer qualification and the ramp-up curve for each year have also not been disclosed. Xiandao Tech's official product information says it offers low-dislocation InP substrates for demanding optoelectronic applications. Even if the planned wafer count is met, actual supply for optical communications will not grow unless the company can produce stably to the specifications customers require.
In its official information, Xiandao Tech says it is vertically integrated from metals through precursors and wafers to specialty components. The expansion falls within the company's scope of business, which links metals to wafers in-house. Vertical integration, however, is not a mechanism that bypasses yield improvement or customer qualification.
The first question is whether construction begins on schedule in August 2026. After that, the points to check are yields after construction is complete, the mix of 4-inch and 6-inch products, customer qualification and the actual mass-production pace. Only when these become concrete by August 2029 can the 2 billion yuan investment plan be judged to have turned into supply capacity for optical communications and RF.