AXT Inc saw its shares rise in premarket trading following disclosure of a multi-year supply deal between its subsidiary AXT-Tongmei and Coherent Corp. The firms formalized a Master Development and Supply Agreement that took effect on June 25 and covers the mass development and provision of 6-inch indium phosphide wafer substrates from AXT to Coherent through June 2029.
Under the contract terms, Coherent will make a $22.3 million prepayment to AXT. That prepayment will be drawn down against product purchases at prices the two parties agreed upon, until the prepayment has been fully applied to purchases.
The agreement obligates AXT to expand manufacturing capacity at its Beijing facility during a window spanning 2026 to 2028. The document also contains provisions that allow Coherent to obtain a refund of any portion of the prepayment that remains unused if the agreement expires or is terminated, subject to the conditions set forth in the contract.
There are explicit conditions linked to minimum ordering. If Coherent does not meet the minimum order quantity requirements specified in the agreement, the balance of the prepayment becomes nonrefundable and AXT would have the right to terminate the arrangement.
The contract also sets out mutual remedies tied to capacity performance. If AXT fails to meet its committed capacity for a period exceeding six consecutive months, Coherent can terminate the agreement and would be entitled to a refund of any unused prepayment. In addition, AXT has agreed that any capacity beyond the committed quantity will be offered to Coherent on the same commercial terms.
The companies disclosed the agreement in an 8-K filing on Thursday evening. The filing indicates the contract includes customary legal provisions addressing confidentiality, force majeure, indemnification, and representations and warranties.
Sectors affected: Semiconductor materials manufacturing, capital equipment supply chains, and electronic components markets.