Backed by federal CHIPS funding and growing demand for AI infrastructure, a $650 million semiconductor and photonics manufacturing expansion has broken ground in Sherman, Texas, where Coherent and NVIDIA are expanding domestic production of indium phosphide semiconductors and optical networking technologies that enable high-speed communication across AI systems. The project will double manufacturing space and quadruple wafer production capacity at Coherent’s Sherman facility.
The expansion will double the site’s manufacturing space and quadruple wafer production capacity, significantly increasing U.S. output of indium phosphide (InP)-based semiconductors used in optical networking systems that connect AI chips, servers, and data centers. The Sherman campus is home to what Coherent describes as the world’s first and largest volume-production 6-inch indium phosphide manufacturing platform.
CHIPS and Science Act Funding
The project will receive up to $50 million in direct funding under the CHIPS and Science Act from the U.S. Department of Commerce. The federal support adds to approximately $20 million previously provided through the Texas Semiconductor Innovation Fund and the Sherman Economic Development Corporation.
New jobs
Company officials expect the expanded facility to create more than 1,000 jobs overall, including more than 550 direct positions in advanced manufacturing, engineering, and technical fields when the project reaches full capacity.
The groundbreaking ceremony brought together NVIDIA founder and CEO Jensen Huang and Coherent CEO Jim Anderson, alongside federal, state, and local officials, underscoring the growing importance of optical networking technologies in the rapidly expanding AI economy.
“AI factories are the infrastructure of the new industrial revolution. Connecting millions of GPUs into one thinking machine requires optical technology built for scale, speed, and energy efficiency,” Huang said. “Coherent has been an important NVIDIA partner for more than two decades, and its expanded InP manufacturing in Texas will help strengthen the U.S. supply chain for the AI infrastructure the world is racing to build.”
NVIDIA’s $2 Billion Commitment Strengthens Coherent’s Growth Plans
The Sherman expansion builds on a deepening relationship between the two companies. Earlier this year, Coherent and NVIDIA announced a multiyear strategic agreement that includes a $2 billion investment by NVIDIA to support research and development, future manufacturing capacity, and U.S.-based production, along with a multibillion-dollar purchase commitment for advanced laser and optical networking products.
For Coherent, the expansion represents a major step in scaling production of the photonic technologies that have become increasingly critical as AI systems grow larger and require faster, more energy-efficient communication between processors and computing clusters.
“AI is transforming our world and driving a new era of American manufacturing to build the infrastructure that will power the AI datacenters of the future,” Anderson said. “This investment expands America’s capacity to manufacture critical AI-enabling technologies, creates high-value jobs, and reinforces U.S. leadership in advanced manufacturing, photonics, and innovation.”
Unlike conventional silicon chips that perform computing tasks, indium phosphide semiconductors specialize in generating and transmitting light. These components are used in lasers, optical transceivers, and networking equipment that move enormous amounts of data across AI data centers at high speed and with lower energy consumption than traditional copper-based connections.
As AI models become larger and data centers continue to scale, optical networking has emerged as one of the most important technologies supporting the industry’s next phase of growth. The Sherman facility’s move to 6-inch indium phosphide wafers is expected to improve manufacturing efficiency and significantly increase production volumes needed for next-generation AI infrastructure.
U.S. efforts to strengthen domestic semiconductor manufacturing
The expansion also aligns with broader U.S. efforts to strengthen domestic semiconductor manufacturing and secure supply chains for strategically important technologies. While advanced processors often dominate discussions about AI, the optical components produced in Sherman form a critical layer of the infrastructure that allows those processors to communicate at scale.
The Sherman expansion joins a growing wave of U.S. semiconductor investments aimed at strengthening the domestic AI supply chain. While Intel’s $28 billion Ohio One campus in Ohio focuses on leading-edge logic chip manufacturing and Micron Technology’s proposed $100 billion semiconductor complex in Clay, New York, is set to dramatically expand U.S. memory chip production, Coherent’s Sherman facility specializes in indium phosphide photonics and optical networking technologies that enable AI chips and data centers to communicate at high speed. Together, the these projects represent complementary investments spanning compute, memory, and connectivity—the core building blocks of next-generation AI infrastructure.
With construction now underway, the Sherman campus is emerging as one of the nation’s leading centers for photonics and advanced semiconductor manufacturing, positioning Texas as an increasingly important hub in the rapidly expanding AI supply chain.
Factsheet: Coherent’s $650M Sherman AI Semiconductor Facility Expansion
Location: Sherman, Texas, USA
Project Owner: Coherent Corp.
Strategic Partner: NVIDIA
Project Type: Semiconductor and photonics manufacturing expansion
Investment Value: $650 million
Federal Incentive: Up to $50 million under the CHIPS and Science Act
State and Local Incentives: Approximately $20 million from the Texas Semiconductor Innovation Fund and the Sherman Economic Development Corporation
Facility Focus: Manufacturing indium phosphide (InP) semiconductors, lasers, optical components, and photonic devices used in AI infrastructure
Expansion Scope:
- Double manufacturing production space
- Quadruple wafer production capacity
- Expand cleanroom and wafer fabrication capacity
- Install additional advanced manufacturing equipment
Technology: 6-inch indium phosphide (InP) wafer manufacturing
Products:
- Semiconductor lasers
- Optical transceivers
- Photonic devices
- Optical networking components
- Compound semiconductors
Applications:
- AI data centers
- High-speed optical interconnects
- AI networking infrastructure
- Data transmission between GPUs, servers, and computing clusters
Employment Impact:
- More than 1,000 total jobs
- More than 550 direct advanced manufacturing, engineering, and technical positions
Key Partnership Development:
- NVIDIA and Coherent have collaborated for more than 20 years.
- NVIDIA recently announced a $2 billion investment in Coherent to support research and development, manufacturing expansion, and U.S.-based production.
Current Status: Groundbreaking completed, June 16, 2026; expansion underway.
Significance: The project expands U.S. manufacturing capacity for AI-enabling optical technologies and strengthens the domestic semiconductor and photonics supply chain.
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