<PAGE>
                                                                   EXHIBIT 10.17


                                    AXT, INC.
                       CODE OF BUSINESS CONDUCT AND ETHICS

1. POLICY STATEMENT

         We are committed to being a good corporate citizen and it is our policy
to conduct our business affairs honestly and in an ethical manner. That goal
cannot be achieved unless each of our employees individually accepts his or her
responsibility to promote integrity and ethical conduct in all of his or her
activities. Activities that may call into question AXT's reputation or integrity
should be avoided. The provisions of this Code cannot anticipate every situation
that may pose an ethical or moral issue, and AXT understands that not every
situation is black and white. The key to compliance with the Code is exercising
good judgment. This means following the spirit of this Code and the law, doing
the "right" thing and acting ethically even when the law is not specific.

         Supervisors set an example for other employees and are often
responsible for directing the actions of others. Every supervisor is expected to
take necessary actions to ensure compliance with this Code, to provide guidance
and assist employees in resolving questions concerning the Code and to permit
employees to express any concerns regarding compliance with this Code. No one
has the authority to order another employee to act contrary to this Code.

         The Code outlines the broad principles of legal and ethical business
conduct under which we do business. The Code is intended to supplement, but not
to replace, our Employee Handbook and any policies that we have established.
Every person who works for AXT, its affiliates or subsidiaries, is expected to
understand and comply with the provisions of this Code.

         Violations of the Code of Business Conduct and Ethics, including
failures to report potential violations by others, will be viewed as a
disciplinary matter that may result in personnel action, including termination
of employment. If you believe that a violation of this Code of Business Conduct
and Ethics has occurred, please contact your supervisor, or the Chairman of our
Nominating and Corporate Governance Committee of the Board of Directors at
Chairman, Nominating and Corporate Governance Committee, c/o AXT, Inc., 4281
Technology Drive, Fremont, CA 94538. If you are concerned about maintaining
anonymity, you may also send correspondence to the Chairman of our Audit
Committee of the Board of Directors, in accordance with our Whistle-Blowing and
Complaint Policy, at the following address: Chairman of the Audit Committee of
the Board of Directors, c/o AXT, Inc., 4281 Technology Drive, Fremont, CA 94538.

2. COMPLIANCE WITH LAWS AND REGULATIONS

         AXT is committed to full compliance with the laws and regulations of
the cities, states and countries in which it operates. Numerous federal, state
and local laws and regulations define and establish obligations with which AXT,
its employees and agents must comply. Violation of governing laws and
regulations may subject AXT to significant risk of fines, penalties and damaged
reputation. All of our employees are expected to comply with applicable laws,
rules and regulations when performing duties for AXT. Under certain
circumstances, local country law may establish requirements that differ from
this Code, and in such situations employees should comply with all local country
laws. An employee or agent who violates laws or regulations in performing duties
for AXT risks individual indictment, prosecution and penalties, and civil
actions and penalties, and may subject AXT to the same risks and penalties. An
employee who violates these laws or this Code may be subject to immediate
disciplinary action, including possible termination of employment or affiliation
with AXT.

3. FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE

         It is of critical importance to AXT that all disclosure in reports and
documents that we file with the Securities and Exchange Commission be fair,
accurate, timely and understandable. You may be called upon to provide
information to assist AXT in these responsibilities consistent with your role
within AXT, and to assure that our public reports are complete, fair and
understandable. We expect all of our employees to take this responsibility

                                       1
<PAGE>



seriously, and to provide prompt and accurate answers to all inquiries made to
you in connection with the preparation of our public reports and disclosure.

4. SPECIAL ETHICS OBLIGATIONS FOR EMPLOYEES WITH FINANCIAL REPORTING
RESPONSIBILITIES

         Our Chief Executive Officer, Chief Financial Officer, controller and
other members of our Finance Department each bear a special responsibility for
promoting integrity throughout AXT. Our Chief Executive Officer and Chief
Financial Officer and other members of our Finance Department have a
responsibility to foster a culture throughout AXT as a whole that ensures the
fair and timely reporting of our financial results and condition. Because of
this special role, our Chief Executive Officer, Chief Financial Officer,
controller and other members of our Finance Department are bound by the
following Financial Officer Code of Ethics, and by accepting the Code of
Business Conduct and Ethics each agrees that he or she will:

         o        Act with honesty and integrity, including the ethical handling
                  of actual or apparent conflicts of interest between personal
                  and professional relationships.

         o        Comply with rules and regulations of federal, state,
                  provincial and local governments, and other appropriate
                  private and public regulatory agencies applicable to the
                  performance of his or her duties to AXT.

         o        Comply with our established accounting procedures, our system
                  of internal controls and generally accepted accounting
                  principles.

         o        Provide information that is accurate, complete, objective,
                  relevant, timely and understandable to ensure full, fair,
                  accurate, timely and understandable disclosure in reports and
                  documents that we file with, or submits to, governmental
                  agencies and in other public communications made by us.

         o        Respect the confidentiality of proprietary information
                  acquired in the course of his or her work except when
                  authorized or otherwise legally obligated to disclose.
                  Proprietary information acquired in the course of one's work
                  will not be used for personal advantage.

5. CONFLICTS OF INTEREST AND CORPORATE OPPORTUNITIES

         There are certain situations and activities that may create a conflict
between your interests and those of AXT. You should avoid any relationship,
influence or activity that would cause a conflict of interest, or appear to
cause a conflict of interest, with your duties and responsibilities at AXT. This
includes situations in which your personal, family or financial interests
conflict or appear to conflict with those of AXT. You should not take for your
own benefit opportunities discovered in the course of employment that you have
reason to know would benefit AXT. Sometimes a conflict of interest will develop
unexpectedly. If you feel that you have a conflict, actual or potential, you
should report the details to your supervisor. Although not all actual or
potential activity creating a conflict of interest is automatically prohibited,
you should disclose all details of the conflict to your supervisor, and if
possible obtain written approval from your supervisor before participating in
any such activity.

         Since it isn't always easy to spot potential conflicts of interests,
set forth below are some examples of actual or potential conflicts, although it
is not possible to list every possible potential conflict, and you are
encouraged to consult with your supervisor before taking action if you are
uncertain whether an activity may constitute a conflict of interest.

         o        you, or a member of your family, receive improper personal
                  benefits as a result of your position in AXT;

         o        you use Company's property for your personal benefit;


                                       2
<PAGE>


         o        you engage in activities that interfere with your loyalty to
                  AXT or your ability to perform Company duties or
                  responsibilities effectively;

         o        you work simultaneously (whether as an employee or a
                  consultant) for a competitor, customer or supplier;

         o        you, or a member of your family, have a financial interest in
                  a customer, supplier, or competitor which is significant
                  enough to cause divided loyalty with AXT or the appearance of
                  divided loyalty (the significance of a financial interest
                  depends on many factors, such as size of investment in
                  relation to your income, net worth and/or financial needs,
                  your potential to influence decisions that could impact your
                  interests, and the nature of the business or level of
                  competition between AXT and the supplier, customer or
                  competitor);

         o        you, or a member of your family, acquire an interest in
                  property (such as real estate, patent or other intellectual
                  property rights or securities) in which you have reason to
                  know AXT has, or might have, a legitimate interest;

         o        you, or a member of your family, receive a loan or a guarantee
                  of a loan from a customer, supplier or competitor (other than
                  a loan from a financial institution made in the ordinary
                  course of business and on an arm's-length basis);

         o        you divulge or use AXT's confidential information - such as
                  financial data, customer information, or computer programs -
                  for your own personal or business purposes;

         o        you make gifts or payments, or provide special favors, to
                  customers, suppliers or competitors (or their immediate family
                  members) with a value significant enough to cause the
                  customer, supplier or competitor to make a purchase, or take
                  or forego other action, which is beneficial to AXT and which
                  the customer, supplier or competitor would not otherwise have
                  taken; or

         o        you are given the right to buy stock in other companies or you
                  receive cash or other payments in return for promoting the
                  services of an advisor, such as an investment banker, to AXT.

         You should not give or receive valuable gifts, payments, special favors
or other consideration to or from customers, suppliers or competitors beyond
those extended in normal business, and you should not make payments or promises
to influence someone else's acts or decisions. You must observe all government
restrictions on gifts and entertainment, including the restrictions of the
Foreign Corrupt Practices Act, which makes it illegal to offer payment, promise
to pay, or authorize payment of any money, gifts, or things of value to any
foreign official, or any foreign political party, candidate or official, for the
purpose of (i) influencing any act, or failure to act, in the official capacity
of that foreign official or party; or (ii) inducing the foreign official or
party to use influence to affect a decision of a foreign government or agency,
in order to obtain or retain business for anyone, or direct business to anyone.

         Although we encourage you to participate in industry and civic
associations, you should be sensitive to possible conflicts with our business
interests, if, for instance, the association takes a position adverse to our
interests. As a general rule employees may not accept a position as an outside
director of any current or likely competitor of AXT.

6. REPORTING VIOLATIONS OF COMPANY POLICIES AND RECEIPT OF COMPLAINTS REGARDING
FINANCIAL REPORTING OR ACCOUNTING ISSUES

         If you become aware of conduct by an officer, director, employee or
contract worker which you believe in good faith is a potential violation of this
Code, you should notify your own or any other AXT supervisor, the Chief
Executive Officer, or the Chief Financial Officer as soon as possible. You
should also report any complaint or concern regarding AXT's accounting, internal
accounting controls, or auditing matters, or any concerns regarding


                                       3
<PAGE>


questionable accounting or auditing matters. Supervisors are required to refer
all reports of possible violations to the Chief Executive Officer, the Chief
Financial Officer or the Chair of the Audit Committee.

         All reports of complaints or concerns shall be recorded in a log,
indicating the description of the matter reported, the date of the report and a
brief summary of the disposition. The log shall be maintained by the Chief
Financial Officer and shall be reviewed periodically with the Audit Committee.
Allegations of violations of the Code should be made only in good faith and not
to embarrass or put someone in a false light. If you become aware of a suspected
or potential violation don't try to investigate or resolve it on your own.
Prompt disclosure under this Code is vital to ensuring a timely and thorough
investigation and resolution. You are expected to cooperate in internal or
external investigations or alleged violations of the Code.

         In response to every report made in good faith and subsequently
determined to concern activity outside the Code, AXT will undertake an effective
and thorough investigation, and if improper conduct is found, AXT will take
appropriate disciplinary and remedial action. Compliance procedures are set
forth in Appendix B to this Code. AXT will attempt to keep its discussions with
any person reporting a violation confidential to the extent reasonably possible
without compromising the effectiveness of the investigation. If you believe your
report is not properly explained or resolved, you may take your concern or
complaint to the Audit Committee of the Board of Directors.

         It is our policy that there be no intentional retaliation against any
person who provides truthful information to a Company or law enforcement
official concerning a possible violation of any law, regulation or Company
policy, including this Code. Persons who retaliate may be subject to civil,
criminal and administrative penalties, as well as disciplinary action, up to and
including termination of employment. In cases in which you report a suspected
violation in good faith and are not engaged in the questionable conduct, we will
attempt to keep our discussions with you confidential to the greatest extent
possible. In the course of our investigation, we may find it necessary to share
information with others on a "need to know" basis. No retaliation shall be taken
against you for reporting alleged violations while acting in good faith.

7. COMPLIANCE PROCEDURES

         o        Compliance Officer. The Corporate Compliance Officer is the
                  Chief Financial Officer. The Compliance Officer's
                  responsibility is to ensure communication, training,
                  monitoring, and overall compliance with the Code. The
                  Compliance Officer will, with the assistance and cooperation
                  of AXT's officers, directors and Supervisors, foster an
                  atmosphere where employees are comfortable in communicating
                  and reporting concerns and possible Code violations.

         o        Access to the Code. AXT shall ensure that employees, officers
                  and directors may access the Code on AXT's website. In
                  addition, each current employee will be provided with a copy
                  of the Code. New employees will receive a copy of the Code as
                  part of their new hire information. From time to time, AXT
                  will sponsor employee training programs in which the Code and
                  other Company policies and procedures will be discussed.

         o        Monitoring. Supervisors are the "go to" persons for employee
                  questions and concerns relating to the Code. Supervisors or
                  supervisors will immediately report any violations or
                  allegations of violations to the Compliance Officer.
                  Supervisors will work with the Compliance Officer in assessing
                  areas of concern, potential violations, any needs for
                  enhancement of the Code or remedial actions to effect the
                  Code's policies and overall compliance with the Code and other
                  related policies.

         o        Internal Investigation. When an alleged violation of the Code
                  is reported, AXT shall take prompt and appropriate action in
                  accordance with the law and regulations and otherwise
                  consistent with good business practice. If the suspected
                  violation appears to involve either a possible violation of
                  law or an issue of significant corporate interest, or if the
                  report involves a complaint or concern of any person, whether
                  employee, a stockholder or other interested person regarding
                  AXT's financial disclosure, internal accounting controls,
                  questionable auditing or accounting matters or practices or
                  other issues relating to AXT's accounting or auditing, then
                  the manager or investigator should immediately notify the
                  Compliance Officer, who, in turn, shall notify the Chair of
                  the Audit Committee. If a suspected


                                       4
<PAGE>


                  violation involves any director or executive officer or if the
                  suspected violation concerns any fraud, whether or not
                  material, involving management or other employees who have a
                  significant role in AXT's internal controls, any person who
                  received such report should immediately report the alleged
                  violation to the Compliance Officer and, in every such case,
                  the Chair of the Audit Committee. The Compliance Officer or
                  the Chair of the Audit Committee, as applicable, shall assess
                  the situation and determine the appropriate course of action,
                  including the conduct of an investigation, as appropriate.

         o        Disciplinary Actions. Subject to the following sentence, the
                  Compliance Officer, after consultation with the Manager of
                  Human Resources, shall be responsible for implementing the
                  appropriate disciplinary action in accordance with AXT's
                  policies and procedures for any employee who is found to have
                  violated the Code. If a violation has been reported to the
                  Audit Committee or another committee of the Board, that
                  Committee shall be responsible for determining appropriate
                  disciplinary action. Any violation of applicable law or any
                  deviation from the standards embodied in this Code will result
                  in disciplinary action, up to and including termination of
                  employment. In addition to imposing discipline upon employees
                  involved in non-compliant conduct, AXT also will impose
                  discipline, as appropriate, upon an employee's supervisor, if
                  any, who directs or approves such employees' improper actions,
                  or is aware of those actions but does not act appropriately to
                  correct them, and upon other individuals who fail to report
                  known non-compliant conduct. In addition to imposing its own
                  discipline, AXT will bring any violations of law to the
                  attention of appropriate law enforcement personnel.

         o        Retention of Reports and Complaints. All reports and
                  complaints made to or received by the Compliance Officer or
                  the Chair of the Audit Committee relating to violations of
                  this Code shall be logged into a record maintained for this
                  purpose by the Compliance Officer and this record of such
                  report shall be retained for five years.

         o        Required Government Reporting. Whenever conduct occurs that
                  requires a report to the government, the Compliance Officer
                  shall be responsible for complying with such reporting
                  requirements.

         o        Corrective Actions. Subject to the following sentence, in the
                  event of a violation of the Code, the manager and the
                  Compliance Officer should assess the situation to determine
                  whether the violation demonstrates a problem that requires
                  remedial action as to Company policies and procedures. If a
                  violation has been reported to the Audit Committee or another
                  committee of the Board, that committee shall be responsible
                  for determining appropriate remedial or corrective actions.
                  Such corrective action may include providing revised public
                  disclosure, retraining Company employees, modifying Company
                  policies and procedures, improving monitoring of compliance
                  under existing procedures and other action necessary to detect
                  similar non-compliant conduct and prevent it from occurring in
                  the future. Such corrective action shall be documented, as
                  appropriate.

8. PUBLICATION OF THE CODE OF BUSINESS CONDUCT AND ETHICS; AMENDMENTS AND
WAIVERS OF THE CODE OF BUSINESS CONDUCT AND ETHICS

         The most current version of this Code will be posted and maintained on
AXT's website. Any substantive amendment or waiver of this Code for executive
officers or directors may be made only after approval by a committee comprised
of a majority of AXT's independent directors and will be promptly disclosed to
shareholders.


                                       5