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The current status of the fiber optic cable industry

Time:2020-06-30 Views:1552
"China‘s optical fiber production capacity is twice the demand." An industry source revealed this information after objectively analyzing market demand. Relevant data shows that the current production capacity of my country‘s optical fiber is about 500 million core kilometers, while the actual market demand is more than 200 million core kilometers, and the production capacity is twice the demand.
        Another view is that the double argument exaggerates the facts. "According to the actual production capacity, the demand for fiber in the entire Chinese market is about 200 million core kilometers, and the excess capacity is about 100 million to 120 million core kilometers."
        Whether the production capacity is twice or 1.5 times the demand, China‘s overcapacity of optical fiber and cable is an indisputable fact. This serious surplus is the most important and fundamental reason for the price war of China Mobile‘s optical cable centralized procurement in 2019.
        After experiencing growth in the past two years and excessive capacity expansion, the industry is faced with the situation of overcapacity, slowing demand growth, declining shipments, price reduction by operators, and severe competition. Although in the long run, this will benefit the development of the entire industry, but the short-term difficult status quo is difficult to change, and the industry‘s valuation will be suppressed.
        The domestic optical fiber and cable industry has formed a complete industrial chain system including optical rod manufacturing, optical fiber drawing and optical cable manufacturing. It also has a leading position in the global market. However, one of the most fatal problems in the fiber optic cable industry is that the downstream customers are too concentrated. The customers in the industry are mainly the three major operators, the government and some Internet companies. Among them, China Mobile, China Telecom, China Unicom, the three major operators of fiber optic cable demand accounted for about 80% of total domestic demand. Therefore, operator demand has a significant impact on the fiber optic cable industry. This has caused the industry to be very cyclical on the one hand, and demand fluctuates with the operator‘s network construction; on the other hand, the three major operators are always in a strong position due to excessive reliance on the three major operators without pricing power. China Mobile‘s centralized procurement price reduction is the most direct manifestation. Moreover, due to the relatively low barriers to fiber drawing and cable manufacturing, the total number of domestic fiber and cable companies has reached more than 150, and operators have sufficient choices. Therefore, the situation of fiber and cable manufacturers being suppressed by operators is unlikely to change in the short term.
        In terms of quantity, referring to China Mobile‘s historical centralized mining situation, a total of 177 million core kilometers were collected in 2017; the demand for half a year in 2018 was 110 million core kilometers, and the scale of China Mobile‘s centralized mining is about 105 million core kilometers. What‘s more, this scale is the usage in the whole of 2019. Compared with the centralized procurement in 17 and 18 years, China Mobile‘s fiber demand in 2019 has dropped by 50%.
        In fact, after the double-digit growth in 2016 and 2017 in the entire fiber optic cable market, the growth rate in 2018 has slowed significantly by only 4%. Under the guidance of the policies of "Broadband China" and "Optical Into Copper", China has vigorously built home broadband fiber access networks since 2015, which has brought China‘s fiber optic cable industry a golden three years, 2016 and 2017 industries This is the reason for the high growth. As of April 2018, my country‘s optical fiber coverage rate reached 87.5%, and there is not much room for future penetration. Therefore, the future increase in fiber demand depends mainly on the construction of 5G.
        However, due to the fact that my country‘s fiber optic cable laying in the 4G period is relatively saturated, the incremental demand in the 5G period is not as much as expected. CRU estimates that the global and Chinese optical cable demand will reach 617 million core kilometers and 355 million core kilometers by 2021, 3-4 times that of 4G. Although absolute demand is still growing, the overall 5G demand has only grown at an average annual compound rate of 5%, and it is no longer possible to achieve double-digit growth in 16 and 17 years.
        Therefore, based on the above analysis, when my country‘s fiber penetration rate is close to the ceiling and the demand for 5G fiber is not as elastic as the demand for broadband fiber, the peak of the entire industry has passed, and the growth rate will slow significantly in the next three to five years.