An analysis by Guolian Minsheng points out that the current uptrend in the optical fiber and cable industry is essentially the result of a combination of "inevitable trends and opportunistic catalysts." The "inevitability" lies in the fact that after years of capacity rationalization, the industry's supply structure has significantly improved, while the construction of AI data centers, the global digitalization process, and network upgrades constitute solid, long-term demand support. The "opportunistic" factor is marked by industrial catalysts such as major international technology companies signing large-scale, long-term orders (for instance, Meta's procurement agreement with Corning valued at up to $6 billion), which have accelerated the manifestation of supply-demand imbalances, driving spot shortages, extended production lead times, and pushing prices into an upward trajectory. Against this backdrop, the industry is entering a new cycle of prosperity driven by demand and characterized by rigid supply. From an investment perspective, the focus should be on leading optical fiber and cable companies directly benefiting from volume and price increases, optical module manufacturers at the forefront of technological iteration, and liquid cooling solution providers emerging alongside the demand for high-density computing power. AI demand is accelerating the formation of a supply gap for optical fiber. The report indicates that the optical fiber and cable industry is entering a critical phase of reshaping its supply and demand structure. According to reports, the current market supply is showing signs of tension, with high-quality optical fiber products from leading companies experiencing spot shortages and some order lead times extending to several months. The reversal in the industry's supply-demand balance is primarily driven by two factors: on the supply side, years of continuous capacity rationalization have significantly reduced inefficient supply; on the demand side, a confluence of factors including AI data center construction, global network upgrades, and overseas market expansion has ushered in a concentrated upward cycle. In terms of industry characteristics, optical fiber and cable exhibit typical cyclical features, with demand closely tied to the pace of communication technology iteration and network construction investment. Looking back at its development, from 3G commercialization and "Broadband China," to 4G and Fiber-to-the-Home (FTTH), and then to large-scale 5G deployment, each wave of communication technology upgrade has propelled optical fiber demand to a new level. Concurrently, leading domestic companies have effectively smoothed out industry cyclical fluctuations by actively exploring overseas markets. It is noteworthy that the capacity construction cycle for optical fiber preforms, the core raw material for fiber manufacturing, is as long as about two years, often leading to periodic mismatches between industry supply and demand. During the recent industry adjustment period spanning about two years, several companies with production capacities reaching tens of millions of core kilometers have exited the market, and multiple medium-sized manufacturers have also postponed or canceled preform expansion plans. This has led to a substantive clearing out of inefficient capacity, laying the supply-demand foundation for a new cycle of prosperity. Global AI data center construction is driving a demand explosion. The report states that the structural growth in optical fiber demand is being driven by a dual dynamic in both domestic and overseas markets. Domestically, the national "AI+" strategy is propelling AI data centers into a phase of large-scale construction; simultaneously, overseas markets, particularly North America, are experiencing a boom in the construction of hyperscale AI data centers, with operators accelerating the deployment of "AI factories," collectively leading to tightening global optical fiber supply. A significant development is the historic shift in the North American market structure, where the data center market size has surpassed that of the traditional telecom market for the first time. Mike O'Day, head of Corning's optical fiber business, pointed out that meeting robust demand has become the industry's primary challenge, noting that Meta's data center project in Louisiana alone requires approximately 8 million miles of fiber. Since 2025, data center construction has continued to reshape the structure of optical fiber demand. On one hand, the rapid expansion of AI training clusters requires high-density optical fiber interconnection within data centers. On the other hand, the clustered development of hyperscale data center campuses is spurring a new wave of demand for Data Center Interconnect (DCI) construction. These application scenarios impose higher performance requirements on optical fibers, including low-loss designs, higher specification bend-insensitive fibers (such as G.657.A1/A2), and optical cable structures with ultra-high core counts. Consequently, data center-related demand is becoming the core driver for technological upgrades and scale growth in the optical fiber and cable industry. The challenge of balancing supply for AI and telecom markets. In their continuous efforts to optimize network speed, latency, throughput, and energy efficiency, data center operators are driving a sharp increase in demand for high-performance optical cables for internal links, data center interconnects, and backbone network upgrades. The growth rate in this area has significantly outpaced that of the traditional telecom market. Demand created by emerging applications, represented by artificial intelligence, is profoundly reshaping the supply-demand dynamics and industrial ecosystem of the traditional telecom market. From the perspective of the domestic market, this trend presents a dual impact: on one hand, the large-scale construction of AI data centers is generating strong demand for optical fiber resources, which may objectively exert some pressure on the traditional telecom market demand; on the other hand, China's three major telecom operators still maintain stable annual procurement volumes in the tens of millions of core kilometers, with China Mobile's demand reaching the hundred-million core kilometer level, forming the fundamental business support for leading domestic optical fiber companies represented by Yangtze Optical Fibre and Cable, Hengtong Optic-Electric, FiberHome Technologies, and Zhongtian Technology. In this context, manufacturers that can actively engage in technological innovation and business expansion centered on data center and AI demands are poised to enhance their capacity utilization and optimize unit costs by expanding customer coverage and supply scale. Leveraging superior product performance and comprehensive service capabilities, these companies will further consolidate their existing advantages in the telecom market, achieving synergistic growth across cycles and domains.
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