A recent research report from China Galaxy Securities indicates that the current price surge in optical fibers and cables is primarily driven by three emerging demand factors. The first is the interconnection demand arising from the large-scale construction of AI data centers. The second is the rapid volume increase in specialized application scenarios, such as fiber-optic drones. The third is the export demand fueled by the ongoing expansion of overseas infrastructure markets. These demands are substantial in scale and are accompanied by an evolution in product structure towards higher-end and specialized offerings, suggesting the optical fiber industry may be on the verge of a structural transformation.
The main viewpoints from China Galaxy Securities are as follows:
An analysis of the bidding results for China Mobile's 2026-2027 special optical cable centralized procurement project reveals a telling trend. Regarding the winning bid prices, seven out of the eight successful manufacturers submitted bids at the maximum price ceiling. This instance of procurement ceilings reaching new highs underscores that emerging demands are the key drivers behind the price increases.
The procured products were specialized optical cables, encompassing five types. These include special demand standard optical cables, special demand ribbon optical cables, air-blown micro cables, optical-electrical composite cables, and figure-8 self-supporting cables. The total procurement volume was approximately 79.4 thousand sheath-kilometers, equivalent to 3.131 million fiber-kilometers. The project set a maximum bid ceiling of 251.24 million RMB (excluding tax). The fact that most winning bidders opted for the ceiling price provides further evidence of a significant upward trend in optical fiber and cable prices.
From the demand perspective, the core drivers of the optical fiber industry have undergone a fundamental shift. Historically, industry growth was largely dependent on 5G base station construction and large-scale FTTH deployments, essentially addressing the basic need for "connectivity availability," with the three major telecom operators dominating the procurement market through their strong bargaining power. However, since 2025, global AI competition has spurred the construction of massive intelligent computing clusters. The demand for high-bandwidth, low-loss optical fibers for data center interconnects has surged, marking a formal industry transition from being "operator infrastructure-driven" to "AI computing power-driven."
Concurrently, fiber-optic drones have achieved scaled deployment in specific complex electromagnetic environments. Leveraging their technical advantages of anti-electromagnetic interference and high bandwidth, these drones transmit high-definition real-time images back to the operation center, enabling remote precision tasks. Such drones utilize G.657A2 specialty fibers, with a single drone consuming 20-50 kilometers of fiber as a disposable material, thereby creating a structural demand pull on the specialty fiber market.
Furthermore, emerging scenarios like industrial internet and vehicle-mounted fibers are opening up additional, diversified, and high-end demand growth opportunities.
On the supply side, the core factor pushing this round of price increases is a production bottleneck in optical fiber preforms. Preforms account for approximately 70% of the industry chain's profits, involve high technical barriers, and have a lengthy expansion cycle of 18-24 months. Following previous price wars and industry consolidation, capacity expansion has been limited, making it difficult for supply to keep pace with demand growth. Current global preform capacity is nearing full utilization. Under these capacity constraints, manufacturers are prioritizing the allocation of preform resources towards higher value-added specialty fibers, such as G.657.A2 and G.654.E, which squeezes the production capacity for standard G.652.D fibers and exacerbates the structural shortage. Overseas markets face similar challenges, with major players like Corning and Fujikura also constrained by long expansion cycles, making a short-term resolution to the supply gap unlikely.
In summary, prices for various types of optical fibers and cables are likely to see further increases in the near future. The profits generated from these price hikes are also expected to fund research and development into cutting-edge technologies like hollow-core fibers, potentially creating a virtuous cycle.
Risks include potential delays in capacity expansion and changes in the international landscape.
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