China Galaxy Securities has released a research report stating that, as export control policies tighten, the supply of germanium—a key raw material for optical fiber preforms—remains constrained. Combined with long expansion cycles, the persistent supply gap is expected to support a steady rise in preform prices. At the same time, accelerated AI infrastructure development is driving higher demand for optical fibers, which in turn strengthens expectations for fiber price increases and is likely to sustain an upward trend in industry prosperity. Recommended companies to watch include YOFC (601869.SH, 06869), Zhongtian Technology (600522.SH), FiberHome Telecommunication Technologies (600498.SH), and Hengtong Optic-Electric (600487.SH). The main points from China Galaxy Securities are as follows:
Export controls on germanium are tightening the supply of upstream materials for optical fibers. Germanium, in the form of ultra-high purity germanium tetrachloride, serves as a core dopant in optical fiber preforms, enhancing the refractive index of the fiber core and reducing transmission loss. According to USGS data, global proven reserves of germanium resources total 8,600 tons, primarily distributed in the United States, China, and Russia. The U.S. accounts for 45% of global reserves, while China holds 41%. Germanium is widely used in high-tech fields such as optical fibers, infrared technology, and space photovoltaics, as well as in national defense. In accordance with an August 2023 announcement by China’s Ministry of Commerce and General Administration of Customs, export controls on germanium-related items took effect from August 1, 2023. Furthermore, under the 2026 Directory of Dual-Use Items and Technologies Subject to Import and Export License Administration, germanium-related items fall under export control as dual-use goods, requiring strict licensing and contributing to a continued tightening of global supply.
Long expansion cycles for optical fiber preforms and a persistent supply gap reinforce the upward price trend. Optical fiber preforms represent the high-value, high-technology segment of the optical fiber and cable industry, accounting for approximately 70% of fiber cost. Due to high technical barriers and lengthy expansion timelines—typically 1.5 to 2 years from construction to stable mass production for a single production line—supply shortages remain a key constraint. Following industry consolidation, few large-scale capacity expansions have taken place, and manufacturers are prioritizing higher-margin specialty fiber products, leading to increasingly tight supply. The inability of preform capacity to quickly respond to demand results in a sustained gap. Meanwhile, rising costs across the optical fiber supply chain—including higher prices for raw germanium, extended delivery times for imported precision equipment, and fluctuating energy prices during production—further support the logic for rising preform prices.
Accelerated AI computing construction is driving a notable recovery in the optical fiber industry's prosperity. The sector is entering an upcycle, with demand driven by the expansion of AI data centers and overseas markets, leading to increased demand for specialty fibers such as reduced-diameter fibers, bend-insensitive fibers, and hollow-core fibers. Globally, CRU reports indicate that worldwide demand for optical fiber and cable is expected to grow 4.1% year-on-year in 2025, while demand for data center fiber and cable is projected to surge 75.9% year-on-year. Chinese optical fiber and cable manufacturers have strengthened their international presence, securing multiple bidding projects in regions such as the Middle East, Latin America, and Europe, thereby reinforcing their position beyond traditional Asian markets. With advantages in scale, technology, and cost, Chinese fiber producers are poised to benefit from growing demand aligned with AI computing investments over the next 2 to 3 years, as well as from the eventual adoption of 6G networks, supporting continued industry recovery.
Risk factors include potential delays in capacity expansion, weaker-than-expected product demand, increased industry competition, and uncertainties in the international landscape.
Comments