According to a research report from GF SEC, data from the China Electronic Components Association indicates that the average price of G.652.D single-mode fiber in the Chinese market exceeded 40 yuan per core kilometer in January 2026, reaching its highest level in nearly seven years, with some manufacturers quoting prices as high as 50 yuan per core kilometer. The market price surged over 75% in January alone. Demand from both data communications and telecommunications sectors is strengthening, which is expected to further benefit fiber optic manufacturers. Significant demand growth for data center fiber in North America, Europe, and the Middle East, combined with capacity constraints among existing overseas suppliers, is likely to boost the market share of domestic Chinese manufacturers. These products offer strong profitability and are expected to deliver favorable profit elasticity. The main viewpoints of GF SEC are as follows:
On the demand side, data center and specialized product segments are experiencing rapid growth, while telecommunications demand shows a clear recovery trend. Demand from AI data centers is driving increases in both the volume and price of optical fibers and cables. In terms of volume, optical fibers and cables are widely used in Scale-Out scenarios within data centers. As transmission rates and supporting optical modules are upgraded, the number of transmission channels and fiber cores in cables is also increasing. Future Scale-Across and Scale-Up scenarios are expected to open additional growth markets for optical fibers and cables. Regarding pricing, improved supply-demand dynamics in the industry are pushing up prices for data center fibers such as G.657.A1 and multimode fibers, while also spurring demand for higher-value products like small-diameter, ultra-low-loss, and hollow-core fibers. According to C114 Communication Network, Meta signed an agreement with Corning on January 28 to invest $6 billion in AI data center fiber cables between 2026 and 2030, underscoring the sector's robust growth prospects.
The Russia-Ukraine conflict has generated substantial demand for FPV drones. According to Reference News, fiber-optic drones began deployment in mid-2024, with demand growing rapidly. Typical operational range for fiber-optic drones is 10 to 20 kilometers, with some models capable of exceeding 30 kilometers. The fiber used is considered a consumable, leading to significant incremental demand. Beyond the conflict-related needs, procurement and stockpiling demands remain strong.
Telecommunications demand is stabilizing and recovering. With upcoming tenders from domestic operators, demand is expected to rise alongside the replacement of aging lines and increased needs for inter-provincial and metropolitan network interconnections.
On the supply side, production utilization rates for fiber preforms remain high. Demand from AI and specialized products is crowding out capacity traditionally allocated to G.652.D fibers. Fiber preforms represent the segment with the longest expansion cycle in the optical fiber and cable industry chain. Due to high technical barriers, the majority of global preform capacity is controlled by leading Chinese, Japanese, and American manufacturers. According to the China Electronic Components Association, the top four Chinese fiber optic leaders and major overseas manufacturers are currently operating at full capacity. The tight supply-demand balance is unlikely to ease in the short term, supporting sustained high industry prices.
AI and specialized products are diverting capacity away from conventional fibers. Data center G.657.A1 fibers and drone-use G.657.A2 fibers are single-mode products that can share production lines with G.652.D fibers. Rising demand from AI and specialized applications is squeezing out traditional supply. Additionally, G.657.A series products involve higher technical complexity and lower drawing efficiency, consuming more capacity for the same specifications compared to G.652.D fibers. While some idled production lines could be restarted and process improvements could yield minor capacity gains, overall market supply remains constrained by upstream preform availability and cannot increase significantly in the short term.
Investment recommendations highlight the improved supply-demand dynamics in the fiber optic cable sector and the strategic positioning in high-value products. Demand from both data communications and telecommunications is strengthening, which should further benefit fiber manufacturers. The lengthy expansion cycle for the preform-fiber-cable supply chain suggests prices may continue to rise in the near term. Growing demand for data center fiber in North America, Europe, and the Middle East, amid limited capacity from overseas suppliers, presents an opportunity for domestic manufacturers to gain market share. These products are highly profitable and offer attractive earnings flexibility. The industrialization of hollow-core fiber is accelerating, with potential CSP order changes expected in the near future. Recommended stock focuses include leading sector players: Yangtze Optical Fibre and Cable (601869.SH, 06869.HK), Hengtong Optic-Electric (600487.SH), Zhongtian Technology (600522.SH), and FiberHome Telecommunication Technologies (600498.SH).
Risks to consider include potential shortfalls in AI infrastructure construction, slower-than-expected development of AI applications, changes in import-export policies related to AI technology, and a reduction in international cooperation.
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