Economic Observer reporter Zheng Chenye

October 8th was the first trading day for A-shares after the National Day holiday. Fiber optic concept stocks weakened along with the optical communication sector, and Hong Kong stock Changfei Fiber (06869. HK) closed sharply lower. On September 28th, Changfei Fiber Optic (601869. SH), Hengtong Optoelectronics (600487. SH), Zhongtian Technology (600522. SH), and FiberHome Communications (600498. SH) collectively hit the limit down.

Fiber optic used to be an inconspicuous communication material, indispensable for home broadband and mobile networks, but its price has been hovering at a low level for many years. Since the beginning of this year, fiber optic prices have risen significantly. China Mobile (600941. SH) has centralized the procurement of ordinary optical cables from 2026 to 2027. The first round of bidding failed in July, and when the bidding was re opened in August, the maximum bidding price was raised by about 8.5%. In the results announced on September 4th, 17 out of 18 successful bidders quoted at the maximum bidding price. According to CRU, a commodity research institution, the price of this centralized procurement converted into optical fiber is about 81 yuan per core kilometer (per kilometer of a single optical fiber) (including tax), while in the previous round of centralized procurement in mid-2025, the price was less than 20 yuan.

On September 28th, the National Bureau of Statistics released the profit data of industrial enterprises above designated size in China from January to August 2026. Yu Weining, Chief Statistician of the Industry Department, explained that driven by the accelerated construction of computing infrastructure, the profit of the fiber optic manufacturing industry increased by 5.3 times, while the profit of high-tech manufacturing enterprises above designated size increased by 54.7% during the same period.

Fiber optic concept stocks have also become a popular sector in the capital market. According to a research report released by UBS on September 23, from the beginning of the year to the high point in June, the stock price of the domestic fiber optic sector has risen by more than 300%, and has since fallen by about 37%. UBS believes that the decline in stock prices is due to new entrants announcing large-scale expansion plans one after another, and investors are concerned about the oversupply of fiber optic and a significant drop in prices, which has also occurred at the end of previous upward cycles.

But after the stock price fell, fiber optic prices did not loosen. Several industry insiders told reporters that at the end of September, domestic GThe price of loose fibers (fibers that have not been made into optical cables) of ordinary single-mode fibers is still above 100 yuan per core kilometer, which has been maintained for more than a month and is not common in the past. In addition, in the fourth quarter of 2026, as the fiber optic cables purchased by telecom operators enter the centralized delivery period, the price of ordinary fiber optic cables will continue to rise.

Why has an inconspicuous communication material suddenly become scarce? The reporter learned during the interview that the incremental demand for fiber optic in this round mainly comes from domestic and foreign data centers, and overseas cloud vendors and operators have begun to lock in supply with long-term agreements. In addition, the speed of expansion cannot keep up with the construction of data centers. It takes time to build new fiber preform capacity (quartz glass rods used for drawing optical fibers), purchase key equipment, and obtain customer certification. According to the construction period disclosed by enterprises, most of the newly announced production capacity since the beginning of this year will not be completed until 2027 to 2028.

Incremental Demand

In the past, the demand for domestic fiber optic cables mainly came from three major operators: China Mobile, China Telecom (601728. SH), and China Unicom (600050. SH). Operators purchased fiber optic cables through centralized procurement based on their capital expenditure budget. Nowadays, operators' investments are beginning to tilt towards computing power networks, and China Mobile expects a 62.4% increase in computing power network capital expenditures by 2026.

Changfei Fiber also stated at its performance briefing on September 24th that the global fiber optic cable market has shifted from mainly relying on the telecommunications market to being driven by both telecommunications and data communication. According to the forecast data mentioned by the company at the briefing, from 2025 to 2030, the average annual growth rate of fiber optic demand in global data centers will be 20.74%, and the average annual growth rate of demand in the telecommunications market will be 2.47%.

Specifically for each GPU, Wei Wende, Chairman, CEO, and President of Corning Incorporated, a US fiber optic and specialty glass manufacturer, estimated at the 2026 Q2 earnings conference that in the horizontal expansion network (networking between servers in data centers), from NVIDIA's Hopper to Blackwell's two generations of GPUs, the number of fibers corresponding to each GPU will increase from 8 to 16. When the GPU cluster exceeds 130000, an additional layer of optical network is required, and the usage of optical products corresponding to each GPU will increase by about 50%. The connection inside the cabinet is the next increment. Wei Wende said that the vertical expansion network (high-speed interconnection between one or several GPUs in the cabinet) is currently connected by copper cables. If all connections are changed to optical connections, each GPU will require about 160 optical fibers. However, the actual solution will be a mixture of copper cables and optical connections, and the actual usage will be less than 160 fibers.

The growth rate of fiber optic demand also depends on the choice of technical solutions. Wei Wende mentioned that with the Rubin platform after Blackwell, as the single channel rate (transmission rate of each optical channel) increases, the number of fibers can remain unchanged. In addition, technologies such as bidirectional transmission and wavelength division multiplexing that allow one fiber to carry more signals can also reduce the demand for fiber count when bandwidth is increased.

However, Benoit Fleury, Business Development Director of Corning Optical Communications PCS (Optical Connectivity Solutions), told Economic Observer that the critical point of replacing copper cables with fiber optic cables in horizontal expansion networks has arrived, but in vertical expansion networks, replacing electrical interconnects with optical interconnects is still in its infancy.

Chen Hao, the Technical and Strategic Director of Corning Optical Communications in the Chinese market, also stated in an interview with reporters that it will become increasingly difficult to increase the single channel speed from 100G to 200G, and then to 400G. Continuing to increase speed comes at a high cost and consumes a lot of power. The simplest way to increase the number of channels is to increase the number of optical fibers.

Previously, cloud data centers or traditional data centers were replaced every 4 years, but now they are replaced every 2 years, or even every 1.5 years. The data volume needs to double, and other infrastructure also needs to keep up, "said Chen Hao.

Data centers also rely on fiber optic connections. Chen Hao introduced that in the past, the industry believed that AI data centers would be more concentrated in one park. With the increasing demand for electricity, overseas power supply is limited to some extent. Now, it is more inclined to build distributed computing power centers and connect them with high-speed optical networks, which is a new growth point for fiber optic demand in North America.

Chen Hao also mentioned that China is also building computing power networks, and operators are laying a large number of new optical fibers, especially GE-fiber (a type of optical fiber with lower loss and suitable for long-distance transmission). The optical cables used for data center interconnection have higher requirements for fiber density and attenuation.

Chen Ziyan, the business director of Corning Optical Communication Data Center in China, told reporters that China's vertical expansion network has moved from single cabinet to multi cabinet, and high bandwidth connections across cabinets are more suitable using fiber optic cables than copper cables, which has increased the demand for a large number of optical connections. He also stated that Corning remains optimistic about the construction of AI computing centers in the next two to three years, as the demand and construction scale of North American computing centers have significantly increased, and investment in Chinese computing centers is gradually increasing.

Domestic manufacturers are also gradually taking on large orders from data center customers. For example, Zhongtian Technology disclosed in its announcement in June that it won the bid for the centralized acquisition project of optical fiber connection products in a data center of a domestic Internet enterprise with an amount of about 1.518 billion yuan.

The fiber optic specifications used in data centers are higher and the prices are also more expensive. Li Xinru, the marketing director of a fiber optic manufacturer in East China, told the Economic Observer that at the end of September, the anti bending GA1 (commonly used for connecting cabinets in data centers) is still in short supply with a price of over 160 yuan per core kilometer. A2 is above 220 yuan. The price of E has remained above 300 yuan per core kilometer since July.

Ordinary fiber optics are also increasing in price. The reporter learned in the interview that with the same drawing capacity (heating and drawing fiber preform into optical fiber), G. can be producedThe efficiency of A2 is higher than that of producing GD (ordinary single-mode fiber) is lower, and manufacturers have shifted some of their drawing capacity to produce fiber for data centers, resulting in a tight supply of ordinary fiber. When the optical cables purchased by operators in the fourth quarter of 2026 are delivered, ordinary optical fibers will in turn occupy a portion of the drawing capacity, and prices will also rise accordingly.

Customers are now more concerned about whether they can receive the goods on time, and the price is actually behind, "said Chen Xinjian, the sales manager of a fiber optic enterprise in Shenzhen.

The practice of overseas manufacturers is to sign long-term agreements in advance. For example, Corning has partnered with Meta, Nvidia, Amazon, as well as US carriers Verizon and AT& T this year; T has reached a multi-year cooperation or supply agreement, in which the buyer and seller agree in advance on the supply for the next few years. The agreement with Verizon covers the period from 2027 to 2032, and the product is used for broadband expansion and long-distance backbone networks connecting AI data centers.

Domestic manufacturers have also begun to sign long-term agreements. For example, optical communication device and module manufacturer Changxin Bochuang (300548. SZ) disclosed in a July announcement that its controlling subsidiary has signed a long-term agreement with an overseas entity, with an expected sales amount of approximately 4.5 billion yuan, to be fulfilled until the end of 2030.

Expansion Time Difference

The market's concern about overcapacity had already occurred in the previous cycle. For example, in its 2019 semi annual report, Changfei Fiber Optic attributed the decline in performance to weak market demand, reduced orders due to the full release of the industry's expanded production capacity in recent years during the reporting period, and a significant drop in fiber optic cable prices. The company also believes that the first half of 2018 was the peak of the industry's previous upward cycle.

The production of optical fibers requires the production of fiber preform rods (i.e. optical rods), which are then drawn into fibers and made into optical cables. The bottleneck of the current round of expansion is in the production of optical rods. CRU pointed out in its market analysis released in February 2026 that China's optical rod production capacity appears to be sufficient on the surface, but after removing idle and old production capacity, the effective utilization rate is already very high. Many manufacturers are approaching their production capacity limit, and restarting idle production capacity will take several months. Some fiber optic factories without their own optical rods find it difficult to obtain stable supply.

The reporter reviewed the expansion announcements of relevant companies since the beginning of this year and found that most of the disclosed construction periods are between 1 and 2 years. Among the top manufacturers of Changfei Fiber Optic, Hengtong Optoelectronics, Zhongtian Technology, and FiberHome Communications, Hengtong Optoelectronics disclosed in its private placement plan released on the evening of September 24th that it plans to build an annual production capacity of 800 tons of optical rods at its existing base in Inner Mongolia; The optical stick project announced by FiberHome Communications in July has a construction period of 2 years.

Other manufacturers and new entrants are also expanding their production. Hangdian Corporation (603618. SH), a power cable and fiber optic cable enterprise, disclosed in July its light rod, quartz base material, and new fiber optic project with a construction period of 1.5 years; The fiber optic and rod project announced by laser processing equipment company Dazu Laser (002008. SZ) in June will be constructed in two phases, with the first phase not exceeding 12 months and the second phase not exceeding 24 months. After the project is completed, it will take some more time for equipment debugging and customer certification.

Several industry insiders told reporters that it is currently difficult to purchase key equipment for light rods and wire drawing. Wire drawing may not seem complicated, but parameters such as furnace temperature and wire drawing speed need to be accurately coordinated, and yield rates rely on experience to achieve.

UBS estimated in the aforementioned research report that Chinese manufacturers account for 60% to 70% of the global supply of optical sticks, and most of the top manufacturers' optical stick equipment is self-developed. The new production capacity may climb within six months. Enterprises without self-developed equipment need to purchase from South Korea and the United States, with delivery times exceeding one year. For new entrants, it takes at least three years from project initiation to effective supply formation, and the actual scale will be significantly smaller than the planned scale.

Overseas manufacturers are also expanding their production. According to Chen Ziyan's introduction, Corning's fiber optic production is expanding from preform to wire drawing, and connectors and complete solutions are also significantly expanding. In China, Corning has achieved local production of prefabricated rods, optical fibers, cables, and connectors, and its production capacity investment is also increasing.

According to the announced schedule, the addition of overseas production capacity came later. Japanese fiber optic cable manufacturer Fujikura announced in March that it will invest up to 300 billion yen in Japan and the United States to increase fiber optic and cable production capacity by up to three times its current level. The new plant at the Sakura factory is expected to start production in December 2030. Italian fiber optic cable leader Prysmian plans to invest 1.25 billion euros in expanding production by 2031, including the fiber optic link. The fiber optic production capacity in the United States will more than double.

Li Xinru believes that the top domestic manufacturers have long planned for this round of expansion, and some optical rod production capacity can be put into operation by the end of 2026, but the new production capacity will mainly be invested in special optical fibers and data center interconnection optical cables. In addition, after the previous cycle, the willingness of top manufacturers to expand their production capacity for ordinary fiber optic is not strong.

The reporter learned in an interview that by 2027, the demand for fiber optic cables in data centers may significantly increase, and leading manufacturers will receive more and more orders for data center interconnection. Currently, North America is in short supply of high core fiber optic cables, with thousands of fibers in one cable. Currently, E accounts for less than 10% of the shipments from the top few manufacturers, and may increase to over 20% by then. The gross profit of this type of fiber optic is much higher than that of ordinary fiber optic.

Changfei Fiber also stated at the aforementioned performance briefing that the capital expenditure of domestic and foreign computing power data centers still maintains a high intensity, and the industry is in an upward cycle. The company plans production capacity based on the long-term needs of strategic customers. At present, the supply and demand structure of the industry is healthy, and there is still a certain shortage of new prefabricated rods and fiber optic products required for computing power data centers. The capacity utilization rate of their main products is at a high level, and the specific product prices depend on the market supply and demand relationship, which is uncertain.

Industry cycles are always intertwined with shortages and surpluses, "said Zhuang Dan, Executive Director and President of Changfei Fiber, at the company's 2025 shareholder meeting. He expects that in the next three to five years, AI related computing infrastructure will continue to maintain high investment, and the duration of this round of fiber shortage depends on the balance between supply and demand.

Before the release of new production capacity, many industry insiders predict that fiber optic prices will rise slightly and last for a relatively long time. UBS also predicted in the aforementioned research report that fiber optic prices will continue to rise until 2027, but the rate of increase will slow down. From 2028 to 2029, the production capacity of second tier manufacturers and new entrants may be gradually released, and the newly added supply will first be concentrated in ordinary GD， At that time, optical interconnection is expected to enter the interior of cabinets on a larger scale, and the demand for high-performance optical fibers will increase.

Li Xinru also believes that after the release of new production capacity, the price of ordinary fiber optic cables will first loosen, but the fiber optic cables used in data centers will remain tight for a longer time. "If a big customer changes to a fiber optic supplier, they have to do certification from scratch, and high-end products cannot be made by anyone who expands production.

(Author Zheng Chenye)