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Since 2015, the optical fiber and optical cable industry has maintained a high boom, and the demand continues to grow rapidly in 2018. The core issue of the industry trend focuses on the demand for optical fiber and optical cable after 2019. Through our top-down analysis, we find that there are four laws in the demand for optical fiber and optical cable:

Four point rule

1. The demand has increased year by year and never declined, reflecting the overall development of China's optical communication industry.

2. The year-on-year growth rate of demand showed a three-year small cycle fluctuation. The year-on-year growth peak appeared in 2003, 2006, 2009, 2012, 2015, 2018 and 2019.

3. The low growth rate in the small cycle is generally maintained at no less than 10%, indicating that in addition to centralized investment, there is a cornerstone demand for stable growth of optical fiber and cable.

4. The average compound growth rate of demand is very stable, basically showing a compound growth rate of about 25%. Behind it is the rapid and stable growth of the whole network traffic.

Based on the above four laws, it is estimated that the demand for optical fiber will be 430 million core kilometers in 2020, with a year-on-year growth rate of 12%, which is at the low point of small cycle.

From the perspective of total amount, without considering 5g construction, if China Mobile builds its backbone network + Metropolitan Area Network + FTTH network to the national coverage level of Telecom + Unicom in 2015, there is still a demand space of 340 million core kilometers of optical fiber and optical cable. By 2018, the coverage level of Telecom + Unicom will coexist in a demand space of 3.4 + 0.84 + 0.49 = 473 million core kilometers.

From the bottom-up analysis, from 2016 to 2019, the average number of cores of ordinary optical fibers and cables intensively purchased by China Mobile showed a gradual growth trend. In the latest round of centralized purchase, it has increased to more than 30 cores. This shows that among the new demands for optical fiber and cable, the demand from the end coverage of the access network (driven by the number of user coverage, consuming 2-12 core optical cables) accounts for a relatively low proportion and is continuing to decline. Therefore, the peak growth of mobile FTTH users has a limited impact on the total demand for optical fiber and cable.

Risk statement

The demand for optical fiber and optical cable continues to grow rapidly for several years, resulting in major suppliers planning to continue to expand production capacity. If the production expansion exceeds the expectation, it may lead to oversupply. Faced with 5g construction, operators have great pressure on capital expenditure, which may lead to a decline in demand. The development of wavelength division multiplexing technology and the price reduction of related optical communication equipment can further improve the unit optical fiber transmission capacity, so that less optical fibers and cables can be used to meet the traffic transmission demand.