CITIC SEC: It is expected that the market size of submarine cables will have a CAGR of 13% from 2025 to 2030. Bullish on leading enterprises.

CITIC SEC released a research report stating that submarine cables are laid at a depth of 8,000 meters underwater to connect data centers in different regions globally, enabling high-speed information transmission with high barriers to entry in the industry. Driven by AI, internet giants are increasing investments in submarine cable construction; the development of deep-sea technology in China, as mentioned in the government work report, is expected to boost the demand for submarine cables for ocean observation. It is estimated that from 2026 to 2030, the global newly built submarine cable length will be about 540,000 kilometers, a 60% increase compared to the planned construction length from 2021 to 2025. The CAGR of the submarine cable market from 2025 to 2030 is estimated to be 13%. It is expected that China will lead more submarine cable projects in the future, with the competitiveness of domestic submarine cable companies continuously strengthening and the outlook positive for industry leaders. The main points of view from CITIC SEC are as follows: - Submarine cables connect data centers in different regions globally to facilitate high-speed information transmission. - Submarine cables are key media for connecting global data centers and transmitting information. According to Hengtong Optic-Electric's official website, 95% of international data is transmitted through submarine cables. According to TeleGeography, at the end of 2025, over 600 submarine cables will be in operation globally, with a total length of about 1.6 million kilometers. Submarine cable systems mainly include cables, optical amplifiers/repeaters, and subsea branching units, laid at a depth of 8,000 meters, with high requirements for pressure resistance, leak prevention, etc., belonging to a high technological barrier industry. Driven by AI and deep-sea technology, it is estimated that 1.6 million kilometers of new submarine cables will be built globally from 2026 to 2040, with a compound annual growth rate of 13% from 2025 to 2030. The demand for submarine cables is driven by factors such as: 1) AI driving data and information transmission - Meta has planned a global submarine cable project of 50,000 kilometers; 2) Deep-sea technology promoting the accelerated development of ocean observation and other areas directly driving the demand for submarine cables; 3) Replacement demand for submarine cables with a 25-year lifespan. According to TeleGeography, it is estimated that 1.6 million kilometers of new submarine cables will be built globally from 2026 to 2040, with approximately 540,000 kilometers added from 2026 to 2030, about 490,000 kilometers added from 2031 to 2035, and around 570,000 kilometers added from 2036 to 2040, representing 60%/44%/68% growth compared to 340,000 kilometers added from 2021 to 2025. The global submarine cable market space is forecasted to be 14.4 billion yuan in 2025 and 26 billion yuan in 2030, with a corresponding CAGR of 13%. The number of submarine cable projects led by China is expected to increase, and the competitiveness and market opportunities of domestic submarine cable companies are continuously improving. According to the China Academy of Information and Communications Technology, by the end of 2024, Chinese companies had jointly invested in and built 17 operational international and Hong Kong-Macao-Taiwan submarine cable systems. In terms of submarine cable construction, Chinese companies have participated in over 130 key projects domestically and internationally, installing over 70,000 kilometers of submarine cables. Due to Chinas late entry into the global submarine cable sector and fewer projects led by Chinese investments, in recent years, with the rich experience in projects and the improvement of the submarine cable and repeater industry chains, Chinese-led submarine cable projects are expected to significantly increase in the future. The China Academy of Information and Communications Technology predicts that from 2023 to 2028, 153 new submarine cable systems will be built globally, with a total length of about 770,000 kilometers, and Chinese companies are expected to participate in 77 submarine cable systems, with a cable length of about 345,000 kilometers. Risk factors include: AI computing power development not meeting expectations; cost reduction not meeting expectations; trade risks and risks of exporting overseas; submarine cable construction falling short of expectations; and risks of declining profitability due to intensified industry competition.