China Securities Co., Ltd.: The optical fiber cable industry is entering a period of prosperity. Optimistic about the overseas opportunities for leading companies.

China Securities Co., Ltd. released a research report stating that since Q3 2025, the price of optical fibers in the Chinese market has continued to rise, reflecting improving demand and overall tight supply. Strong overseas demand and robust export performance reflect the strong demand in the global optical fiber cable market. The company expects that the demand for optical fibers brought by AI will continue to increase rapidly. Firstly, global demand for optical modules is expected to increase significantly in 2026, leading to an increase in demand for optical fibers. Secondly, it is expected that the demand for optical fibers will increase in 2027 due to Scale up. Thirdly, DCI will also bring a large amount of demand. Currently, the optical fiber cable industry has shifted from recovery to a stage of "tight supply and simultaneous increase in quantity and price." As a capital-intensive industry, the company expects that new production capacity will be difficult to add in the short term, therefore prices are expected to continue to rise, and the optical fiber cable sector is continuously recommended. Main points of the China Securities Co., Ltd. securities: CRU data shows that since the third quarter of 2025, the price of domestic G652D optical fiber has continued to increase on a month-on-month basis, reaching 31.5 yuan/core kilometer in January 2026, a 79% increase from November 2025, reflecting improving industry demand and overall tight supply. In 2025, China's optical fiber rod exports increased by 89.5% year-on-year in quantity and 81.7% in amount; optical fiber exports increased by 47.1% year-on-year in quantity and 65.4% in amount. The strong growth in exports reflects the strong demand in the global optical fiber cable market, with strong demand for overseas AI and the consumption of a large amount of G657 fibers in areas like battlefield unmanned drones. The company expects that the demand for optical fibers brought by AI will continue to grow rapidly: Firstly, considering that global demand for optical modules will continue to increase significantly in 2026, corresponding demand for optical fibers will also increase (mainly for Scale out). Secondly, it is expected that the demand for optical fibers from Scale up around 2027 may start, with Corning forecasting that the demand volume from Scale up will be 2-3 times that of existing enterprise networks; thirdly, Sacle Across will also bring a large amount of demand. Hollow core optical fibers have advantages such as low loss, low latency, low nonlinearity, and low dispersion. North American CSP manufacturers and domestic operators are actively deploying hollow core optical fibers. The market is concerned about the supply and demand pattern of optical fiber cables, fearing rapid supply growth after price increases. The company believes that: Firstly, manufacturers in the industry went through the prosperity brought by FTTH from 2016 to 2018, also experiencing the supply-demand imbalance from 2019 onwards and the pain brought by halving prices. This time, manufacturers' expansion will be relatively rational, as industry overall since 2020 has been in the process of clearing out, with few expansions. Secondly, the expansion cycle of optical fiber rods takes at least one year or more (new entrants need longer); thirdly, fiber products such as G654E, G657, multimode, and hollow cores have high technical requirements, which not all new entrants can quickly overcome. Overseas demand is strong, with a supply gap in North America. Focus on leading domestic companies breaking into the North American market The growth in optical fiber demand in the United States is faster than the growth in supply. With AI continuing to drive demand, a supply gap may appear. From 2023 to 2025, the difference between optical fiber supply and demand in the U.S. market was 0.28 billion core kilometers, 0.24 billion core kilometers, and 0.24 billion core kilometers, respectively, basically in a supply-demand balance state, while the growth rates of optical fiber demand in the U.S. market in the past two years have been 22.2% and 24.6%, faster than the growth rates of supply at 11.6% and 19.2%. Currently, major optical fiber suppliers in North America are Corning, Prysmian, Furukawa, and Hitachi, occupying the majority of the North American market, and their capacity utilization rates are already high, with slow expansions (Furukawa announced expansion in April 2025, but it will not be released until after 2028). With AI driving optical fiber demand, the U.S. market may face a supply gap, which will bring significant opportunities for leading domestic optical fiber cable companies to expand overseas. Risk warning: Optical fiber demand growth is lower than expected; optical fiber price increases are lower than expected; risks of fast-paced capacity expansion; complex international trade environment.