China Post Securities: Demand for AIDC in North America is Released Slowly Expanding Production Leads to Tight Supply and Demand Balance.

China Post Securities released a research report stating that the global optical fiber cable market has been in a downturn in recent years, with demand expected to recover starting in 2025. North America's demand accounts for over 25% of the market share, with a year-on-year growth rate of +17%. The bank predicts that external expansion and cross-domain expansion will be the main sources of demand in the short term, and expects incremental demand from upward expansion starting in 2027 due to the increase in CPO and OIO penetration rates. On the supply side, major domestic companies have not announced large-scale capacity expansion plans in the early stages of the current economic recovery cycle, but have focused on restoring existing production line utilization and upgrading structures. Therefore, large-scale uncontrolled production expansion is unlikely in the short term. China Post Securities' main points are as follows: Demand side: The global optical fiber cable market has been in a downturn in recent years, with demand expected to recover starting in 2025. CRU predicts that global demand will reach 5.77 billion core kilometers by 2026, with a 5% year-on-year growth rate. North America's demand accounts for over 25% of the market share, with a year-on-year growth rate of +17%. Ainvest predicts that AI-driven data centers will require over 10 times more optical fibers than traditional data center networks. AI is expected to drive demand for optical fiber cables in data centers and DCI networks. The bank predicts that external expansion (Scale-Out) and cross-domain expansion (Scale-Across) will be the main sources of demand in the short term, and upward expansion (Scale-Up) will bring incremental demand starting in 2027 due to the increase in CPO and OIO penetration rates. By 2030, Corning expects the Scale-Across market to reach $1 billion and Scale-Up to bring in $4-6 billion in new market value for the company. Supply side: In 2024, global optical fiber cable market share: Tier 1 companies (Corning 19%, Furukawa Electric 10.30%, Sumitomo 5.2%, Fujikura 3.1%) monopolize high-end optical fiber rods and specialized optical fiber patents, and are the main suppliers to North American data centers. Tier 2 companies (Yangtze Optical Fibre, Jiangsu Zhongtian Technology, Hengtong Optic-Electric, Fiberhome Telecommunication Technologies) have self-sufficiency rates of 70-100% for optical fiber rods, with significant cost and scale advantages, and continue to increase their overseas market share. The four leading overseas companies are currently operating at full capacity, with a slow pace of expansion for optical fiber rods/fibers. It is expected that there will be a continued tight balance between supply and demand. Fujikura predicts that it will not be able to increase production capacity until 2028, while Corning has reserved production capacity agreements with customers. North American suppliers have strong bargaining power under the combination of "rigid demand + limited capacity". In China, major companies have a deep memory of the lesson of "uncontrolled production expansion leading to price collapses" in the past, and have not announced large-scale capacity expansion plans at the beginning of the current economic recovery cycle. Instead, they are focused on restoring the utilization of existing production lines and upgrading structures, making large-scale uncontrolled production expansion unlikely in the short term. Price side: According to the latest market research from Optical Fiber Online, as of March 4th, the prices of various types of optical fibers have surpassed the industry's perceived "ceiling": the price of G.652.D single-mode fiber has increased from 18 yuan/km before New Year's Day to 85-120 yuan/km now, an increase of nearly 650%; the price of G.657.A1 single-mode fiber has increased from 23 yuan/km to 115-135 yuan/km, an increase of nearly 487%; the price of G.657.A2 single-mode fiber has increased from 35 yuan/km to 210-230 yuan/km, an increase of nearly 557%. Related stocks mentioned include Corning (GLW.N), Fujikura (5803.T), Furukawa Electric (5801.T), Sumitomo Electric (5802.T), Yangtze Optical Fibre And Cable Joint Stock (601869.SH), Jiangsu Zhongtian Technology (600522.SH), Hengtong Optic-Electric (600487.SH), and Fiberhome Telecommunication Technologies (600498.SH). Risk warnings: On the supply side, overseas manufacturers increase production faster than expected or Chinese manufacturers enter the North American supply chain more quickly; on the demand side, total Cloud Service Provider (CSP) Capex spending may be below expectations; on the technical side, advancements in CPO, hollow fiber, and other technologies may not meet expectations or may be replaced faster than expected; risks related to macroeconomic conditions, among others.