Fiber optic cable industry is now exceeding the supply chain

This overcapacity that began in the second half of 2012 finally wakes up China's fiber optic cable companies. In the semi-annual financial report of 2013, several major listed companies took overcapacity as the primary impact of the company and were presented in the financial statement. Reversing the previous steady increase in income and profits, this time they have either experienced a decline in income or they have not achieved satisfactory profits.

Tongding Optoelectronics revenue fell by over 10%, Hengtong Optoelectronics lost a one-time dividend of RMB 90 million, its profit dropped sharply, Fenghuo Communication's profit increased slightly, and Zhongtian Technology’s revenue and profit increased by nearly 20% year-on-year. The decline in profit margins, the only special information that claims profit growth of nearly 60% year-on-year, was not due to the growth of the cable market. It was mainly due to the 61.5% stake in Guangxi Jiguang, the electrolytic aluminum business. In the 2012 financial report, several cable companies still achieved revenue and profit growth of more than 12% in the winter of the entire communications industry. Hengtong Optoelectronics achieved a 35% profit growth.

At the beginning of this year, the prices of fiber-optic collectors have been renewed to new lows in recent years, and excess capacity has exacerbated the fierce price war.

Expansion cannot stop

Just a year ago, China's optical fiber cable industry once welcomed its first price increase in nearly eight years. Now, this is mainly due to the industrial stimulus brought about by the broadband China strategy. The demand for betting by most fiber optic cable companies has increased by 50% to 100%. It now appears that the price increase at that time is like the return of the dream of the shortage of optical fiber.

This proved to be a dream of Huang Xia a few months later. Broadband China’s strategy has always been without substantive policies. However, at the end of 2012, the price of fiber-optic collectors reached a new low, and in 2013, the price of China Telecom’s convergent fiber-optic cables was refreshed. Year records. In this market that is already fully mature and free to compete, falling prices can only indicate that supply exceeds demand.

However, what's embarrassing is that the capacity expansion of fiber-optic companies is still lingering, and there are even many new players entering this market. The overcapacity was caused by the blindness of everyone at the time, but today we have been unable to stop. A senior optical fiber industry analyst told reporters: In this market where the core competitiveness is similar and the company does not have bargaining power, only the scale cost and the price will be scrapped.

In 2013 National Day, the first 7.5 million core fiber drawing project in Shandong Province will be officially put into operation. This project, which is invested by Pacific Fiber Optic Cable Co., Ltd. with a total investment of 380 million yuan, is known to make up for the gap in Shandong Province. However, 100% of the people in the industry have received bad reviews. The more they have pulled, the more they lose.

At the same time, mainstream manufacturers did not stop the pace of expansion. According to statistics from Shenyin Wanguo, Hengtong Optoelectronics' capacity in 2013 is expected to increase by 30% to 30 million core kilometers, and Zhongtian Technology's production capacity will increase by 40% to 20 million core kilometers. Tongding Optoelectronics will increase its production capacity by more than 250% to reach 25 million to 30 million core kilometers. It is now the second-largest fly in the world and has also expanded production.

A long-flying optical fiber cable executive told reporters: Optical fiber production capacity may exceed 185 million core kilometers, exceeding the market demand of 40 million core kilometers. Unless market demand increases by 30%, excess capacity will be unstoppable. But this is basically unrealistic. At this stage, broadband cannot significantly increase the demand for optical fibers, and the construction of LTE will also give priority to upgrading existing sites. It is not as obvious as the previous 2G and 3G upgrades to the market. A fire communication expert expressed this view: In 2013, we couldn't see the end of excess capacity.

The advantages of the whole industry chain are not obvious

In addition to achieving a certain price advantage by relying on the cost of scale, leading companies in optical fiber and cable companies have all played a stick, fiber, and cable integration strategy, hoping to win the advantages of the entire industry chain. However, at present, this strategy is extremely unsatisfactory.

At present, the domestic fiber optic cable still follows the 7:2:1 law. The entire fiber optic cable industry profits, 70% concentrated in the optical fiber preform industry, 20% of the affiliated fiber, and the remaining 10% of the home fiber optic cable. Before 2010, China's optical fiber preforms basically relied on imports, and over 50% of imports were from Japan. After 2010, Hengtong Optoelectronics, Zhongtian Technology, Fiberhome Communications, Faer Sheng [-0.75% Capital Research], Zhongli and other companies have independently studied optical fiber preforms, and the huge import fees paid annually to foreign companies are gradually returning to China. CRU, a well-known cable consulting company, predicts that by the end of 2013, China's light bars will be self-sufficient.