The optical fiber cable industry welcomes recovery, driven by demand from offshore wind power and AI.

At the beginning of 2024, the fiber optic cable industry shows signs of recovery. In 2023, the industry experienced a downturn, mainly influenced by the slowdown in overseas telecommunications demand and the latency in domestic offshore wind power construction, leading to a significant compression of industry valuations. However, as domestic offshore wind power construction gradually recovers, overseas cable demand rises, and high-end optical fibers may break free from cyclical characteristics driven by artificial intelligence demand, the industry is expected to emerge from the trough and welcome a recovery.

The construction of offshore wind power in the country is accelerating its recovery. By the end of April 2024, a bidding announcement for a large offshore wind power project in Yangjiang, Guangdong was released, marking that the industry is emerging from the stagnation period affected by factors such as navigation channel issues. As a key component of offshore wind power construction, submarine cables are expected to fully benefit from the advancement of domestic offshore wind power construction due to the high entry threshold of the industry and a good competitive landscape. At the same time, domestic cable companies are gradually expanding into overseas markets with their technological advantages, and several leading companies have secured important projects in regions such as Europe. The dual benefits from domestic and international markets are expected to drive the offshore wind business out of its low period.

Driven by artificial intelligence, specialty optical fibers are becoming important components, and domestic substitution is ushering in a good opportunity. Traditionally, the global optical fiber market has primarily focused on standard optical fibers used in telecommunications and traditional data centers, with industry development closely related to the global telecommunications network construction cycle. However, with the rise in demand for artificial intelligence, high-end specialty optical fibers are encountering new development opportunities. AI specialty optical fibers mainly include polarization-maintaining fibers, doped fibers, and hollow fibers, which are used to maintain the polarization of light, long-distance high-precision transmission, and short-distance high-speed transmission, respectively. Currently, global AI computing power centers mostly use high-end optical fibers from overseas brands. Against the backdrop of rapidly expanding AI demand, Chinese leading companies in the optical fiber and cable sector with deep technological accumulation are expected to seize new supply chain opportunities.

Specialty optical fibers are devices that are few in number but high in value. Their production requires manufacturers to have comprehensive knowledge from raw materials, process design to manufacturing, with high technical barriers. Industry leaders who have experienced a complete industrial cycle are expected to fully benefit from the recovery of offshore wind power prosperity and technological innovations driven by AI and satellite communications. It is recommended to focus on companies such as Yangtze Optical Fibre and Cable, Hengtong Optic-Electric, Zhongtian Technology, and FiberHome Technologies. Attention should also be paid to emerging companies focusing on specialty optical fiber applications, such as Taicheng Light and Changying Technology. In the international market, noteworthy leading companies include Corning, Furukawa Electric, and Fujikura.

The risk factors to be aware of include AI development not meeting expectations, offshore wind power construction progress being lower than anticipated, and risks associated with technological iteration.