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China's optical fiber manufacturers have experienced explosive growth in recent years. Since the 3G licensing in 2009, Chinese firms have rapidly expanded after the telecom bubble burst in 2000. They've managed to outcompete foreign giants and now hold over 70% of the domestic market share. As China became the world's largest fiber market, local manufacturers have climbed to new heights. According to industry data, half of the top ten global fiber producers are Chinese.
Beneath the surface, however, there are growing concerns. While the market appears booming and companies are expanding aggressively, some experts warn that the industry is heading toward severe overcapacity and fierce price competition. In the first half of this year, many Chinese fiber companies reported declining revenues or slower-than-expected profit growth. A case in point is Xinmao Technology, which saw a 36% increase in fiber revenue and a 165% rise in net profit in 2012 due to large-scale expansion. But by the first half of 2013, its telecom services revenue dropped by 31%, and it even suffered losses in the third quarter. The dream turned into a harsh reality—was the wolf really coming, or had they moved too fast?
CRU, a respected market research firm, recently issued an alert. It pointed out that due to delays in major telecom infrastructure projects, China’s fiber market growth fell short of expectations in the third quarter. Growth was mainly driven by emerging markets like Latin America and Africa, with a 13% increase in the first nine months of the year. Once considered an emerging market, China has grown into a massive player. In 2012, China accounted for nearly 50% of global fiber shipments, making it the world’s largest producer and seller of optical fiber.
However, at a recent industry summit, experts warned about overcapacity in the Chinese fiber sector, limited supply of core technologies, and challenges in new product development. This year, overcapacity is expected to reach 50%, leading to falling prices and reduced profitability. With CRU sounding the alarm, Chinese manufacturers may face short-term difficulties. Even Corning, a global leader in optical fiber, reported a sharp drop in sales, especially in North America and China. By 2013, China’s fiber capacity reached 180 million core kilometers, far exceeding demand. Where will the excess go?
4G is seen as the next big opportunity. For fiber companies struggling with declining revenues, 4G offers a potential revival. The construction of 4G base stations, their connections, and interlinking require significant amounts of fiber. Moreover, 4G uses higher frequency bands, resulting in smaller coverage areas and more base stations, thus increasing fiber demand compared to 3G. With 4G licenses expected soon, China is set to enter a wave of 4G construction. The initial rollout of 207,000 4G base stations by China Mobile alone could bring substantial business opportunities. Recent bids, such as China Telecom’s first 4G station auction reaching nearly 170,000 yuan, show strong interest. With China Unicom also expected to invest heavily, 4G construction is likely to drive fiber demand in the coming years.
Beyond 4G, fiber manufacturers are exploring new applications like fiber-based security systems, sensing technologies, and data center solutions. At the 2013 China Everbright Expo, companies like Hengtong Optoelectronics and Changfei showcased these innovations. Additionally, many firms are investing in core technologies, such as optical fiber preforms, aiming for greater self-sufficiency. Companies like Hengtong and Fiberhome are shifting focus to this area.
Domestically, there is still room for growth, but the international market represents a much larger opportunity. Markets in Latin America, Africa, Russia, India, and Southeast Asia offer promising expansion prospects. With the right timing and conditions, Chinese manufacturers are now well-positioned to go global. Leading firms like Hengtong and Fiberhome have already started expanding overseas. Going international is not just a way to absorb excess production, but also a path to becoming stronger and more competitive on the global stage. After years of success in the domestic market, Chinese fiber companies are now stepping onto the global stage, ready for a new round of competition.