Summary of Fiber Optic Industry Conference Call Industry Overview - The fiber optic industry is experiencing significant changes driven by the development of AI and low-altitude drones, leading to increased demand for fiber optics. AI data centers consume fiber at a rate 10 times that of traditional data centers, with new technologies such as multimode, hollow, and multi-core fibers being widely adopted in AI data centers. Drones also utilize G652D fiber for anti-jamming communication, impacting production capacity [2][4]. Key Points and Arguments - **Fiber Product Types**: Fiber products are categorized into single-mode and multimode. Single-mode systems offer better performance but at a higher module cost, while multimode systems are cheaper. Prices for multimode cables like OM3, OM4, and OM5 are significantly higher than standard G652D single-mode fiber, which is commonly used by operators [2][5]. - **Importance of Optical Rods**: Optical rods are a critical part of the supply chain, as they are used to produce various types of fiber cables. China achieved self-sufficiency in optical rod production from 2010 to 2018, enhancing the domestic production rate and enabling companies like Yangtze Optical Fibre and Cable (YOFC), Zhongtian Technology, and Hengtong to compete internationally [2][6]. - **Market Dynamics**: In 2018, China Mobile's push for fiber-to-the-home led to a demand drop in 2019, causing a supply-demand imbalance. The pandemic in 2020-2021 resulted in increased overseas demand and domestic manufacturers leaning towards exports, which drove prices up. The collective procurement price rose from 40 RMB per core kilometer in 2021 to 65 RMB, with gross margins exceeding 20% [2][7]. - **Future Demand and Pricing**: Looking ahead to 2026, strong overseas demand and AI technology are expected to drive price increases. Exports have seen a year-on-year growth of 100%-150% as of October [3][8]. - **Production Capacity**: There is no imminent overcapacity in optical rod production, with major manufacturers capable of producing 1.1-1.3 million tons of optical rods annually, corresponding to over 300 million core kilometers of fiber. The overall capacity is currently in a tight balance [9][10]. - **Multimode vs. Single-mode Products**: Multimode products maintain high gross margins, with prices for OM4 and OM5 reaching 400-500 RMB per core kilometer and gross margins exceeding 30%. The demand for multimode fibers is expected to grow significantly due to the deployment of 800G modules [10][11]. - **Market Size and Growth Potential**: The fiber optic market is estimated to be worth at least 100 billion RMB, particularly in the FR (remote) and DR (data center) application sectors. AI-related demand is significantly boosting production utilization rates for companies like Corning and Fujikura in North America [12][13]. - **Trends in Hollow Fiber**: Hollow fiber is emerging as a clear industry trend, with prices significantly higher than standard products. It offers advantages such as lower experimental loss and reduced energy consumption, indicating a strong potential for large-scale commercial use if industrial capabilities keep pace [14]. Additional Insights - The operator market is showing signs of bottoming out, with expectations for price improvements in 2026 driven by non-operator markets and AI-related demand growth. Companies like YOFC and Zhongtian Technology have optimistic profit forecasts [15].

Core Viewpoint - The company is advancing its research and development in the low-altitude drone sector, specifically focusing on the "ducted fan" project in collaboration with Tsinghua University, and is moving towards industrial production [2] Group 1 - The company has established a wholly-owned subsidiary, Zhejiang Hanying Intelligent Propulsion Technology Co., Ltd., to promote the research and development of the "ducted fan" project [2] - The company is working on multiple scenarios for the "ducted fan" project products, indicating a diversified application approach [2] - Further updates on the project's progress will be provided through company announcements [2]