Core Viewpoint - The article discusses the significant increase in fiber optic cable prices since early 2026, driven by demand from AI data centers, a shortage of raw materials, and the rising need for fiber optic drones [4][5]. Group 1: Price Trends - Fiber optic prices have surged unexpectedly, with G.652.D single-mode fiber rising from 18 yuan/km before New Year to 85-120 yuan/km, and G.657.A2 increasing from 35 yuan/km to 210-230 yuan/km [4]. - Successful procurement cases show a rapid increase in market prices, with a recent project in Chongqing seeing the maximum response price for a specific fiber optic cable rise to 350 yuan/km [4]. Group 2: Demand Drivers - The demand for high-end fiber optics is being driven by the need for high-speed data transmission in AI data centers [5]. - The supply of fiber preform is tight, with leading Chinese companies operating at full capacity, and the production expansion cycle is lengthy, typically taking 1.5 to 2 years [5]. - Fiber optic drones are contributing to demand, offering advantages such as anti-interference communication and high bandwidth, which further elevates fiber prices [5]. Group 3: Market Response - Companies in the overseas fiber optic industry are responding positively to the market growth driven by AI data centers, with stock prices of Corning, Furukawa Electric, Sumitomo Electric, and Fujikura increasing significantly [6]. - Corning has secured a $6 billion fiber supply agreement with Meta to support its data center expansion, indicating strong market demand [6][7]. - Major North American telecom operators like AT&T and Verizon are investing heavily in expanding their fiber networks to meet the demands of the AI era, with AT&T planning to invest over $250 billion in the next five years [7].

Investment Rating - The report assigns an "Overweight" rating to the industry, indicating a projected performance that exceeds the Shanghai and Shenzhen 300 Index by more than 15% [4]. Core Insights - The demand for optical fibers is surging due to the increasing use of fiber-optic drones, which are replacing traditional FPV drones in military applications, particularly in the Russia-Ukraine conflict. This shift has led to a significant price increase for optical fibers supplied from China to Russian cable manufacturers [2][29]. - The unique technology of fiber-optic drones allows for high-capacity, secure, and interference-resistant communication, fundamentally transforming the operational capabilities of drones in complex environments [7][14][25]. Summary by Sections 1. Rise of Fiber-Optic Drones - Fiber-optic drones are emerging as a new solution to traditional communication challenges faced by drones, offering superior bandwidth, interference resistance, and data security [7][14]. - The technology enables two-way information exchange between drones and ground control, significantly enhancing operational efficiency [8]. 2. Innovation on the Russia-Ukraine Battlefield - Traditional FPV drones are becoming less effective due to advancements in electronic warfare, prompting the deployment of fiber-optic drones by Russian forces to maintain operational advantages [19][23]. - The fiber-optic drones are designed to operate effectively in high-electromagnetic-interference environments, preserving their operational capabilities [25]. 3. Surge in Fiber Demand and Benefits for Domestic Manufacturers - The reliance of Russian cable manufacturers on Chinese optical fiber supplies is increasing, with prices rising sharply due to heightened demand driven by military applications [29][30]. - The market for optical fibers is experiencing a significant upward trend, with prices for G.652.D single-mode fibers reaching historical highs, reflecting the robust demand from both military and civilian sectors [30][34].

Core Viewpoint - The report from GF Securities indicates a significant increase in the price of G.652.D single-mode optical fibers in China, with prices exceeding 40 yuan per core kilometer in January 2026, marking a nearly seven-year high, driven by strong demand from both data centers and telecommunications sectors [1] Demand Side - The demand for optical fibers and cables is rapidly increasing due to the growth of data centers and special products, with a notable recovery in telecommunications demand [2] - AI data center demand is driving both volume and price increases for optical fibers and cables, with applications in data center ScaleOut scenarios leading to growth in transmission channels and fiber counts [2] - The ongoing Russia-Ukraine conflict is generating substantial demand for fiber optic drones, with deployment expected by mid-2024, further boosting demand [2][3] Supply Side - The production capacity of optical fiber preforms remains high, but AI and special products are encroaching on traditional G.652.D fiber capacity [4] - The majority of global optical fiber preform capacity is controlled by leading domestic, Japanese, and American manufacturers, and current production levels are at full capacity, making it difficult to alleviate supply constraints in the short term [4] - The introduction of high-value products like G.657.A1 and G.657.A2 fibers is expected to further strain traditional fiber production capacity, as these products share production lines with G.652.D fibers but have higher technical demands [4] Investment Recommendations - The report suggests focusing on the optical fiber and cable sector due to improving supply-demand dynamics and the potential for high-value product development [4] - Companies such as Yangtze Optical Fibre and Cable (601869.SH), Hengtong Optic-Electric (600487.SH), Zhongtian Technology (600522.SH), and FiberHome Technologies (600498.SH) are highlighted as key players to watch in this sector [5]

Core Viewpoints - The communication industry is expected to enter a new prosperity cycle due to significant improvements in supply and demand relationships, particularly in the fiber optic cable sector [1][14]. Industry Overview - In January 2026, the average price of G.652.D single-mode fiber in China exceeded 40 CNY per core kilometer, reaching a seven-year high, with some manufacturers quoting prices as high as 50 CNY per core kilometer. The price increase in January alone exceeded 75% [7][14]. - Demand is surging from data centers and special products, with a notable recovery trend in telecom demand. AI data center requirements are driving both volume and price increases for fiber optic cables, as they are widely used in data center scale-out scenarios [15][16]. - The ongoing Russia-Ukraine conflict has led to a rapid increase in demand for fiber optic drones, with deployment expected by mid-2024. These drones typically require fiber optics as consumables, indicating a significant demand increase [15][16]. Supply Dynamics - The utilization rate of optical preforms remains high, with AI and special products occupying traditional G.652.D fiber production capacity. The production of optical preforms is the longest cycle in the fiber optic cable industry, and most capacity is controlled by leading domestic and international manufacturers [16]. - The production capacity of major fiber optic manufacturers is currently at full capacity, making it difficult to alleviate supply-demand imbalances in the short term, which is likely to keep prices high [16]. Investment Recommendations - The report emphasizes the importance of the improving supply-demand relationship in the fiber optic cable sector and the layout of high-value products. Both data communication and telecom demand are expected to benefit fiber manufacturers, with prices likely to continue rising in the short term [17]. - There is a significant increase in demand for fiber optics from data centers in North America, Europe, and the Middle East, with domestic manufacturers expected to gain market share due to limited capacity from existing overseas suppliers [17]. - The report suggests focusing on leading companies in the fiber optic cable sector, including Yangtze Optical Fibre and Cable Joint Stock Limited Company, Hengtong Optic-Electric Co., Ltd., Zhongtian Technology Co., Ltd., and FiberHome Technologies Group [17].