Summary of Fiber Optic Cable Industry Conference Call Industry Overview - The conference focused on the fiber optic cable and submarine cable industry, highlighting recent developments and market performance [1] - The analysis included a review of historical cycles in the fiber optic cable market, particularly the significant cycles from 2015 to 2018 and the smaller cycle starting in late 2021 [1][2] Key Points and Arguments Historical Cycles - The first major cycle (2015-2018) was driven by the 4G rollout and increased fixed network construction by China Mobile, leading to a surge in demand due to a traffic explosion [1][2] - After this cycle, the market faced a downturn characterized by declining demand and oversupply, resulting in severe price wars and industry consolidation until 2020-2021 [2][6] - A smaller cycle began in late 2021, primarily driven by increased demand from overseas operators post-COVID-19, particularly in the US and Europe, which implemented infrastructure spending to enhance broadband capacity [2][3] Current Market Dynamics - The current cycle is marked by a significant price increase in the fiber optic market, particularly in the scatter fiber segment, which saw prices rise from approximately 25-30 CNY to over 50 CNY in early 2023 [9][10] - The global fiber optic market size was approximately 5.5 billion core kilometers, with China accounting for about 2.5 billion core kilometers and the US around 850-900 million core kilometers [10][11] - The demand structure is shifting, with non-telecom markets (data centers and special applications like drones) now accounting for over 20% of the market, compared to over 90% previously dominated by telecom operators [15][16] Price Trends and Supply Dynamics - The price of fiber optic cables has seen significant fluctuations, with a notable drop of around 70% during the oversupply period in 2020, followed by a recovery in 2021 [7][8] - The current price increase is attributed to a combination of rising demand from data centers and drones, alongside a rigid supply due to limited capacity expansion by major manufacturers [18][19] - Concerns exist regarding potential capacity expansions by second-tier manufacturers, which could disrupt the current price stability if they react to the increased prices [25][26] Operator Dynamics - Telecom operators, who have significant bargaining power, are hesitant to raise prices despite rising costs, as they have not benefited from the AI-driven demand surge seen in data centers [23][24] - The operators' reluctance to increase procurement prices could lead to a delay in price transmission from the retail market to the operator market [25] Other Important Insights - The fiber optic industry is characterized by long product lifecycles, with fibers typically lasting over 20 years, contrasting with the shorter lifespans of semiconductor products [5] - The market is experiencing structural changes, with a growing emphasis on data center and special application fibers, indicating a potential shift in investment focus for manufacturers [14][15] - Analysts express a cautious optimism regarding the market's future, acknowledging the potential for continued price increases while also highlighting the risks associated with supply dynamics and operator pricing strategies [27] This summary encapsulates the key insights and developments discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the fiber optic cable industry.

Core Viewpoint - The report from CITIC Securities indicates a sustained increase in fiber optic prices in the Chinese market since Q3 2025, reflecting strong demand and tight supply conditions. The global demand for fiber optic cables is robust, driven by overseas demand and AI-related applications, leading to a recommendation for continued investment in the fiber optic sector [1]. Group 1: Price Trends and Demand - Since Q3 2025, the price of domestic G652D fiber has consistently increased, reaching 31.5 yuan per core kilometer in January 2026, a 79% increase from November 2025, indicating a favorable industry demand and tight supply [1]. - In 2025, China's optical fiber exports increased by 47.1% in volume and 65.4% in value, while optical preform exports rose by 89.5% in volume and 81.7% in value, reflecting strong global demand for fiber optic cables [1]. Group 2: Future Demand Projections - The demand for fiber optics is expected to grow rapidly due to AI and other factors, with significant increases in global optical module demand anticipated in 2026, which will correspondingly boost fiber demand [2]. - By around 2027, the demand for fiber optics is projected to scale up significantly, with Corning estimating that this demand could be 2-3 times that of existing enterprise network business [2]. Group 3: Supply Dynamics - The North American market is experiencing a supply gap, with fiber demand growth outpacing supply growth, leading to potential shortages as AI continues to drive demand [3]. - The supply-demand balance in the U.S. market is projected to show deficits of 0.28 million core kilometers in 2023, 0.24 million in 2024, and 0.24 million in 2025, indicating a tightening market [3]. - Major suppliers in North America, such as Corning and Prysmian, are operating at high capacity utilization rates and are expanding slowly, which may create significant export opportunities for leading domestic fiber optic companies [3].

Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained rating) [1] Core Insights - Google Cloud announced a price increase for global data transfer services, with North American rates doubling from $0.04/GiB to $0.08/GiB, while European and Asian rates increased by 60% and 42% respectively [2][6] - Amazon raised the price of its machine learning EC2 capacity block instances, with the p5e.48xlarge instance price increasing from $34.61 to $39.80 per hour, reflecting a 15% increase [2][13] - The expansion of computing infrastructure is driving an increase in AIDC leasing prices, with the MRR Per Cab rising from $1,877 in Q1 2018 to $2,436 in Q3 2025, a 29.8% increase [19] - The demand for CPUs is increasing due to AI agents, leading to a rise in CPU prices, particularly for the Intel Core i7 Alder Lake model, which has seen significant price increases since January 2026 [24] - The AI sector is reshaping the demand structure for optical fibers, with a clear upward price trend for G652D fibers, which have seen price increases over two consecutive quarters [42][47] - The global market for optical modules is expected to grow at a CAGR of 22% from 2024 to 2029, driven by strong demand from AI applications and cloud service providers [54] Summary by Sections Data Transfer Services - Google Cloud's price increase for data transfer services will take effect on May 1, 2026, with North American rates doubling [3][6] Machine Learning Instances - Amazon's price adjustment for the p5e.48xlarge instance reflects strong demand and rising costs, marking a significant shift in the pricing trend for cloud services [13] AIDC Leasing Prices - Equinix's MRR Per Cab has shown a consistent upward trend, indicating a recovery in the AIDC leasing market [19] CPU Demand and Pricing - The rise in CPU demand is attributed to the increasing complexity of AI tasks, leading to higher prices for key CPU models [24] Optical Fiber Market - The optical fiber market is experiencing a recovery in demand, particularly for G652D fibers, with prices showing a positive trend [42][47] Optical Module Market - The optical module market is projected to expand significantly, driven by AI and cloud service demands, indicating a robust growth trajectory [54]

Group 1 - The core viewpoint of the news highlights the strong performance of AI computing power, particularly in the optical module CPO and optical communication sectors, with significant market gains observed [1] - As of 10:15, the 5G Communication ETF (515050) surged by 3.69%, while the AI-focused ChiNext ETF (159381) rose by 3.28%, indicating robust investor interest in these sectors [1] - The price of domestic G652D optical fibers has been steadily increasing since Q3, driven by overseas AI demand, leading to an 87.78% year-on-year increase in China's optical rod exports from January to November 2025 [1] Group 2 - LightCounting's latest report predicts that the optical module market will exceed $23 billion by 2025, with demand for many products, including optical modules, currently outpacing supply by twofold or more [1] - CITIC Securities remains optimistic about the AI computing power sector, noting that the demand for computing power is strong and the competition is ongoing, with a focus on both North American and domestic supply chains [1] - The domestic supply chain is expected to benefit from increased production capacity and the release of H200, which may accelerate the deployment of AI computing infrastructure [1] Group 3 - The ChiNext AI ETF (159381) tracks the ChiNext AI Index and has a significant weight in optical module CPOs, with the top three holdings being Zhongji Xuchuang (26.62%), Xinyi Sheng (19.35%), and Tianfu Communication (5.05%) [2] - The 5G Communication ETF (515050) focuses on the 5G communication theme index, with major holdings in companies like Zhongji Xuchuang and Xinyi Sheng [2] - The Cloud Computing 50 ETF (516630) tracks a cloud computing index with a high AI computing power content, covering various sectors including optical modules, data centers, and AI servers [2]

Core Viewpoint - The domestic G652D fiber optic prices have been steadily increasing since Q3 2023, indicating strong industry demand and tight overall supply, with robust overseas demand and export performance [1] Group 1: Export Performance - China's optical fiber rod exports from January to November 2025 saw a year-on-year increase of 87.78% in volume and 77.36% in value; optical fiber exports increased by 48.74% in volume and 63.37% in value [1] - The growth rate has notably accelerated since October 2023, reflecting strong global demand for optical fibers and cables [1] Group 2: Market Demand Drivers - Strong growth in exports is attributed to robust global demand, particularly from the AI sector, with Corning's Enterprise Network business in North America experiencing year-on-year growth of 106%, 81%, and 58% from Q1 to Q3 2025 [1] - The demand for G657 fiber is also driven by applications such as battlefield drones, which consume significant amounts of this type of fiber [1] Group 3: Future Demand Projections - The demand for optical fibers is expected to continue growing due to the anticipated increase in global optical module demand, projected to rise significantly through 2026 [1] - There is an expectation that the demand for optical fibers will scale up by 2027, with Data Center Interconnect (DCI) also contributing to substantial demand [1] Group 4: Industry Outlook - Concerns about the supply-demand balance in the optical fiber and cable market persist, but it is believed that manufacturers will approach capacity expansion more rationally compared to the imbalances seen in 2019 [1] - The current demand recovery, coupled with rising prices, may lead to both profit and valuation increases for leading companies in the industry [1]