Summary of Hengtong Optic-Electric Conference Call Industry Overview - **Global Fiber Optic Demand**: There is a significant tension in global fiber optic demand, driven by accelerated domestic construction and international backbone, metropolitan, and access network developments. The adoption of AR technology is expected to sustain demand growth in the coming years [2][3][7]. - **International Market Growth**: The international market has shown substantial price increases, particularly in backbone and metropolitan networks, with many countries actively advancing infrastructure development [4][5]. Company Insights - **Hengtong's Position**: Hengtong Optic-Electric maintains stable production capacity for conventional fiber optics while heavily investing in special fibers, such as G6,541 ultra-low loss fiber and multi-core hollow laser fibers. The new fiber center is expected to release capacity in the first half of next year [2][10][12]. - **Production Capacity Utilization**: The company has been operating at full capacity since the beginning of 2025, with no significant changes in conventional fiber capacity [14][10]. - **Special Fiber Development**: Hengtong is a leader in the multi-core fiber sector, with prices approximately ten times that of G652D fiber. The company has received certifications from major telecom operators [12][13]. Financial Performance - **Revenue Composition**: Fiber optics and cables account for over 80% of Hengtong's total revenue, with overseas customers contributing 30%-50% and domestic operators about 40% [22][24][25]. - **Price Trends**: Domestic fiber prices have increased by approximately 10%, while international prices, particularly in the U.S., are significantly higher, with G652D priced at $5.5 to $6 per meter [9][20]. Future price increases are anticipated due to changing supply-demand dynamics [9]. Market Dynamics - **Domestic Operator Bidding**: The bidding volume from domestic operators remains stable, but the new "Eight Vertical and Eight Horizontal" project is expected to drive demand for special fibers [6][10]. - **Supply-Side Changes**: Major suppliers, including Corning and Prysmian, are expanding their special fiber offerings, impacting traditional 652D fiber production capacity [8][10]. Future Outlook - **Demand Projections**: The demand for fiber optics is expected to continue growing in the coming years, driven by advancements in AR technology and data center construction [7][18]. - **Expansion Plans**: Hengtong plans to expand production capacity within 6-12 months, depending on the type of fiber and existing infrastructure [11][18]. The company is also focusing on green production practices to meet future demand [27]. Strategic Initiatives - **International Market Strategy**: Hengtong is leveraging its brands to navigate tariff barriers in the U.S. market, with expectations of sales growth by 2027 [5][16]. The company has established multiple production bases globally to support its international operations [23][32]. - **Adaptation to Market Changes**: Hengtong is adjusting its procurement strategies based on regional market conditions, ensuring minimal impact on sales despite challenges in raw material sourcing [19][31]. Conclusion - **Industry Outlook**: The fiber optic communication industry is poised for optimistic growth, particularly with the increasing influence of AI and drone applications. Hengtong Optic-Electric is well-positioned to capitalize on these trends, presenting significant investment opportunities [33].

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].