China Posts Record Growth in Fibre Optics
There is one notable exception to the conclusion that China’s wire and cable industry has both risen to the challenge of supplying domestic customer and expanded rapidly enough to capture a significant share of export markets. That is fibre optic cable. Demand for optical cable in China’s domestic telecom networks has grown considerably faster in recent years than the domestic manufacturers’ ability to expand capacity.
Investors Are Trying to Catch Up
China’s telecom cable industry has attracted joint-venture participants and other outside investors, just as have other wire and cable product segments. In this case, however, a new fibre-making factory can take two years to build, and an existing factory can take several quarters to be expanded. And such changes have not been able to keep pace with the growth in fibre demand. To address the current situation, several major domestic suppliers, as well as large established fibre market participants from Japan and Western markets have announced investments or expansions in China.
China is Almost Half the 2009 World Market
Chinese network operators installed 79 million km of cabled fibre in 2009, up 89% from 42 million km in 2008. More significantly, the entire world market in 2009 was 166 million, meaning that China was 47% of the world demand. With most other markets showing a decrease in fibre demand due to the recession in 2009, China’s increase of 37 million fibre-km used up all the world’s spare optical fibre capacity. The costs of keeping fibre-making equipment available for production or in service are such that the industry generally would not have a maintained excess capacity of 20% or 30% more than near-term requirements. If the other markets had not experienced lower demand due to the recession, China’s network operators may have encountered a true shortage and been unable to complete their expansion plans.
Mobile Networks Spurred Fibre Demand
A major development last year was the government’s decision to restructure the telecom industry, grouping five carriers into three, each with mobile, fixed line, and broadband licenses. The three remaining carriers, which actually are holding companies with many local or provincial operating companies, are China Mobile, China Telecom, and China Unicom.
This restructuring was completed in advance of the 3G mobile licenses, which were officially awarded in January 2009. This licensing schedule effectively launched a race for the three newly restructured telecom giants to upgrade their nationwide networks. With the new wireless licenses and a commitment to strong competition, the carriers have been rolling out fibre to support broadband services – both fixed line and wireless. Although the bulk of the mobile infrastructure will be built by the end of 2011, there will be on-going demand for fibre in fixed-line broadband networks, such as fibre-to-the-home or building networks, which will accompany residential construction and economic expansion for many years after 2011.
