Promoting the Sustainable and Healthy Development of the Optical Cable Industry"-At the recently held 2023'TOEM Forum Council meeting in Shanghai, industry experts and entrepreneurs from raw materials and equipment companies gathered to delve into market dynamics, jointly assess the current industry landscape and future development trends, and chart a course for the industry's progress in the new year.Technological Evolution
The market exerts a significant influence on technological evolution. The telecommunications industry's largest customers are network operators. Currently, it appears that operators consider five factors when making technology decisions: maturity of the industrial chain, cost-effectiveness of new technologies, competitor dynamics, user demand, and support from various existing terminals. The evolution of communications services and technology has generally maintained a trend of "one generation every decade". This trend is particularly evident in wireless technologies. 2G and 3G have become obsolete, 4G, which started in 2011, and 5G, which reached maturity around 2020, have become dominant. Meanwhile, the integrated 6G network combining space, sky, and ground is still in the early research stage, and the practical application of 6G network architecture and technical standards may not occur until around 2030. China began commercializing 5G in 2019, and according to the latest data from the Ministry of Industry and Information Technology (MIIT), by the end of November 2023, China had built a total of 3.282 million 5G base stations in four years, an extraordinary achievement made possible by the concerted efforts of the entire industry. According to incomplete statistics, during the early stages of 5G construction, each newly added base station required approximately 3.3 kilometers of access layer optical cables. However, as base station deployment became denser, the figure dropped to around 2.2 kilometers. The declining demand and the near completion of 5G construction collectively constitute the current market backdrop.
Currently, the transmission network technology is in a period where 100G technology is mature, and 400G is beginning to be introduced. To match 400G and even higher capacities such as 800G, the progression from G.652.D optical fiber to G.654.E is inevitable. Today, the price of ordinary G.652.D optical fiber optic cables has been compressed to the limit, and telecommunications operators have gradually come to view them as low-value, consumable commodities akin to Category 5 cables, especially small-core optical cables, whose prices have fallen below the labor cost required for recycling. The optical cable industry needs to strike a balance between technological innovation and market expansion. It also needs to focus on the collaborative use and even integration of optical fiber and basic infrastructure, simultaneously fulfilling communication and sensing functions, which may be a necessary path for the construction of new-type digital infrastructure.
Special cables are an area of great industry concern. However, the research and development of highly sophisticated special products pose significant challenges to China's optical cable industry. For example, China still falls short of advanced international levels in the production of G.654.D optical fibers specifically designed for submarine use, resulting in weak market competitiveness. Consequently, such ultra-low-loss products have become a typical "chokepoint" technology that requires concerted industry efforts to address. However, considering the monopolies in developed countries and interference from foreign policies, the supply scale of these products is small, the domestic and international market capacities are limited, and the constraints imposed by technology and cost factors have created significant pressure on Chinese companies aiming to seize this lucrative market. Additionally, in the field of special cables, attention should be paid to the supply of highly reliable raw materials. For instance, the grease and insulating materials required for OPGW or submarine optical cables rely heavily on imports. The demand for these special products is low, and the difficulty is high. Companies need to make long-term arrangements for technological breakthroughs. Cooperation between companies in the industry chain and end-users is also encouraged. Suppliers and end-users (such as manufacturers and operators) should collaborate on their technical strengths and share investment risks, jointly promoting the research and development and market application of high-tech specialty cables.
Computing Power Development
China has always attached great importance to network construction. The central government has successively issued strategies to accelerate the construction of a network of power and digital China. The 20th National Congress of the Communist Party of China (CPC) provided an in-depth exposition on these strategies, and the development of the digital economy has become part of China's overall macroeconomic layout. Computing power infrastructure has been incorporated into national action, and the sharing of basic telecommunications facilities has been deepened. Governments at all levels have provided policy guarantees for the high-quality development of computing power. Infrastructure construction has accelerated its pace of improvement and shifted towards the layout of intelligent computing power. The scale of innovative applications of computing power, deeply integrating the digital and physical economies, has expanded, and the industry scale has continued to grow, becoming a new engine for economic growth.
In February of this year, the central government approved the "Overall Layout Plan for Digital China Construction", which proposes to systematically optimize the layout of computing power infrastructure, promote efficient mutual complementation and coordinated linkage between the eastern and western regions, and guide the rational echelon layout of general data centers, supercomputing centers, intelligent computing centers, and edge data centers. This plan clarifies the key tasks for the development of China's computing power industry in the coming period. Looking at China's computing power development landscape, Internet technology companies and operators have made significant investments, resulting in China's total computing power ranking second in the world and achieving an average annual growth rate of approximately 30% over the past five years. Notably, 2023 marks a year of explosive growth for China's computing power industry.
Operators have also actively entered the computing power industry. Currently, the main aspects of the operators' business development include two parts: one is the traditional track represented by conventional communications services, and the other is the new track represented by computing power infrastructure. Since China's communications penetration rate has exceeded the global average, it is difficult for the traditional track to maintain rapid growth in the future and may continue to maintain a slow growth pattern. Therefore, the new track will become a key area of development that deserves full consideration. With the strong support of governments at all levels, scientific research institutions, business and enterprise customers, and a wide range of suppliers, operators have made comprehensive arrangements for the "East Data and West Computing" project and are actively participating in the construction of national data center clusters in regions such as Beijing-Tianjin-Hebei, the Yangtze River Delta, the Greater Bay Area of Guangdong-Hong Kong-Macao, Chengdu-Chongqing, Inner Mongolia, Guizhou, Gansu, and Ningxia.
Overseas Development
There are currently considerable opportunities in overseas markets. We possess a mature industrial chain and the ability to adapt to the market environment. For example, the fact that China accounts for approximately 70% of the world's 5G base stations proves the outstanding competitiveness of China's communications industry, making such a massive 5G network construction feasible. However, many countries overseas still rely primarily on 4G, which presents significant market potential. Compared with other industries, the communications and information industry is also one of China's advantageous choices for entering the international market. At the same time, it aligns with the country's overall requirements for the "Belt and Road" initiative, the "Going Global" strategy, and the "Building a World-Class Enterprise". Moreover, it is an important component of "network power".
In the overseas development of the communications and optoelectronics industry, we must be keenly aware of the risks involved. Firstly, China's engineering construction, communications operation, and content services overseas are subject to interference from geopolitical factors. Some companies have experienced being sanctioned, suppressed, or even having their contracts canceled after winning bids. However, overall, a considerable number of leading Chinese communications companies are gradually expanding overseas, bringing new growth points to the industry, from product trade, project construction, and market operation to the deployment of information and communications infrastructure. Secondly, the global economic weakness has persisted since the outbreak of the pandemic, and many developing countries are experiencing economic difficulties and even foreign exchange exposure. This may lead to problems with foreign exchange settlement for Chinese communications companies conducting business overseas. In addition to paying attention to foreign policy restrictions and regulatory risks, we also need to address this direct uncertainty.
In general, China's communications and information industry is facing a pivotal moment. Technology development, represented by 5G, has matured, and the network layout has been largely established. Before 6G technology makes comprehensive progress and achieves large-scale commercial use, the construction pace in the field of wireless networks may slow down compared to the previous few years. However, investment in computing power and data centers will remain substantial. In the next five years, optical communication materials companies can consider gradually shifting their product focus from 5G construction to products with computing power construction, national digital infrastructure construction, and the research and application of special high-tech technologies.
