Since 2015, the optical fiber and cable industry has continued to have a high boom. Demand continues to grow rapidly in 2019, and it will slow slightly in 2019. The core issue of the industry trend is focused on the demand for optical fiber and cable in 2020 and beyond. After our top-down analysis, we found that there are four points in the demand for fiber optic cables.

1. Demand has increased year by year and has never declined, reflecting the overall development of China’s optical communications industry;

2. The year-on-year growth rate of demand showed a 3-year small-cycle fluctuation. In 2003, 2006, 2009, 2012, 2015, and 2019, the year-on-year growth peaks appeared.

3. The low growth rate during small cycles is generally maintained at a level of not less than 10%, indicating that in addition to centralized investment, there is a steady growth in the demand for fiber optic cables.

4. The average compound growth rate of demand is very stable. Since 2002, it has basically shown a compound growth rate of about 25%. Behind this is driven by the fast and steady growth of network-wide traffic.

Based on the above four-point rule, the optical fiber demand in 2019 is 385 million core kilometers. If the year-on-year growth rate is 10%, the fiber demand in 2020 should be 430 million core kilometers, a year-on-year growth rate of 12%, and the year-on-year growth rate is at a low point of low cycles. .

From bottom to top, from 2016 to 2019, the average number of cores of ordinary fiber optic cables collected by China Mobile has gradually increased and gradually slowed down. However, in the latest round of centralized mining, it has been increased to more than 30 cores. . This shows that among the new demands for fiber optic cables, the demand from the end of the access network (driven by user coverage and consuming 2-12 cores of fiber optic cables) accounts for a relatively low amount and is continuing to decline. Therefore, the growth of mobile FTTH users has peaked against fiber optic cables The impact of aggregate demand is limited.

Risk reminder: Demand for fiber optic cables continues to grow for several years, causing major suppliers to continue to expand production capacity. If the expansion exceeds expectations, it may lead to oversupply. In the face of 5G construction, the operator ’s pressure on capital expenditure may cause demand. The decline; the development of wavelength division multiplexing technology and the reduction of related optical communication equipment can further increase the unit optical fiber transmission capacity, so that fewer optical fiber cables can be used to meet traffic transmission needs.

1. Fiber optic cables are the cornerstone of the information society

1.1, the long-term steady growth of fiber optic cable demand

The high demand for the optical fiber and cable industry has lasted for 3 years. From 2016, the industry demand and its growth rate have shown an increasing trend, thereby driving the industry leading stock prices to rise. However, the biggest problem facing the industry at present is that there is uncertainty in the demand for fiber optic cables in 2019 and beyond, which is the core issue that determines the trend of the stock price of the sector.

The proportion of demand from operators has been maintained at about 85% for a long time. With the development of the industry in recent years, the proportion has gradually increased year by year.

1.2, traffic growth is the core driving force for the growth of fiber demand

Similar to the increase in vehicle traffic driving highway construction, the demand for fiber optic cables is mainly based on the construction of operator’s fiber optic cable communication networks. The core driving force behind this undoubtedly comes from the rapid growth of network traffic. Regarding the growth rate of Internet traffic in China, there is currently no direct statistical data, so it can only be estimated through indirect data:

According to data reported by Cisco, global Internet traffic has grown at a rate of 33% in the past 10 years (2007-2017), and is expected to grow at a compound rate of 24% in the next 5 years.

Domestic situation, according to statistics from China Telecom, the backbone network traffic has increased at a compound rate of 47% in the past 10 years and is expected to exceed 42% in the next 5 years. Among them, the traffic from the mobile Internet has grown even more rapidly, with a compound growth rate of 95% since 2009. In recent years, mobile Internet applications have been expanding rapidly, and mobile traffic consumption has become free. It is expected that the compound growth rate in the next five years is expected to exceed 100%.

Considering that the proportion of mobile network traffic in the total network traffic is low, the growth rate of the entire network traffic should be closer to the growth rate of the backbone network traffic and higher than the growth rate of the backbone network traffic.