Optical fiber has become the core infrastructure for AI computing power. Since the beginning of this year, driven by the demand for AI computing power and optical fiber drones, the market for optical fibers has been soaring, and related listed companies have become the focus of attention and investment in the capital market.
At the 27th China International Optoelectronic Exposition (CIOE) in September, optical fiber manufacturers made a collective appearance. The lineup included the "Big Four" - YOFC (Yangtze Optical Fibre and Cable), Hengtong Optic-Electric, FiberHome, and ZTT (Zhongtian Technology) - as well as key players like Tongding Interconnection and SDG Information, and Corning Incorporated from the US, which secured a multi-billion-dollar optical fiber supply agreement with Verizon. As the AI era arrives, optical fiber manufacturers have entered a completely new industrial development cycle, standing at the center of the stage at CIOE and even the entire optical interconnect industry.
01. Concept Definition: What is Optical Fiber
Optical fiber is a quartz glass fiber thinner than a human hair, which transmits information from one end to the other through the total internal reflection of light. Hundreds or thousands of optical fibers are coated with protective layers to form optical cables, which are laid in pipelines and under the sea. According to the propagation mode of light in the core, it is divided into two categories: single-mode and multi-mode. Single-mode fiber has low loss and long transmission distance, making it the mainstay of backbone networks and long-haul trunk lines. Multi-mode fiber is mostly used for short-distance connections within data centers. Regardless of the classification, optical fiber is the physical foundation for global data flow. No matter how boundless AI computing power is, the cross-domain transportation of data will ultimately rely on this glass thread.
Specifically, the lifeline of the industrial chain lies in the optical preform. It forms the core layer of the optical fiber through a deposition process inside a quartz glass tube, and then draws it into an optical fiber at high temperatures. The purity and geometric precision directly determine the transmission loss of the optical fiber. The mainstream preparation routes include VAD, OVD, and MCVD. The difficulties are concentrated in the purity control of the core layer and the uniformity of doping. The capacity expansion cycle is usually 12 to 18 months, and for some high-end product lines, it may be extended to 24 months. Global capacity is concentrated in the hands of a few manufacturers, making it the link with the lowest supply elasticity in the entire chain.
Over the past decade or so, the cycle of the optical fiber industry has essentially been a tug-of-war between optical preform capacity and operators' demand. After the breakthrough in domestic optical preform technology, capacity expanded rapidly, but operators' centralized procurement continued to push down prices year by year. The price of optical fiber fell from tens of CNY per fiber-kilometer in 2018 to less than 20 CNY by early 2025. The industry has endured several years in the trough, and manufacturers are no longer competing on technology, but on who can withstand lower costs better. Profits have always been concentrated upstream. Optical preforms account for about 60% of the cost of optical fibers, and the self-sufficiency rate directly determines how much gross profit a manufacturer can retain.
The difference in this round lies in the replacement of the underlying logic on the demand side. According to Corning's estimates, the optical fiber consumption of a single node in an AI data center is about 16 times that of a traditional switch scenario. High-speed interconnection between GPU clusters and long-haul interconnection between data centers consume optical fibers in ways and quantities far exceeding traditional communication networks. In addition, long-distance interconnection has also spawned demand for low-loss and high-density products. Ordinary single-mode optical fibers are hard to meet the requirements, and special optical fibers with smaller bending radii and higher refractive index precision have become rigid demands.
In its semi-annual report, YOFC expects that the total global demand for optical fibers will exceed 670 million fiber-kilometers in 2026, a year-on-year growth of over 10%. Among them, the growth rate of data center-related demand is as high as 69%, which is the main source of incremental growth in the industry. The self-sufficiency rate of domestic optical preforms has increased rapidly in recent years, and the supply of ordinary products is no longer a bottleneck. What is really tight is the capacity for high-end and special applications.
02. Worth Noting: One Overseas and One Domestic Order
In terms of news, on September 8, Corning announced the confirmation of a multi-year optical fiber supply agreement with Verizon, valued at billions of US dollars. It will deliver over 80 million miles (approximately 129 million kilometers) of high-density optical fiber from 2027 to 2032. The products cover both fixed broadband and backbone network interconnection for AI data centers, supporting Verizon's goal of reaching 40 million to 50 million broadband users.
This is not Corning's first order this year. In January, Corning signed a multi-year agreement with Meta worth up to 6 billion US dollars. In June, it also secured a multi-billion-dollar data center optical fiber order from Amazon. To meet the demand for intelligent computing centers, it has increased its optical connectivity manufacturing capacity in the US by ten times and expanded its optical fiber capacity by over 50%. In less than nine months, it has successively locked in global leading technology companies, with the total amount of long-term orders reaching the scale of tens of billions of US dollars.
The domestic signal is equally direct. China Mobile has completed the bid evaluation and announcement for the centralized procurement of ordinary optical cables for 2026 to 2027, with a budget of 7.0998 billion CNY and a procurement scale of 69.222 million fiber-kilometers. 18 manufacturers were shortlisted, among which 17 quoted at the maximum limit. Calculations show that the unit price of optical cables in this round is approximately 102.56 CNY per fiber-kilometer, an increase of about 90% from the previous round. Such a single-round increase is rare in the history of domestic optical cable centralized procurement. The bidding process itself is also interesting: the first bidding in early July was aborted due to insufficient valid bidders. It was restarted in August, and manufacturers' quotations converged, with most enterprises bidding at the maximum price limit. The same group of enterprises that desperately pushed down prices at the centralized procurement table in the past collectively quoted at the maximum limit this time.
Affected by the news, Corning's stock price rose by 5% at the beginning of the trading session. The market's understanding of this long-term order is very consistent: optical fiber is no longer just a communication consumable, but a strategic resource carrying the flow of computing power.
03. Price Increase Logic: Demand is Rewritten, but Supply Cannot Speed Up
According to industry data, in March 2026, the spot price of domestic G.652.D bare optical fiber reached 83.40 CNY per fiber-kilometer, an increase of 165% from the beginning of the year, and a year-on-year increase of 418%. Calculated from the low point of less than 20 CNY at the beginning of 2025, the cumulative increase has exceeded 400%.
High-end varieties are rising even faster. The G.657.A2 special optical fiber, which is suitable for high-speed interconnection in intelligent computing centers, saw its price rise from 32 CNY in 2025 to 240 CNY per fiber-kilometer in March 2026, an increase of about 650%.
Guosheng Securities estimates that the global optical fiber supply-demand gap rate will be about 6% in 2026 and will expand to 15% in 2027. According to CRU data, the global optical fiber supply-demand gap in 2026 will be about 180 million fiber-kilometers, with a gap rate of about 16.4%. The effective capacity utilization rate of China's optical preforms has reached 84.3%, close to full load.
However, the supply side cannot keep up. The capacity expansion of optical preforms must cross several thresholds: technological accumulation, equipment acquisition, process ramp-up, and customer certification. Each of them is slowing down the pace of new capacity landing. The 12 to 18-month cycle means that even if full production starts now, scaled output will not be available until after 2027.
Since the beginning of this year, companies such as FiberHome, Tongding Interconnection, Far East Co., Ltd., and Han's Laser have successively increased their investment in optical preform-related projects. The market generally expects that capacity will be released in a concentrated manner around 2028. The tension overseas is no less than that in China. Under the dual demand of broadband expansion and AI backbone networks in North America, the situation is equally tight. News of price increases and capacity expansion by overseas leaders continues to emerge, and the global gap has simultaneously opened the export window for domestic manufacturers.
The method of capacity expansion in this round is fundamentally different from the speculative capacity expansion in history. In the past, manufacturers gambled on the cycle. Under the temptation of price increases, capacity surged, followed by overcapacity and price collapse. This round is mostly driven by customer prepayments and long-term contract lock-ins. Before the capacity is even built, orders have already been signed for years to come.
04. Industrial Chain: Optical Preform Self-Sufficiency and Special Optical Fibers Determine Who Can Capture the Thickest Profits
Profits on this chain are not evenly distributed. Whether one can capture the thickest segment depends on the self-sufficiency rate of optical preforms and the proportion of special optical fibers.
YOFC (601869) is a sample with a relatively high proportion of both optical preform self-sufficiency and special optical fibers. Its performance elasticity is also the strongest when the industry is on the rise. In the first half of the year, revenue from optical transmission products was about 6.126 billion CNY, a year-on-year increase of 59.2%, and the gross profit margin reached 63.11%. The company is also laying out capacity in high-end directions such as multi-mode optical fibers, special optical fibers, and hollow-core optical fibers.
Hengtong Optic-Electric (600487) and ZTT (600522) follow a dual-main-business route of optical communication plus energy, with businesses spanning power grids, marine, and new energy. In the first half of the year, Hengtong's optical communication business revenue increased by over 130% year-on-year, with a gross profit margin of over 60%. ZTT's shipment of AI computing power optical fiber G.657.A2 increased by more than twice year-on-year. The dual main businesses diluted the net profit margin but also thickened the safety cushion for crossing the cycle. The accumulation of the two in submarine optical cables and marine engineering has opened a door to the overseas interconnection market for them.
As an equipment manufacturer, FiberHome (600498) naturally benefits at a slower pace than the cable segment. In the first half of the year, its net profit attributable to the parent company declined due to the drag of exchange losses. However, after the reset of centralized procurement prices, the elasticity on the equipment side is expected to be made up in subsequent reports. In the second-tier camp, Tongding Interconnection (002491), Far East Co., Ltd. (600869), and Hangzhou Cable (603618) have a certain degree of capacity elasticity. T&S Communications (688205) in the direction of DCI interconnection is also on the list of institutional recommendations (the above sorting does not constitute investment advice).
There is also a layer of easily ignored cost support upstream. The prices of doping materials such as metal germanium required for optical preform manufacturing continue to rise, and the demand for high-purity silicon tetrachloride grows synchronously with capacity expansion. The cost side has bottomed out the price of optical fibers. Technological iteration is also brewing a new stratification: hollow-core optical fibers replace the glass core with an air core, which can theoretically reduce latency and loss by an order of magnitude. Domestic commercial hollow-core optical cable procurement projects at the level of tens of thousands of fiber-kilometers have been implemented, and multiple leading manufacturers have begun to lay out dedicated production lines.
05. Demand Realization: Prices Have Risen for Half a Year, and Financial Reports Have Started to Speak
The realization of price increases has long been reflected in the semi-annual reports. In the first half of the year, YOFC's revenue was 9.809 billion CNY, a year-on-year increase of 53.64%. The net profit attributable to the parent company was 2.925 billion CNY, a substantial year-on-year increase of 888.88%. The net profit margin was close to 30%, ranking first in the optical communication sector. The company also launched an interim dividend of 10.6 CNY for every 10 shares. Hengtong Optic-Electric's revenue was 42.026 billion CNY, a year-on-year increase of 31.13%, and the net profit attributable to the parent company was 3.120 billion CNY, a year-on-year increase of 93.38%. ZTT's revenue was 30.939 billion CNY, a year-on-year increase of 31.10%, and the net profit attributable to the parent company was 2.387 billion CNY, a year-on-year increase of 52.29%. Second-tier companies such as Tongding Interconnection (002491) and Huamai Technology (603042) achieved a turnaround from losses to profits. In this round of centralized procurement by China Mobile, YOFC ranked first with a 10.07% share. The four companies - YOFC, Hengtong, ZTT, and FiberHome - won bids for a total of about 38.8%, and the head pattern is solid.
Beyond the financial reports, there are two leading indicators worth noting. The inventory of optical communication enterprises generally increased month-on-month at the end of the second quarter. While profits of some companies surged, the operating cash flow remained a net outflow. The reason is the massive procurement of raw materials such as optical preforms for subsequent delivery. Revenue recognition lags behind stockpiling, and the boom is being transmitted to the second half of the year.
Operators' actions are also intensifying. In addition to China Mobile, the optical cable procurement by China Telecom and China Unicom this year also showed stable volume and rising prices. The pace of upgrading the backbone network to 400G adds another layer of support for demand beyond ordinary optical fibers. Prices in the overseas market are also rising. Leading companies such as Prysmian and Corning have synchronously raised their quotes in North America and Europe, enabling domestic manufacturers on the export chain to gain an additional growth curve beyond domestic centralized procurement. The newly added capacity of domestic manufacturers is mostly directed to be released after the end of next year, while the construction of data center backbone networks on the demand side is accelerating. The window period of supply-demand mismatch falls exactly in the next one to two years.
06. Outlook: From Communication Cyclical Products to Computing Power Infrastructure Products
In the past, optical fibers followed telecom capital expenditures and were communication cyclical products with a cycle of two to three years. Today, AI has rewritten the demand function into a multiplication of optical fiber consumption and transmission efficiency. From data center interconnection to backbone network construction, it is stretching the boom cycle of optical communication from a two- to three-year product cycle to a six- to ten-year system-level construction cycle.
Some institutions judge that a scarce window where demand outpaces qualified capacity may appear from 2027 to 2029. At that time, the attributes of the industry will be closer to computing power infrastructure rather than traditional building materials. For domestic manufacturers, the most direct benefit is that the visibility of orders is lengthened, and the days when revenue fluctuated drastically with centralized procurement prices are decreasing.
The calm side also exists. LightCounting reminds that with the expansion of supply, there is a possibility that the market growth rate will fall back after 2027. The new capacity of optical preforms will be released in a concentrated manner around 2028, which will test whether this boom can cross the supply inflection point. The fluctuations in operators' centralized procurement prices and spot prices, as well as the changes in the pace of capital expenditures by cloud vendors, are also variables that need to be continuously tracked. Particularly, when the new capacity of optical preforms is released in a concentrated manner around 2028, if the demand growth rate slows down, the industry may once again face the pressure of supply-demand rebalancing. At that time, manufacturers with high-end special optical fibers and overseas export channels will be more resilient.
However, at least for now, a glass thread that was once sold by the weight, holding long-term orders worth tens of billions of US dollars and a 90% increase in the average price of centralized procurement, has already stood at the poker table of the computing power era.
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