Fiber and Cable Industry General Revenue Decline in the First Half of the Year

In the semi-annual financial report of 2013, several major listed companies took "overcapacity" as their top priority, and were presented in the financial statement. The situation of “income and profit” has been changed steadily, and this time they have either experienced a drop in revenue, or they have had unsatisfactory profits.

Tongding Optoelectronics revenue fell by over 10%, Hengtong Optoelectronics lost a one-time dividend of RMB 90 million, its profit dropped sharply, Fenghuo Communication's profit increased slightly, and Zhongtian Technology’s revenue and profit increased by nearly 20% year-on-year. The decline in profit margins, the only special information that claims profit growth of nearly 60% year-on-year, was not due to the growth of the cable market. It was mainly due to the 61.5% stake in Guangxi Jiguang, the electrolytic aluminum business. In the 2012 financial report, several cable companies still achieved revenue and profit growth of more than 12% in the winter of the entire communications industry. Hengtong Optoelectronics achieved a 35% profit growth.

At the beginning of this year, the prices of fiber-optic collectors have been renewed to new lows in recent years, and excess capacity has exacerbated the fierce price war.

Expansion of production could not be stopped One year ago, China's fiber optic cable industry once ushered in the first price increase in the past eight years. Now, this is mainly due to the industrial stimulus brought about by the broadband China strategy. Most of the optical fiber and cable companies are betting that "demand will increase by 50%-100%." It now appears that the price increase at that time was like the return of the dream of "fiber shortage."

This proved to be a “yellow dream” a few months later. Broadband China’s strategy has always been without substantive policies. However, at the end of 2012, the price of fiber-optic collective procurement was a new low. In 2013, the price of China Telecom’s collective fiber was refreshed. Records in recent years. In this market that is already fully mature and free to compete, falling prices can only indicate "supply exceeds demand."

However, what's embarrassing is that the capacity expansion of fiber-optic companies is still lingering, and there are even many new players entering this market. "Overcapacity was caused by the blindness of everyone, but today we have been unable to stop." A senior fiber optic industry source told reporters: "In this market where core competitiveness is similar and companies have no bargaining power, only the scale costs and price Waiting for a shuffle."

In 2013 National Day, the first 7.5 million core fiber drawing project in Shandong Province will be officially put into operation. The Pacific Optical Fiber and Cable Co., Ltd. invested 380 million yuan, claiming to make up for the gap in Shandong Province, but it received 100% bad reviews from the industry. "The more you pull, the more you lose."

At the same time, mainstream manufacturers did not stop the pace of expansion. According to statistics from Shenyin Wanguo, Hengtong Optoelectronics' capacity in 2013 is expected to increase by 30% to 30 million core kilometers, and Zhongtian Technology's production capacity will increase by 40% to 20 million core kilometers. Tongding Optoelectronics will increase its production capacity by more than 250% to reach 25 million to 30 million core kilometers. It is now the second-largest fly in the world and has also expanded production.

A long-flying optical fiber cable executive told the reporter: “The optical fiber production capacity may exceed 185 million core kilometers, exceeding the market demand of 40 million core kilometers. Unless the market demand increases by 30%, the excess production capacity is unstoppable.” But this is basically unrealistic. "At this stage, broadband cannot significantly increase fiber demand, and LTE construction will also give priority to upgrading existing sites. It is not so obvious for the market to improve 2G and 3G." A flame communications expert expressed this view: "2013 In the year, we cannot see the end of excess capacity."

The advantages of the whole industry chain have not shown that apart from achieving a certain price advantage by relying on the cost of scale, leading companies of optical fiber and cable have played an integrated strategy of “stick, fiber, and cable” and hope that the entire industry chain will prevail. However, at present, this strategy is extremely unsatisfactory.

At present, domestic optical fiber and cable still follow the "7:2:1" law. The entire optical fiber cable industry profits, 70% concentrated in the optical fiber preform industry, 20% of the affiliated fiber, the remaining 10% of the ownership of optical fiber cable. Before 2010, China's optical fiber preforms basically relied on imports, and over 50% of imports were from Japan. After 2010, Hengtong Optoelectronics, Zhongtian Technology, Fiberhome Communications, Fasten, Zhongli and other companies have independently researched and developed optical fiber preforms. The huge import fees paid to foreign companies each year gradually return to China. The famous cable consulting company CRU predicts that At the end of 2013, China's light bar will be self-sufficient.

But this does not mean that fiber optic cable companies have added 70% of their profits. What is at a loss is that the pass rate, production cost, and drawing efficiency of light bars in the country are still lower than those of international companies. The production cost of light bars for many companies is even higher than the import price.

It is because of this that the availability of light bars has not significantly changed the profitability of companies. In the first half of 2013, the gross margin of fiber optic cable increased between 3-6%, while FiberHome Communications only increased 1%. In 2012, FiberHome's optical fiber optic cable gross margin even fell by 1%.

On the other hand, the advantages of the industrial chain brought by the whole industry chain are not obvious. "The bar-integrated companies will eventually eliminate companies that only have fiber optic cable." A senior industry source told reporters: "But this process was delayed by the operator's collection mechanism and even shelved."

At the same time, mainstream manufacturers did not stop the pace of expansion. According to statistics from Shenyin Wanguo, Hengtong Optoelectronics' capacity in 2013 is expected to increase by 30% to 30 million core kilometers, and Zhongtian Technology's production capacity will increase by 40% to 20 million core kilometers. Tongding Optoelectronics will increase its production capacity by more than 250% to reach 25 million to 30 million core kilometers. It is now the second-largest fly in the world and has also expanded production.

A long-flying optical fiber cable executive told the reporter: “The optical fiber production capacity may exceed 185 million core kilometers, exceeding the market demand of 40 million core kilometers. Unless the market demand increases by 30%, the excess production capacity is unstoppable.” But this is basically unrealistic. "At this stage, broadband cannot significantly increase fiber demand, and LTE construction will also give priority to upgrading existing sites. It is not so obvious for the market to improve 2G and 3G." A flame communications expert expressed this view: "2013 In the year, we cannot see the end of excess capacity."

The advantages of the whole industry chain have not shown that apart from achieving a certain price advantage by relying on the cost of scale, leading companies of optical fiber and cable have played an integrated strategy of “stick, fiber, and cable” and hope that the entire industry chain will prevail. However, at present, this strategy is extremely unsatisfactory.

At present, domestic optical fiber and cable still follow the "7:2:1" law. The entire optical fiber cable industry profits, 70% concentrated in the optical fiber preform industry, 20% of the affiliated fiber, the remaining 10% of the ownership of optical fiber cable. Before 2010, China's optical fiber preforms basically relied on imports, and over 50% of imports were from Japan. After 2010, Hengtong Optoelectronics, Zhongtian Technology, Fiberhome Communications, Fasten, Zhongli and other companies have independently researched and developed optical fiber preforms. The huge import fees paid to foreign companies each year gradually return to China. The famous cable consulting company CRU predicts that At the end of 2013, China's light bar will be self-sufficient.

But this does not mean that fiber optic cable companies have added 70% of their profits. What is at a loss is that the pass rate, production cost, and drawing efficiency of light bars in the country are still lower than those of international companies. The production cost of light bars for many companies is even higher than the import price.

It is because of this that the availability of light bars has not significantly changed the profitability of companies. In the first half of 2013, the gross margin of fiber optic cable increased between 3-6%, while FiberHome Communications only increased 1%. In 2012, FiberHome's optical fiber optic cable gross margin even fell by 1%.

On the other hand, the advantages of the industrial chain brought by the whole industry chain are not obvious. "The bar-integrated companies will eventually eliminate companies that only have fiber optic cable." A senior industry source told reporters: "But this process was delayed by the operator's collection mechanism and even shelved."