With the end of April, Changfei, Hengtong, Fiberhome, Zhongtian and the four major fiber optic cable listed companies all announced their 2021 results. Of course, the unlisted Fortis also announced its annual results at the Shanghai Clearing House. In this way, the "Big Five" of optical fiber and cable shows us all aspects of how they are doing in 2021.
Over the years, these five major manufacturers have been able to obtain nearly 70% of the share in the collection and procurement of the three major operators. In addition, at the 7th World Fiber Optic Cable Conference in 2021, CRU pointed out that looking at the world, China's fiber optic cable market, both in demand and supply, exceeds 50%. "The Chinese market is more decisive than ever to determine the price of fiber optic cables around the world."
Therefore, the performance of the "Big Five" can well reflect the domestic and even global market pattern.
(Note: Fortis data is found at Shanghai Clearing House)
Shouzheng raw flowers
In 2021, after nearly 3 years of market adjustment, China's optical fiber and cable market ushered in a glimmer of light. In the past three years, the mainland has successfully achieved the goal of 100% village-to-village fiber, the construction of home width has been basically completed, and the penetration rate of some cities has even exceeded 100%, so the demand for optical cables by the three major operators has slowed down significantly, and the collection price has descended step by step, bringing huge survival pressure to manufacturers.
In fact, in most of 2021, they are still implementing the framework contract for operators to collect in 2020, and in the case of a sharp rise in the price of bulk raw materials, most manufacturers are almost at a loss in supply, but most manufacturers still adhere to the implementation, quality and quantity to complete the supply, support the construction of the mainland's new generation of information and communication infrastructure, help the mainland 5G network to lead the world, but also provide a guarantee for the diversified layout of the follow-up 5G + intelligent applications.
(Note: Fiberhome Data is the income of optical fiber and cable business)
Their persistence has paid off with the landing of China Mobile's pu cable collection in the second half of the year. All along, due to the huge demand of China Mobile, its optical cable collection price has become a bellwether of global price trends. Different from the previous two years of "the low price is the winner", in 2021, China Mobile's collection and procurement plan adopts the best price method, and at the same time introduces the linkage mechanism between price and raw materials to guide the orderly competition and healthy development of the industry. This method was later adopted by China Telecom.
Through the fluctuations of the collection and mining in the past three years, whether it is China Mobile's 2021 pu cable collection or China Telecom's outdoor optical cable collection in 2021, the "five giants" represented by Changfei, Hengtong, Fiberhome, Zhongtian and Futong have once again gathered in the first echelon, which well interprets the strength of large factories and further consolidates the domestic industrial pattern.
Of course, while adhering to it, manufacturers continue to optimize the production process of light rods, optical fibers and optical cables, improve the level of intelligent manufacturing, and optimize production efficiency and cost structure. In addition, continue to invest in the development of new optical fibers, taking G.654E as an example, with the upgrading of the backbone network of the three major operators, from the results of the collection of G.654E optical cables in the past two years, the advanced layout has allowed the "five giants" to gain a first-mover advantage and form a competitive barrier.
The boundary is no longer
It is also in the domestic market environment in the past three years, manufacturers represented by Changfei, Hengtong, and Zhongtian have "tacitly" extended to other industrial chains of optical communications, such as continuous breakthroughs in optical modules and optical devices, data centers and other fields. As a well-established optical communication industry chain solution provider in China, Fiberhome is constantly improving in the fields of optical transmission, 5G bearer, and PON.
However, entering a new field is not easy, taking the optical transceiver and optical device industry as an example, only in the domestic market has gathered hundreds of suppliers, which can be described as a group of wolves. Therefore, the way of capital is a good choice. Hengtong has reached a cooperation with Lockley many years ago, has mass production capabilities in high-speed optical transceivers, and has participated in key research projects for operators; Changfei has also become the controlling shareholder of Borche Technology in 2022.
At the same time, with the blessing of emerging technologies such as 5G, cloud computing, and artificial intelligence, the digital economy has accelerated its penetration into more application scenarios and vertical industries such as smart cities and industrial Internet. It also brings new opportunities to the "Big Five" rooted in the information and communication industry, and the boundaries of development are further broken.
As a manufacturing enterprise, the "Five Giants" are actively exploring the industrial Internet, realizing their own intelligent manufacturing, reducing costs and increasing efficiency, and Changfei is the advantage of integrating optical communications, creating a "5G + optical cloud industrial Internet platform" to empower more manufacturing industry transformation and upgrading. In addition, the digital transformation of larger scenarios is also active in their presence, especially Fiberhome, in addition to having the ability of the whole industry chain of optical communication, also has the ability of cloud computing platform, which can better provide end-to-end solutions for smart cities and digital villages.
Of course, while expanding the business, we also need to pay attention to the prevention of risks, such as last year's "private network communication scam" there were a number of optical fiber and cable companies recruited. The plunge in Zhongtian Technology's net profit in 2021 was mainly due to the provision of 3.619 billion yuan for the impairment of 100% of the risk assets of high-end communication business, but fortunately, with the "double carbon" track of offshore wind power and new energy, it was able to tide over the difficulties.
Expand the frontier
It is worth mentioning that in the past 3 years, an important reason for the reversal of supply and demand is overcapacity. Therefore, in the face of pressured production capacity, domestic optical fiber and cable manufacturers either cut production and production, or expand overseas markets, or relocate factories overseas, basically achieving the goal of de-capacity.
The "Big Five" basically chose the latter two, expanding their territory in overseas markets, building new factories through joint ventures or wholly-owned enterprises; acquiring local enterprises, exporting technology and management, etc., and becoming more and more competitive. In the past year, changfei's overseas business revenue accounted for more than 30%, an increase of 46.8% year-on-year; Zhongtian participated in the "all-light" (FTTP) broadband and Ethernet project launched by BT's Openreach in the UK; Hengtong and Fiberhome also continued to deepen their overseas strategies.
In particular, stimulated by the new crown epidemic, the digital transformation process has been further accelerated, and the local broadband strategy has been launched around the world, while the construction of 5G infrastructure is also accelerating, and the demand for optical fiber and cable continues to grow.
CRU data shows that in the major markets, the demand for optical cables in western Europe in 2021 increased by 11.3% year-on-year, and can maintain a 6% growth thereafter. The U.S. market grew 11.4% year-on-year and further improved to 12.7% in 2022. Demand in the Asia-Pacific market has grown steadily. Emerging markets will grow at a compound annual growth rate of 5%-6% over the next five years. Overall, by 2025, the global demand for fiber optic cables will be 600 million core kilometers.
Therefore, for Chinese optical fiber and cable manufacturers who have already controlled the domestic market, facing the construction needs of information infrastructure in Western Europe, South America, and the Belt and Road countries, it will be the driving force for the sustainable growth of enterprises in the future.
However, in overseas markets, Chinese manufacturers are also facing more and more market restrictions. As CRU pointed out at the beginning of the article, the Chinese market almost determines the global price of optical fiber and cable, and Chinese manufacturers continue to threaten the main local competitors, so the anti-dumping knife is "cut" down.
Although, CRU believes that the demand for optical fiber and cable in the Chinese market will reach 261 million core kilometers in 2022, an increase of 6.5% year-on-year, so Chinese manufacturers will pay more attention to domestic demand and reduce exports in 2022, but overseas markets are won by Chinese manufacturers with their continuous improvement of competitiveness, and their influence is also under this effort, so the pace of their internationalization strategy will not stop. (C114 Water Easy)