Chinese optical vendors are raking it in on the back of skyrocketing fiber demand while their telco customers are being squeezed. Operators have been forced to cancel and then restart several optical tenders this year after the initial pricing failed to attract bids.
Most notably this includes a billion-dollar nationwide procurement from China Mobile – its largest of the year. Issued in early July, it had initially sought to purchase 69 million core kilometers of fiber cable at a total price of 6.5 billion Chinese yuan (US$970 million). But it was withdrawn after receiving too few bids due to the low offer price.
The telco reissued the tender early this month and completed it for a total price of CNY7.1 billion ($1.05 billion) – a 9% hike.
China Telecom went through a series of failed and restarted optical tenders this year. It had to call off two tenders in Guangdong because the initial prices were below the market, ultimately completing the deals at a 45% higher price. In another project in Chongqing, it was forced to restart the bidding twice after receiving no bids at all. It eventually settled for a unit price 64% higher than its original offer.
Turbocharged
The cost increases are not because of heavy demand for the G.652.D fiber that the telcos are seeking, but because suppliers have transferred resources to the upstream optical preforms required for the higher value-added data center products such as G.657.A1 and A2.
The escalation in optical demand has turbocharged the suppliers’ finances. YOFC, China’s biggest optical cable vendor, expects to report a bumper first-half profit of CNY2.4 billion to CNY3.0 billion ($356 million to $445 million) this Friday – roughly ten times higher than its CNY296 million ($43.9 million) result a year ago.
The company raised its guidance last month, attributing it to the “accelerated development of computing power data centers [and] demand for new types of optical fiber and cable.”
Among the other big three Chinese optical fiber companies, Heng Tong Opto-Electrical, the second-largest, doubled its earnings in Q1, while its stock price has enjoyed a 164% growth since the start of the year.
ZTT’s share price has climbed 93% this year, with first quarter earnings up 89%, while Fiberhome has seen its stock price rise 6% during the same period.
