October 8 marked the first trading day for A-shares after the National Day holiday, and optical fiber concept stocks weakened alongside the optical communications sector, with Hong Kong-listed YOFC (06869.HK) closing sharply lower. Earlier, on September 28, Yangtze Optical Fibre And Cable Joint Stock Limited Company (601869.SH), Hengtong Optic-Electric Co.,Ltd. (600487.SH), Jiangsu Zhongtian Technology Co.,Ltd. (600522.SH), and Fiberhome Telecommunication Technologies Co.,Ltd. (600498.SH) had all hit the daily limit down together.
Optical fiber was once an unremarkable communications material, indispensable for home broadband and mobile networks, yet its price had lingered at low levels for years. Since the start of this year, optical fiber prices have surged dramatically. In China Mobile Limited's (600941.SH) centralized procurement of ordinary optical cable for 2026 to 2027, the first round of bidding in July failed, and when bidding was reopened in August, the maximum bid price was raised by approximately 8.5%. In the results announced on September 4, 17 of the 18 winning candidates quoted at the maximum bid price. According to estimates by commodity research firm CRU, this procurement translates to an optical fiber price of about 81 yuan per core kilometer (per kilometer of a single fiber, tax included), whereas in the previous procurement round in mid-2025 the price was still below 20 yuan.
On September 28, the National Bureau of Statistics released profit data for industrial enterprises above designated size from January to August 2026. Yu Weining, chief statistician of the industrial department, noted in his interpretation that driven by the accelerated construction of computing infrastructure, profits in the optical fiber manufacturing industry grew 5.3-fold, while profits in high-tech manufacturing above designated size grew 54.7% over the same period. Optical fiber concept stocks also became a hot sector in the capital markets. UBS calculated in a research report published on September 23 that from the beginning of the year to the June peak, domestic optical fiber sector share prices rose more than 300%, before falling back about 37%. UBS attributed the pullback to new entrants successively announcing large-scale capacity expansion plans, fueling investor concerns about oversupply and a sharp price decline, a pattern seen at the end of previous upcycles.
But after the share price pullback, optical fiber prices did not soften. Multiple industry insiders told reporters that at the end of September, the price of loose fiber (fiber not yet made into cable) of domestic G.652.D standard single-mode optical fiber remained above 100 yuan per core kilometer, a level that had held for more than a month, which is unusual by past standards. In addition, in the fourth quarter of 2026, as telecom operators' centrally procured optical cable enters a concentrated delivery period, ordinary optical fiber prices will rise further.
Why has an unremarkable communications material suddenly become so tight? Reporters learned in interviews that the incremental demand for optical fiber in this round comes mainly from data centers at home and abroad, and overseas cloud vendors and operators have already begun locking in supply through long-term agreements. Moreover, the pace of capacity expansion cannot keep up with data center construction. Building new optical fiber preform (quartz glass rods used to draw fiber) capacity, procuring key equipment, and passing customer certification all take time. Based on construction cycles disclosed by companies, most of the new capacity announced since the start of this year will not be completed until 2027 to 2028.
In the past, domestic demand for optical fiber came mainly from the three major operators—China Mobile Limited, China Telecom Corporation Limited (601728.SH), and China United Network Communications Limited (600050.SH)—which procure optical cable through centralized bidding based on capital expenditure budgets. Now, operators' investment is tilting toward computing networks, with China Mobile expecting computing network capital expenditure to grow 62.4% in 2026. YOFC also said at its September 24 earnings briefing that the global optical fiber and cable market has shifted from relying mainly on the telecom market to being driven jointly by telecom and data communications. According to forecast data mentioned at the briefing, from 2025 to 2030, global data center optical fiber demand will grow at an average annual rate of 20.74%, while telecom market demand will grow at an average annual rate of 2.47%.
On a per-GPU basis, Wendell P. Weeks, chairman, CEO, and president of U.S. optical fiber and specialty glass manufacturer Corning, estimated at the company's second-quarter 2026 earnings call that in scale-out networks (networking between servers in a data center), the number of optical fibers per GPU increased from 8 to 16 across NVIDIA's Hopper and Blackwell GPU generations. When a GPU cluster exceeds 130,000 units, an additional optical network layer is required, raising optical product usage per GPU by roughly another 50%. Connections inside racks represent the next increment. Weeks said scale-up networks (high-speed interconnection among GPUs within one or several racks) currently use copper cable connections. If all were converted to optical connections, each GPU would require about 160 fibers, but what is actually being introduced will be a hybrid of copper and optical connections, so actual usage will be less than 160 fibers.
The growth rate of optical fiber demand also depends on the choice of technical solutions. Weeks noted that on the Rubin platform following Blackwell, as per-channel speeds (transmission rate per optical channel) increase, the number of fibers can remain unchanged. In addition, technologies such as bidirectional transmission and wavelength-division multiplexing, which allow a single fiber to carry more signals, can also reduce the need for more fibers when bandwidth increases. However, Benoit Fleury, director of business development for Corning Optical Communications' PCS (optical connectivity solutions) business, told reporters that the tipping point for replacing copper with optical fiber in scale-out networks has already arrived, but in scale-up networks, replacing electrical interconnects with optical interconnects is still in its infancy.
Chen Hao, director of technology and strategy for Corning Optical Communications in the China market, also said in an interview that as per-channel speeds rise from 100G to 200G and then to 400G, further increases become increasingly difficult, with high costs and high power consumption. The simplest way to add speed is to increase the number of fibers. "Cloud data centers or traditional data centers used to switch generations about every 4 years, but now they switch every 2 years, or even every 1.5 years. Data volumes are doubling, and other infrastructure has to keep up," Chen Hao said.
Data centers also need to be connected to one another via optical fiber. Chen Hao explained that the industry once believed AI data centers would be concentrated mostly within a single campus, but as electricity demand rises and overseas power supply faces certain constraints, there is now a preference for building distributed computing centers interconnected by high-speed optical networks, a new growth point for optical fiber demand in North America. Chen Hao also noted that China is building computing networks, and operators have begun laying large quantities of new types of optical fiber, especially G.654.E fiber (a lower-loss fiber suited for long-distance transmission). Optical cable used for data center interconnection has higher requirements for fiber density and attenuation.
Chen Ziyan, China director of Corning Optical Communications' data center business, told reporters that China's scale-up networks have moved from single racks to multiple racks, and high-bandwidth cross-rack connections are better served by optical fiber than copper cable, adding substantial optical connection demand. He also said Corning remains optimistic about AI intelligent computing center construction over the next two to three years, because demand and construction scale for North American intelligent computing centers are growing markedly, and investment in China's intelligent computing centers is also gradually increasing.
Domestic manufacturers are also successively securing large orders from data center customers. For example, Jiangsu Zhongtian Technology Co.,Ltd. disclosed in a June announcement that it won a centralized procurement project for data center optical fiber connection products from a domestic internet company worth about 1.518 billion yuan. Optical fiber used in data centers has higher specifications and higher prices. Li Xinru, marketing director of an optical fiber manufacturer in East China, told reporters that at the end of September, bend-resistant G.657.A1 (mostly used for connections between racks in data centers) was priced above 160 yuan per core kilometer and remained in short supply. G.657.A2 was above 220 yuan. G.654.E had stayed above 300 yuan per core kilometer since July.
Ordinary optical fiber is also rising in price. Reporters learned in interviews that with the same drawing (heating and drawing optical fiber preform into fiber) capacity, the efficiency of producing G.657.A2 is somewhat lower than producing G.652.D (standard single-mode fiber). Manufacturers have shifted part of their drawing capacity to produce fiber for data centers, tightening supply of ordinary fiber. When operators' centrally procured optical cable is delivered in concentrated fashion in the fourth quarter of 2026, ordinary fiber will in turn take up part of the drawing capacity, and prices will rise accordingly. "What customers care about now is whether they can get the goods on time; price comes second," said Chen Xinjian, sales head of an optical fiber company in Shenzhen.
Overseas manufacturers' approach is to sign long-term agreements in advance. For example, Corning reached multi-year cooperation or supply agreements this year with Meta, NVIDIA, Amazon, and U.S. operators Verizon and AT&T. Such agreements have buyers and sellers pre-arrange supply for the coming years. The agreement with Verizon covers 2027 to 2032, with products used for broadband expansion and long-haul backbone networks connecting AI data centers. Domestic manufacturers have also begun signing long-term agreements. For example, optical communications device and module maker Everprox Technologies Co.,Ltd. (300548.SZ) disclosed in a July announcement that its controlling subsidiary signed a long-term agreement with an overseas entity, with expected sales of about 4.5 billion yuan, to be performed through the end of 2030.
The Capacity Expansion Time Gap
The overcapacity that the market fears has occurred before in the previous cycle. For example, in its 2019 interim report, YOFC attributed its performance decline to weak market demand, reduced orders caused by the full release of capacity expanded by the industry in recent years during the reporting period, and a sharp drop in optical fiber and cable prices. The company also believed that the first half of 2018 was the peak of the industry's previous upcycle. Optical fiber production requires first making optical fiber preform (i.e., preform rods), then drawing it into fiber and making it into cable. The bottleneck in the current expansion round is preform. In a market analysis published in February 2026, CRU noted that China's preform capacity appears sufficient on the surface, but after excluding idle and outdated capacity, effective utilization is already very high, with many manufacturers near their capacity ceilings. Restarting idle capacity takes months, and some fiber plants without their own preform struggle to secure stable supply.
Reviewing expansion announcements by relevant companies since the start of this year, the disclosed construction periods are mostly between one and two years. Among leading manufacturers YOFC, Hengtong Optic-Electric Co.,Ltd., Jiangsu Zhongtian Technology Co.,Ltd., and Fiberhome Telecommunication Technologies Co.,Ltd., Hengtong Optic-Electric disclosed in a private placement plan released on the evening of September 24 that it plans to build new preform capacity of 800 tons per year at its existing base in Inner Mongolia. The preform project announced by Fiberhome in July has a construction period of two years. Other manufacturers and new entrants are also expanding. Power cable and optical fiber and cable company Hangzhou Cable Co.,Ltd. (603618.SH) disclosed in July a preform, quartz base material, and new-type optical fiber project with a construction period of 1.5 years. Laser processing equipment company Han'S Laser Technology Industry Group Co.,Ltd. (002008.SZ) announced in June an optical fiber and preform project to be built in two phases, with phase one not exceeding 12 months and phase two not exceeding 24 months.
After projects are completed, equipment commissioning and customer certification still take additional time. Multiple industry insiders told reporters that key equipment for preform and drawing is currently very difficult to buy. Drawing may look uncomplicated, but parameters such as furnace temperature and drawing speed must be precisely coordinated, and yield must be improved little by little through experience. UBS estimated in the aforementioned research report that Chinese manufacturers account for 60% to 70% of global preform supply, and leading manufacturers mostly develop preform equipment in-house, so new capacity may ramp up within six months. Companies without self-developed equipment must procure from South Korea and the United States, where lead times already exceed one year. For new entrants, going from project initiation to effective supply takes at least three years, and actual scale will be significantly smaller than planned.
Overseas manufacturers are also expanding. According to Chen Ziyan, Corning is expanding capacity from preform to drawing for optical fiber, and is also significantly expanding connectors and complete solutions. In China, Corning has achieved local production from preform, optical fiber, and optical cable to connectors, and capacity investment is increasing. Judging from published timetables, overseas new capacity will arrive later. Japanese optical fiber and cable manufacturer Fujikura said in a March announcement that it will invest up to 300 billion yen in Japan and the United States to raise optical fiber and cable capacity to as much as three times the existing level, with the new plant at its Sakura factory targeting production start in December 2030. Italian cable leader Prysmian plans to invest 1.25 billion euros through 2031 to expand capacity, including the preform segment, and will more than double U.S. optical fiber capacity.
Li Xinru believes that leading domestic manufacturers had long planned this round of expansion, and some preform capacity can come on stream by the end of 2026, but the new capacity is mainly directed at specialty fiber and data center interconnect cable. In addition, after experiencing the previous cycle, leading manufacturers are not strongly inclined to expand ordinary optical fiber capacity. Reporters learned in interviews that in 2027, data center optical fiber demand may rise substantially, leading manufacturers are receiving more and more data center interconnect orders, and what is currently in short supply in North America is high-core-count optical cable, in which a single cable contains more than a thousand fibers. G.654.E currently accounts for less than 10% of shipments by the leading manufacturers, and may rise above 20% by then, with gross margins far higher than ordinary fiber.
YOFC also said at the aforementioned earnings briefing that capital expenditure on computing data centers at home and abroad remains at a relatively high intensity, the industry is in an upcycle, and the company plans capacity according to the long-term needs of strategic customers. At present, the industry's supply-demand structure is healthy, new preform and optical fiber products required by computing data centers still face a certain shortage, and capacity utilization of its main products is at a relatively high level. Specific product prices depend on market supply and demand and are subject to uncertainty. "Industry cycles always feature a mix of shortage and excess," said Zhuang Dan, executive director and president of YOFC, at the company's 2025 annual shareholders meeting. He expects that over the next three to five years, AI-related computing infrastructure will continue to see high investment, and how long this optical fiber shortage lasts will depend on the result of balancing supply and demand.
Before new capacity is released, multiple industry insiders expect optical fiber prices to rise in small steps and for the situation to last a relatively long time. UBS also expected in the aforementioned research report that optical fiber prices will continue to rise through 2027, but the pace of increase will slow. From 2028 to 2029, capacity from second-tier manufacturers and new entrants may be released successively, and the new supply will first concentrate in ordinary G.652.D. By then, optical interconnect is expected to enter racks on a larger scale, and demand for high-performance optical fiber will increase further. Li Xinru also believes that after new capacity begins to be released, ordinary optical fiber prices will soften first, but optical fiber used in data centers will remain tight for longer. "If a major customer switches to another optical fiber supplier, it has to go through certification all over again. High-end products are not something just anyone can make simply by expanding capacity."