The optical fiber and cable industry is recovering, driven by the dual demand of offshore wind power and AI.

The optical fiber cable industry is experiencing a round of recovery. In 2023, affected by the slowdown in overseas telecom demand and the latency in domestic offshore wind power construction, the industry went through a period of stagnation, and valuations were compressed accordingly. However, at the beginning of 2024, the industry outlook began to improve. The restart of domestic offshore wind power projects, the increase in overseas cable demand, along with the rise in demand for high-end optical fibers driven by artificial intelligence, are collectively pushing the industry out of the trough.

The domestic offshore wind power construction shows signs of recovery, and the export of submarine cables is also steadily advancing. At the end of April 2024, a large offshore wind power project in Yangjiang, Guangdong, will start bidding, marking that the industry is accelerating its recovery. As a key component of offshore wind power construction, submarine cables are expected to benefit from this trend due to the high industry threshold. Meanwhile, leading domestic companies are gradually exploring overseas markets with their technological advantages. The dual drive from domestic and international markets is expected to help the submarine cable business emerge from its sluggish period.

Driven by artificial intelligence, specialty optical fibers have become important components, creating opportunities for domestic alternatives. Traditionally, the global optical fiber market has been dominated by standard optical fibers used in telecommunications and traditional data centers, with industry development closely related to the global telecommunications network construction cycle. However, with the growth of demand for artificial intelligence, high-end specialty optical fibers are ushering in new development opportunities. Currently, the specialty optical fibers mainly used in the field of artificial intelligence include polarization-maintaining fibers, doped fibers, and hollow fibers, which play important roles in different application scenarios. With the expansion of artificial intelligence computing centers and the increase in internal communication rates of data centers, the demand for these specialty optical fibers is expected to grow rapidly. At present, global artificial intelligence computing centers mostly use high-end optical fibers from overseas brands, which provides new supply chain opportunities for Chinese optical fiber and cable leading enterprises with deep technical accumulation.

In terms of investment advice, special optical fibers, as a high value-added, low-output product, require manufacturers to master the complete set of technologies from raw materials to production. The entry barrier is relatively high. Industry leaders that have experienced a complete industrial cycle are expected to fully benefit from the recovery of offshore wind power prosperity and the technological innovations driven by artificial intelligence and satellite communications. Among domestic companies, it is recommended to focus on Yangtze Optical Fibre and Cable Joint Stock Limited Company, Hengtong Optic-Electric, Zhongtian Technology, and FiberHome Technologies Group; at the same time, pay attention to emerging companies focusing on special optical fiber applications, such as TaiChen Guang and Changying Tong. On the international front, noteworthy companies include Corning, Furukawa Electric, and Fujikura, which are leading enterprises in the industry.

The risks to be aware of include the slower-than-expected development of artificial intelligence, delays in offshore wind power construction, and challenges brought about by technological iteration.