The boom in optical communication is rising, and domestic fiber optic prices are soaring. What's the logic behind this?

Fiber optic cables are experiencing an unprecedented boom cycle.

On one side is a historic breakthrough in prices, with mainstream fiber optic products reaching nearly a seven-year high, domestic operators’ centralized procurement prices doubling, and Chinese fiber optic prices surpassing European and Indian markets for the first time in over seven years; on the other side is a comprehensive demand surge, with overseas orders flooding in, domestic manufacturers operating at full capacity yet still in short supply, and export volume and prices rising significantly.

On April 3rd, the computing power sector rebounded again, with A-share optical communication and fiber optic concept stocks performing strongly, including Hengtong Optoelectronics (600487.SH), Guangxun Technology (002281.SZ), Dongshan Precision (002384.SZ), Changxin Bochuang (300548.SZ), FiberHome Communications (600498.SH), among others. The largest index ETF, Huaxia Communication ETF (515050), rose over 2.5% intraday, attracting 112 million yuan in net inflows over the past 20 days. The lowest-fee ETF in the same category, Huaxia Artificial Intelligence ETF (159381), increased over 2%.

Domestic fiber enters a volume and price rising channel

Looking at core product prices, CRU data shows that the most widely used G.652.D single-mode fiber in communication and computing applications was still hovering at a low of 18-20 yuan per core-kilometer in November last year. By February this year, the market average had stabilized above 40 yuan per core-kilometer, with some urgent orders quoted at over 50 yuan per core-kilometer, hitting a new high since 2019; in just three months, the cumulative increase ranged from 94% to 144%, with the monthly increase from November 2025 to January 2026 exceeding 80%, driving Chinese fiber prices to surpass European and Indian markets for the first time in seven years.

Specialty fibers saw even more rapid price increases, with high-end products’ premium capabilities continuing to stand out. For example, G.657.A2 fibers used in military and data centers are priced at 60-70 yuan per core-kilometer, while ultra-low-loss G.654.E fibers for AI infrastructure have risen to 240-260 yuan per core-kilometer, with monthly increases maintained at 30%-40%. The frontier hollow-core fiber market prices have even reached 25k-50k yuan per core-kilometer.

Traditionally “price-sensitive” operators are now adopting a “chasing the rise” pricing approach in their centralized procurement. In January 2026, Guangdong Telecom increased the maximum limit price for GYTA-24 core cable from 1,245 yuan per km to 2,500 yuan per km, an increase of over 100%. But this was just the beginning—on March 22nd, Heilongjiang Telecom issued an emergency procurement notice, further raising the price limit for the same specification cable to 3,737.43 yuan per km, equivalent to about 155.7 yuan per single core-kilometer, a surge of 246% over the spot market benchmark. The traditional “low-price priority” logic in centralized procurement has failed, marking a complete shift of fiber pricing power from buyers to sellers.

Exports are also showing a “burst order” trend, with overseas markets actively purchasing Chinese fiber. Customs data shows that in February 2026, China exported 3,779.9 tons of fiber, worth 790 million yuan, with year-on-year increases of 63.6% and 126.8%, respectively. Converted into length, the export volume in February was about 25.2 million core-kilometers, accounting for roughly 65% of the domestic fiber monthly effective production. When including fiber used in cable exports, the actual export share would be even higher.

Domestic fiber manufacturers report that since late 2025, overseas orders from South America, the Middle East, Africa, and Southeast Asia have grown significantly, with delivery cycles generally compressed to within half a month. Some companies’ fiber exports in the first two months increased by 51% year-on-year. Current capacity is fully booked, with urgent expansions and new production lines underway to meet market demand. CITIC Securities states that domestic fiber suppliers are now in a “no worries about sales” high prosperity state.

What is the logic behind fiber price increases?

In summary, the current fiber optic cable price rise results from the resonance of new demand from AI computing power and drone markets, combined with rigid supply-side constraints. On the demand side, AI data centers significantly increase fiber usage density, coupled with emerging military drone consumption markets, sharply boosting fiber demand. On the supply side, fiber capacity is highly concentrated, and the long expansion cycle of fiber preform production has become a “hard constraint,” with supply-demand mismatch driving continuous price increases.

AI is a “light”: computing centers become major fiber demand drivers

The reason for the sustained expansion and upgrading of the optical communication industry’s prosperity is due to profound changes in its core driving forces.

Once, optical communication was like building “digital highways” (fiber to the home) and “information overpasses” (5G base stations). Now, it has welcomed a more heavyweight customer—AI computing power. This time, it’s no longer just about building roads but constructing “neural networks” for super brains.

The explosion in global intelligent computing centers has become the core engine of demand for optical communication. Unlike traditional data centers that mainly rely on CPU computing, storage, and external service traffic, AI computing centers need to support high-density GPU clusters working collaboratively. Thousands of GPUs exchange massive data (such as model parameters and gradients) in real-time and at high frequency during training tasks. This results in extremely complex and dense internal network architectures (like InfiniBand or RoCE Ethernet). Guosheng Securities estimates that a single cabinet can consume fiber equivalent to 5-10 times that of traditional data centers.

To illustrate, if we compare an AI computing center to a “super brain” in thought, fiber is like its intricate network of neural fibers, determining the scale and connectivity of the computing cluster. Fiber modules are like efficient, precise “signal converters” at each nerve ending, responsible for high-speed, accurate conversion between electrical and optical signals, affecting transmission speed, efficiency, and energy consumption. One solves the “connection scale” problem, the other the “communication efficiency” problem, together supporting the AI’s computing power foundation.

By 2025, global fiber demand is expected to grow by 4.1% year-on-year, but demand in data centers will surge by 75.9%, showing explosive growth. Structural changes are even more pronounced: according to CRU data, AI-related fiber demand will jump from 5% in 2024 to 30% in 2027. At that time, global annual fiber demand for data centers is projected to reach 880 million core-kilometers. Overseas cloud giants are accelerating their computing investments; Amazon (AMZN.US), Microsoft (MSFT.US), Google, and Meta (META.US) have announced combined capital expenditures exceeding $600 billion in 2026, mainly for AI infrastructure, continuously boosting fiber demand.

Drones: Important “consumables”

In military applications, fiber-guided drones are becoming a significant incremental demand, transforming fiber from “one-time infrastructure” into “high-frequency consumables.”

Fiber-guided drones (such as cruise missiles) need to continuously release fiber during flight for guidance. This “kite string” is non-recyclable and consumes a large amount per aircraft, making it a typical high-consumption product. Currently, global annual demand in this field has rapidly risen to about 50 million core-kilometers, expected to reach 80 million core-kilometers by 2026, providing stable incremental demand for the industry.

Global supply chain restructuring: domestic fiber going abroad enters a golden period

China is the world’s largest fiber optic cable producer with the most complete industry chain. In 2025, China’s fiber optic shipments reached 372 million core-kilometers, a 7.5% YoY increase, accounting for 56.3% of global shipments, with its dominant position in the global supply chain continuing to strengthen.

Geopolitical shifts are reshaping the supply chain, further amplifying demand for domestically produced fiber. For example, Russia’s local fiber production capacity has ceased, and nearly 100% of the fiber needed for domestic optical communication construction depends on imports. China has become its main supplier, with fiber export prices to Russia increasing 2.5 to 4 times since 2026. Meanwhile, digital infrastructure projects in emerging markets like South America, the Middle East, Africa, and Southeast Asia are accelerating, with overseas orders exploding, supporting the growth of domestic fiber demand.

Rigid supply: the key confidence for price hikes

The dual surge in demand is already strong, and the rigid constraints on supply provide long-term support for price increases.

The fiber industry chain follows a strict “preform—fiber—cable” production process, with the preform being the core and highest barrier to entry, directly determining the industry’s supply ceiling. The expansion cycle for preforms is 18-24 months; even if manufacturers start expanding immediately, new capacity cannot be released until after 2027. Coupled with previous industry price wars clearing excess capacity, most manufacturers are cautious about large-scale expansion. The core characteristics of preforms make it difficult for supply to quickly catch up with demand surges.

Current capacity is near maximum. Since January 2026, fiber preform supply has been tight globally, with capacity approaching full utilization. China’s four major fiber leaders’ preform lines are operating at full capacity, and overseas capacity utilization remains high. Meanwhile, structural mismatches in capacity further widen the supply-demand gap: manufacturers prioritize producing high-value specialty fibers, which have 10%-15% lower drawing efficiency than mainstream G.652.D fibers, consuming more preform capacity and creating a “more needed, more scarce, more expensive” positive cycle.

Estimates show that by 2026, the global fiber shortage will reach 180 million core-kilometers, with a shortage rate of 16.4%. The supply-demand tight balance is expected to persist until at least the end of 2027, with a highly certain price increase cycle.

Analysis of the fiber industry chain

The fiber optic cable industry chain has a “pyramid” structure, with core barriers concentrated upstream. Downstream applications are continuously expanding, and technological iteration is driving the industry from scale competition to value competition.

Upstream core: preforms, which are the profit core and highest barrier, accounting for about 70% of the industry’s profit. Their quality directly affects fiber transmission performance and is the current industry bottleneck. Companies with independent R&D and large-scale production of preforms are better positioned to benefit from this price increase cycle and enjoy the performance dividends from volume and price growth.

Midstream manufacturing: fiber drawing and cable assembly, transforming preforms into fiber and then into cables through sheathing and cabling processes. This is capital-intensive. Companies with large-scale production and full industry chain layout have stronger cost advantages and risk resilience, enabling faster response during industry booms.

Downstream applications: demand has fully upgraded from traditional telecom networks and fiber-to-the-home to AI data centers, data center interconnects (DCI), military guidance, ocean communications, new energy, and more. The demand structure has shifted from single To G to diversified To B and global markets, opening new growth ceilings.

Meanwhile, technological innovation continues, with breakthroughs in hollow-core and multi-core fibers, and high-end specialty fibers for AI infrastructure commanding premium prices. The industry is entering a new valuation cycle.

Given the high prosperity of the fiber industry, leading companies with core competitiveness (such as Yangtze Optical Fibre and Cable (601869.SH), Hengtong Optoelectronics, Zhongtian Technology (600522.SH), FiberHome, etc.) are expected to be the biggest beneficiaries. Additionally, related companies in the computing power supply chain—fiber modules, liquid cooling, servers—will also benefit from coordinated growth (e.g., Zhongji Xuchuang (300308.SZ), Xinyi Sheng (300502.SZ), Tianfu Communications (300394.SZ), Huagong Tech (000988.SZ), Tengjing Tech (688195.SH), Fujian Fuyuan (601138.SH), Inspur (000977.SZ), Unisoc (000938.SZ), ZTE (000063.SZ), InnoTek (002837.SZ)).

For ordinary investors, the fiber computing power sector has many subdivided segments with high volatility. Investing via ETFs is an efficient and convenient way to gain broad exposure to core industry targets and diversify risk. Focus on computing power-related ETFs such as:

Data sources: iFinD

Communication ETF Huaxia (515050)

Tracks the CSI 5G Communication Theme Index, with a recent size of nearly 8 billion yuan, covering core infrastructure fields like optical modules, fiber optic cables, communication equipment, and storage. The combined weight of CPO+CPB concept stocks exceeds 76%, ranking first in the market. Top holdings include leading optical module and fiber cable companies like Zhongji Xuchuang, Xinyi Sheng, Tianfu Communications, Dongshan Precision, Hengtong Optoelectronics, as well as Luxshare Precision (002475.SZ), Fujian Fuyuan, GigaDevice (603986.SH), balancing growth and stability, suitable for long-term infrastructure investment. ( Class A: 008086; Class C: 008087 ).

ChiNext Artificial Intelligence ETF Huaxia (159381)

Nearly half of the index’s weight is concentrated in optical module CPO sectors, with the other half covering AI software applications, forming a “hardware + application” balanced layout aligned with AI expansion and large model deployment. The top 10 holdings include Zhongji Xuchuang (11.8%), Xinyi Sheng (11.2%), Tianfu Communications (10.7%), Runze Technology (300442.SZ), BlueFocus (300058.SZ), Xiechuang Data (300857.SZ), Kunlun Wanyou (300418.SZ), Beijing Junzheng (300223.SZ), Wangsu Science & Technology (300017.SZ), Runhe Software (300339.SZ), covering core hardware and AI application leaders. The fund’s size is nearly 2 billion yuan, with a low total expense ratio of 0.20%, suitable for high-flexibility investors optimistic about AI+ themes. Off-market connect (A: 025505; C: 025506).

Cloud Computing ETF Huaxia (516630)

Focuses on domestic AI hardware and software computing power, with over 80% weight in software, cloud services, and computing equipment, deeply covering the DeepSeek industry chain, benefiting from domestic large model upgrades and autonomous computing power. The total expense ratio is only 0.20%, ideal for investors bullish on domestic computing power development. Off-market connect (A: 019868; C: 019869).

Note: All ETFs mentioned above do not charge subscription, redemption, or sales service fees. The agents for subscription and redemption may charge commissions up to 0.5%, including related fees from stock exchanges and settlement agencies; also, the management and custody fee rates are as follows:

Data sources: iFinD, brokerage research reports, Huaxia Fund, etc. The above stocks are not recommendations. As of March 2, 2026, they are not advised for investment. The products mentioned have a risk level of R4 (medium-high risk). All are stock funds with higher risk and return than hybrid, bond, or money market funds. Investors should carefully read the fund’s legal documents such as the “Fund Contract,” “Prospectus,” and “Product Summary” before investing, fully understand the risk-return profile and product features, and consider their own risk tolerance based on investment goals, time horizon, experience, and asset situation. Make rational and cautious investment decisions based on understanding the product and sales suitability, and bear the investment risks independently. Index performance does not represent product performance, and secondary market prices do not reflect net asset value performance. As ETF funds, investors face risks such as tracking error, index provider discontinuation, component suspension, divergence from the index, index volatility, deviation of fund returns from the index, index changes, premium/discount in secondary trading, errors in subscription/redemption, IOPV calculation errors, delisting risks, redemption failure risks, valuation risks, derivative investment risks, etc. For ETF linked funds, the assets mainly invest in target ETFs, which generally maintain a high proportion of target ETF holdings, and their net asset value may fluctuate with the target ETF. Risks related to the target ETF may directly or indirectly affect the ETF linked fund. Specific risks include tracking deviation, performance divergence from target ETF, index provider discontinuation, index changes, component suspension or default, etc. This document is not a legal document and is for reference only. All information or opinions expressed do not constitute final investment, legal, accounting, or tax advice. Our company does not guarantee the final operational advice based on this information. Under no circumstances shall we be liable for any losses caused by the use of this information. The market is risky; please invest cautiously.