Analysis of increasing price for fiber optical cable

The AI infrastructure boom is not just raising memory prices – optical fiber costs are soaring as well, giving telcos something else to think about as they grapple with the emergence of AI.

The strongest marker is the price of a single-mode G.652.D optical fiber, the mainstay of the carrier market, which rose 75% in January and is at its highest price in seven years.

The China Electronic Components Industry Association has said China's four major optical fiber vendors are operating at full capacity and that foreign vendors are also close to their limit.

It says the supply-demand imbalance is unlikely to ease in the short term and that industry prices are expected to remain high.

The market generally believes that rising demand for AI data centers is the primary driver, while major suppliers are already operating at full capacity, creating a backdrop of both increasing volume and rising prices in the industry.

The sudden rise in fiber costs also appears to have hit China's telco construction plans.

Fiber rollout suspended 

China Telecom has suspended two optical projects in Guangdong because of the cost hikes.

For the Chinese optical sector, there’s also another factor: Russian and Ukrainian drones. Since mid-2024, the two countries have been deploying FPV (first person view) drones connected by long fiber cables in order to evade jamming. 

Typically each has a range of 10 to 20 kilometers, with some devices capable of flying over 30 kilometers, using bendable G.657.A2 fiber.

The higher prices and heavy demand are now showing up in vendors’ bottom lines. Most notably Corning Inc. last week reported a 71% jump in Q4 net earnings in its optical division. It has also just signed a $6 billion deal to supply Meta’s data centers – equivalent to its entire optical revenue last year. It has forecast 15% higher sales in Q1.

The spike in prices has driven Corning’s stock up 47% this year and has had a similar effect on other vendors, with Ciena 24% higher and Coherent gaining 12%, while China’s two biggest suppliers, YOFC and Hengtong, have risen 119% and 55% respectively.