Cat Brother Research Post (2): Optical Fiber and Optical Preform (1)

Let me introduce fiber optic rods to help beginners understand the industry. [Taoguba]
If fiber optics continue to diverge, there may be opportunities for low-cost absorption. Watch which stocks lead (not just the ones mentioned in the basic knowledge section below).

1. Background
   By 2026, China’s fiber optic industry is undergoing a structural transformation driven by AI computing power demand. The overall market demand is expected to be about 233 million core kilometers. On the supply side, due to severe capacity expansion bottlenecks in upstream core raw materials—fiber optic preform rods (fiber rods)—the industry has entered a “supply-demand balance” state, with high-end products in short supply.

2. Industry Landscape

3. China is the world’s largest fiber optic producer, accounting for about 64% of global capacity.

4. Domestic total capacity limit: 550-575 million core kilometers.

5. Four major domestic players: Yangtze Optical Fiber & Cable, Hengtong Optoelectronics, Zhongtian Technology, FiberHome Technologies. (Not recommendations)

6. Combined capacity of the four giants: about 380 million core kilometers, roughly 60% of domestic total capacity.

7. Fiber rod capacity of the four giants: about 48,000 tons/year, supporting approximately 500 million core kilometers of fiber production.

8. Demand Driven (AI computing power demand)
   A single 10,000-core AI cluster requires about 100,000 core kilometers of fiber. Globally, over 50 new AI clusters are expected in 2026, increasing demand by over 5 million core kilometers.
   Unmanned aerial vehicle dedicated networks: 50 million core kilometers in 2025 → over 80 million in 2026 (+60%)
   Global capacity gap in 2026 is projected to reach 180 million core kilometers.
   Leading international companies like Corning, Tohoku, and Preformed have reached full capacity in their fiber cable capacity by Q2 2025 and are purchasing from China. Domestic four giants’ fiber rod capacities are also at full capacity.

9. Supply Bottleneck (mainly fiber rods)

10. Expansion cycle for fiber preform rods is long: 2-3 years for new capacity, with investments over 2 billion RMB for 10,000 tons.

11. Existing capacity is saturated: top manufacturers utilization rates exceed 90%, overseas leaders (Corning, Tohoku) reach 100%.

12. Fiber rod capacity determines fiber production limits: 48,000 tons of fiber rods can support about 500 million core kilometers of fiber.

13. Price Trends Driven by Supply and Demand
    Prices have surged: 657 A2 special optical fiber prices surpass 100 RMB per core kilometer; 652D standard fiber exceeds 60 RMB per kilometer.
    Compared to the low point in 2024 (around 40 RMB), prices have increased by over 50%, with daily fluctuations reaching record highs.

14. Basic Information on the Four Major Domestic Giants
    Yangtze Optical Fiber & Cable

15. Global leader focused on optical communications. Owns the world’s largest fiber preform capacity with 100% self-sufficiency in fiber rods.

16. Fiber capacity: 120-150 million core kilometers/year.

17. Market position: third globally, alongside Corning and Prysmian in the top tier.

18. 3-month stock increase: 170.33%. Total market cap: 195.4 billion RMB.

19. Core logic: Deeply benefits from AI computing power demand; 22% of high-end North American orders.

Zhongtian Technology

1. Diversified industry giant across four major sectors: fiber optic cables, power grid construction, offshore wind power, new energy.
2. Fiber capacity: 90 million core kilometers/year.
3. Fiber rod self-sufficiency: about 85%. Special fiber proportion: about 30%.
4. Total market cap: approximately 98.26 billion RMB.

Hengtong Optoelectronics

1. Fiber capacity: 100 million core kilometers/year + 600 tons of fiber preform rods from subsidiary Inner Mongolia Hengtong Optical Fiber.
2. R&D center for advanced fiber materials (Suzhou Wujiang): over 200 acres, producing ultra-low loss hollow-core fiber, ultra-low loss multi-core fiber, high-performance multi-band multi-mode fiber, etc., urgently needed for AI computing power.

FiberHome Technologies

1. Fiber rod capacity to increase to over 3,000 tons, becoming the second-largest fiber rod producer domestically. By 2026, multi-mode fiber with 4 million core kilometers will directly serve 1.6T computing centers.

2. Next-generation communication infrastructure and digital economy base (Wuhan Optical Valley).

3. R&D investment: over 12% of annual revenue, improving profitability; gross profit margin of 22.42%, above industry average.

4. Other Companies
   Many are interested in Falsun. According to circulating online information, a prominent analyst suggests Falsun is about one-third of Yangtze Optical Fiber & Cable. Yangtze’s market cap is around 200 billion RMB, implying Falsun could be over 65 billion RMB. Currently, Falsun is about 3.5 billion RMB, leaving roughly 20 times room for growth.
   Another circulating chart shows Yangtze’s fiber capacity at 100 million core kilometers, Falsun’s current actual capacity at over 16.5 million, plus Suqian Changguang at 16 million, totaling 32.5 million. From a capacity perspective, Yangtze’s is about three times that of Falsun.

When reviewing this information, always verify rather than blindly follow.

Note: This is not a recommendation.

Falsun

1. Business focus: mainly metal products (steel wires, steel ropes), accounting for over 86% of revenue. Its fiber business is mainly through the equity stake in “Putu Falsun Optical Communication Co., Ltd.” (holding 19%).

2. Verification of circulating “current actual capacity of 16.5 million”

1. June 2012, Falsun announced: the company and China Putu jointly invested to establish Putu Falsun, aiming to quickly form a business scale of 10 million core kilometers of fiber and 11 million core kilometers of cable by integrating resources.
2. 2011-2012, China Securities Journal reported: after establishing the joint venture, plans to expand capacity rapidly to reach 10 million core kilometers of fiber annually.
3. October 2012, Putu Falsun general manager Liang Letian confirmed in an interview that the new joint venture planned an annual production scale of 10 million core kilometers of fiber.
4. April 2013, VicoNet reported that after the joint venture was established and began operations, further expansion was planned, aiming to reach 20 million core kilometers of fiber within five years.
   Thus, the “current actual capacity of 16.5 million” is roughly credible.

3. Verification of circulating “Suqian Changguang 16 million”

1. Suqian Changguang refers to Jiangsu Falsun Changguang Communication Technology Co., Ltd.
2. Shareholder background: Falsun Group, Changguang Communication, Suqian Economic Development Group.
3. Capacity: Suqian Daily and Environmental Impact Reports show: 500 tons of fiber rods, 16 million core kilometers of fiber.
   Therefore, “Suqian Changguang 16 million” is correct.

However, it’s important to clarify relationships among parent and subsidiary companies:

1. Falsun Hongsheng Group is the controlling shareholder of the listed company “Falsun” (000890).

2. Jiangsu Falsun Changguang Communication Technology Co., Ltd. (Suqian Changguang 16 million) is a controlled subsidiary of Falsun Hongsheng Group, parallel to the listed company “Falsun” (000890).

3. Jiangsu Falsun Optoelectronics Technology Co., Ltd. is a wholly owned subsidiary of Falsun Hongsheng Group, parallel to the listed “Falsun.”

4. Putu Falsun Optical Communication Co., Ltd. (current capacity 16.5 million), is partially held by the listed “Falsun” (000890).
   Thus, Suqian Changguang and the listed “Falsun” are sibling companies; the 16 million core kilometers capacity cannot be consolidated directly. The entire Falsun Hongsheng Group (or its optical communication division) owns about 32.5 million core kilometers capacity.

5. Risks: Capital preservation
   According to the 2025 third-quarter report, Falsun faces serious financial risks:

1. Net assets attributable to parent: -5.5431 million RMB. If the annual report remains negative, it will be *ST.
2. Operating revenue: 205 million RMB. If below 300 million and net profit is negative, it will be *ST.
3. Filing date for annual report: April 23.
4. Capital preservation measures:

• Controlling shareholder’s cash donation of 85 million RMB (by December 2025), directly added to capital reserves to increase net assets.
• Sale of 10% stake in Bekaert steel cord, for 161 million RMB, approved at the shareholder meeting on March 4, 2026.

That’s all for now. Due to space and timing constraints, some hot stocks like Tongding Interconnection are not covered. Friends are encouraged to do further research.