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Optical fiber supply continues to outstrip demand

Supply and demand of optical fiber are badly mismatched, according to a market report from KMI Research.

Three years after the burst of the telecom bubble the optical fiber industry is still out of balance and more consolidation is required, according to a recent market report by KMI Research of the US.

The January 2004 report, “Worldwide optical fiber and cable markets: market developments and forecast”, says that between 2001 and 2003 fiber shipments dropped by 47% while worldwide fiber-making capacity decreased by only 10%. To indicate the size of the problem, last year demand fell to 63.5 million km while plants were still capable of producing 145 million km of fiber.

According to the report, this overcapacity has resulted in aggressive price competition. “For the 47 fiber-manufacturing facilities that operated for at least part of 2003, average-capacity utilization for all facilities was less than 50%,” says KMI. “This overcapacity meant that the worldwide average price for conventional singlemode fiber fell from $35 per km in 2001 to a record low of $15 per km in 2003.”

The report also reveals that there has also been a dramatic shift in the geography of fiber demand. Asia accounted for 66% of all cable-fiber shipments in 2003, up from 29% in 2000. During the same period North America fell from a 40% market share to 18%.

According to KMI, in the US, the world’s most developed telecommunications market, the long-distance market is saturated and metropolitan rings in and around major cities have been completed. As a result, Asian countries have now become the most important consumers of fiber.

The report says that thanks to its rapid development China has continued extensive fiber deployment while Japan is still hungry for fiber as part nationwide fiber-to-the-home (FTTH) plans. Between them these two countries accounted for 55% of all the optical fiber installed last year.

Author
Oliver Graydon is editor of Optics.org and Opto & Laser Europe magazine.

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