China's massive fiber installation efforts expected to spur a healthy market

Oct. 1, 1999

China is the world's fastest-growing market for fiber-optic communications, and by 2004, it will have installed more fiber in the feeder and access networks than the United States, according to a new report by KMI Corp., a Rhode Island-based market-research firm. According to the report, entitled Optical Fiber and Fiberoptic Cable Markets in China, a massive deployment of fiber systems at the access level is being planned for China later this year.

In 1998, 1.6 million km of fiber cable was installed in China's feeder and distribution systems. KMI predicts an annual increase from 2.9 million cabled fiber-km in 1999 to 11.2 million in 2004, a compound annual growth rate (CAGR) of 39%. This amount compares with a similar forecast in the United States for 2004.

At the end of 1997, China had installed 4.1 million km of fiber cable, representing more than 11% of the world market. The report indicates fiber-optic cable demand will continue to increase from 5.2 million km in 1998 to nearly 13 million km in 2004, making China the world's largest market for fiber-optic cable outside the United States. Currently, 14 joint-venture cable manufacturers in China supply more than 80% of the country's cable requirement.

The annual growth in demand for fiber-optic cable will be 10% to 20% from 1998 to 2004 with a market value increasing from $675 million in 1998 to more than $1 billion in 2004, a CAGR of 7%. In the past, China has imported fiber from the United States, Japan, and other countries. The imported percentage is expected to remain at least up to 30% until 2003. KMI's report forecasts that the market for bare fiber will grow from $231 million in 1998 to $400 million in 2004, a CAGR of nearly 10%.

The drivers for such rapid growth in fiber-optic systems in China include demographics and geography as well as China's understanding that the key to economic superiority is communications. By 2004, China will see its number of telephone subscribers increase from 110 million in 1997 to 250 million in 2004, a 15% CAGR. Nationwide telephone penetration will increase to 22%, up from only 8% in 1997. This growth will exceed the capacity of public local-telephone-exchange lines, which will reach 240 million by 2004.

Consistent with the rest of the world, China is strongly affected by Internet usage. In January 1999, there were about 3.8 million Internet users in China. That number will increase to 6.7 million by the end of this year, and reach 15 million by 2001, a CAGR of 93%.

KMI's report details fiber pricing, up-to-date analysis of China's telecommunications providers, and the effect of foreign investment, mobile telephones, the Internet, and cable TV.

This report is available from KMI Corp. by calling (401) 849-6771, fax (401) 847-5866, or e-mail: [email protected].