Providence, RI, February 26, 2003. Beginning in mid-2001 and extending through 2002, fiber and cable manufacturers have had to confront the collapse of the telecom market, which has led to a steep decline in fiberoptic cable sales. The industry is meeting this challenge by shutting-down and "moth-balling" factories, consolidating facilities, and reducing staff. The result is a rapidly changing landscape for fiber and cable suppliers.
KMI Research has tracked these changes and published them in the latest version of its annual report, Worldwide Markets for Optical Fiber and Fiberoptic Cable: Market Developments and Forecast (released December 2002). For example, the report shows that plant closings have reduced the number of fiber-manufacturing facilities from a peak of 65 in 2000 to 46 that were operational for at least part of 2002. Recent plant closings mean that the number of facilities could decrease again in 2003.
Patrick Fay, lead author of the KMI report, noted that it's not just the smaller facilities being closed down. He said, "Some of the larger market participants with fiber plants in different countries have decided to close one or more plants, consolidating company-wide production to fewer facilities. Some of the factories being closed had capacity of several million km."
Fay noted that the recent industry turmoil is revealed not only in capacity and production data, but also in the report's assessment of installations, sales, inventories, prices, net imports and exports, and application and geographic segments. For example, he noted that worldwide fiberoptic cable sales dropped from $8.7 billion in 2001 to $3.5 billion in 2002, a decline he attributed to several factors, chiefly the steep decline in cable demand, and price erosion due to excess capacity as well as competition, and a change in the mix of applications.
The shift in applications and its effect on the market is due mainly to the collapse of long-distance telecom markets, especially in the U.S. and W. Europe. In 2002, terrestrial (not submarine) long-distance applications used 12 million km of cabled fiber, down from 26 million km in 2001 and 36 million km in 2000. This segment largely used more expensive non-zero dispersion-shifted (NZDS) fiber, so the changing mix of applications has had a major impact on the market in terms of sales ($).
Fay said another important aspect of the market's restructuring is the shift away from North America and Western Europe to Asia. For most of the 1990s and in 2000, the U.S. was 37% of worldwide fiberoptic cable installations. In 2002, this percentage had fallen to 21%. The amount of cable installed in the U.S. and Western Europe was 59% of the worldwide total in 2000, and this dropped to 34% in 2002. The fiber installed in the Asia-Pacific region was 54% of the worldwide total in 2002, and this percentage will remain above 50% throughout the five-year forecast. Fay said the strong demand in China, India, and Japan mean the Asia-Pacific region has three of the world's top four markets.
Another factor affecting the market in 2002 was the build-up of cable inventories during 2000 and 2001. The KMI report shows that more than 16 million km of cabled fiber have accumulated in inventory since 2000. Some of this inventoried cable was installed in late 2001 or 2002, and affected new cable sales, but not all of this inventory will be used up, due to its location, ownership status, fiber count, fiber type, and other factors.
Fay said KMI forecasts continued industry restructuring next year as the U.S. remains a weak market and as worldwide installations of fiberoptic cable show only gradual growth. Slower growth means that in 2007, the worldwide fiberoptic cable market will still be well below that of the peak in 2000. But by then, industry participants will have responded to the market changes, and there will be a better balance between the number of suppliers and the demand.
For more information and to view a full Table of Contents, visit www.kmiresearch.com .