Price, lead times and scarcity of fiber optics may derail projects

Cost of optical cable more than doubles in 16 months as demand goes through roof

The price of fiber optic cables is shooting up, more than doubling in just 16 months due to massive demand from datacenter and network providers with supply shortfall exacerbated by disruption in production.

According to market researcher Cru Group, average prices have soared from record lows of $3.70 per fiber kilometer in March 2021 to $6.30, and this could dampen the deadlines for significant projects.

“Given that the cost of deployment has suddenly doubled, there are now questions around whether countries are going to be able to meet targets set for infrastructure build, and whether this could have an impact on global connectivity,” said Michael Finch, a Cru analyst who spoke to the FT.

Fiber optic cable use grew 8.1 percent year-on-year in the first half of calendar 2022, data collated by Cru indicates. It said China comprised 46 percent of global usage and North America, where demand grew the fastest, accounted for some 15 percent of the world total.

Among the component shortages creating the cable deficit is helium, which is produced by fabrication plants in the US and Russia that have experienced outages in the past this year. The cost of liquid helium itself has more than doubled in the past two years to $2,000 per 100-liter dewar. Silicon tetrachloride has also doubled, according to Cru.

Wendell Weeks, CEO at Corning, one of the biggest producers of fiber optic cables worldwide and which helped to invent the tech in the 1970s, said he is in uncharted territory.

"In my professional career I've never seen anything like this inflationary crunch," he said. Corning is upping manufacturing on the back of demand from telecoms businesses and big tech.

"It's going to continue to be tight for a while but we’ll get through this hyper-crunch," he added.

Optical communication remains Corning's biggest market, and it said in calendar Q1 it grew 28 percent to $1.3 billion in revenues.

"At the pace that datacenter construction is accelerating and fiber-rich wireless deployments are underway, we continue to be energized by the momentum that is building," said Weeks on a Q1 earnings call in April to investors, hitting a more upbeat tone.

Lead times for fiber optic cables now stretch from 20 weeks to more than a year for smaller buyers, according to Martijn Blanken, chief exec at digital infrastructure provider Exa Infrastructure.

Simon Hansford, CEO at UKCloud, said prices of the cables had gone up by as much as 50 percent in the UK. He said the "scarcity of supply and long lead times make capacity planning an issue and hence introduces another complexity."

Cru reckons supply in the US is faring relatively better than in Europe or China. Backing this up is a February report [PDF] by the Department of Commerce and Homeland Security, which claimed the domestic production of fiber optic cables stateside is a bright spot. Why? Stimulus packages.

The Federal broadband policy includes the Federal Communications Commission's Rural Digital Opportunity Fund of $20.4 billion and the Infrastructure Investment and Jobs Act, which has $1.2 trillion to invest, $550 billion of which is new federal spending. Major manufacturers including Corning confirmed cap-ex spending of $275 million in 2021, the report adds.

The Reg has asked British national telecoms giant BT, as well as Microsoft, AWS, Google and Meta to comment. ®

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