Global fiber shortage threatens 5G and data center infrastructure

According to a report by the Financial Times (FT.com), market intelligence company Cru Group recently revealed that a global shortage of fiber optic cables has pushed up product prices, extended supply lead times, and cast a shadow on ambitious industry plans for advanced telecommunications infrastructure.

As the Financial Times website reports, the timing couldn't be worse. Governments around the world have set ambitious targets for rolling out ultra-fast broadband and 5G infrastructure, both of which of course require laying large amounts of fiber-optic cables underground. At the same time, the report notes, companies such as Amazon, Google, Microsoft and Facebook's parent company Meta are expanding their data centers around the world to meet growing demand, including deploying undersea fiber-optic cables around the world.

Fiber optic prices hit 3-year high

According to the Financial Times website, Cru's analysis shows that fiber prices have now reached their highest level since July 2019. North America has been less severely affected than Europe, China and India, but this situation may not last long.

At the same time, the price surge has led to a significant increase in delivery times for optical fibre, with delivery times for small customers extending from 20 weeks to nearly a year, the report said. Ankit Agarwal, managing director of STL, one of the UK's largest optical fibre suppliers, told the Financial Times website: "We are all prioritising the fastest delivery speeds for our largest customers."

Cru Group said Europe, India and China were among the regions in the world hardest hit by the price increases, with the analyst saying fibre costs had risen 70% from a record low in March 2021, from $3.70 per kilometre to $6.30.

The report noted that Cru estimates that total cable TV consumption in the first half of 2022 increased 8.1% compared to the same period last year.

The analyst said China accounted for 46% of total consumption, and North America was the fastest growing region, with a year-on-year increase of 15%.

"I've never seen deflation like this in my career," Wendell Weeks, CEO of Corning, was quoted by the Financial Times website as saying. Corning is one of the world's top fiber optic cable producers. Weeks noted that the company has been significantly increasing production to meet exponential demand from governments, telecom companies and large technology companies, including building new facilities in the United States and Europe.

Rising raw material costs

Notably, the report highlights that the root cause of the cable shortage is the rising prices of some key components in the manufacturing of fiber optic technology.

The report said the price of helium, a key component in making fiber-optic glass, had risen 135 percent over the past two years, mainly due to factory shutdowns in Russia and the United States.

Meanwhile, prices for silicon tetrachloride, another key component in optical fiber manufacturing, have risen 50%, according to Cru.

“Given that deployment costs have suddenly doubled, there are now doubts as to whether countries will be able to meet the targets they have set for infrastructure rollout, and whether this will have an impact on global connectivity,” Cru analyst Michael Finch told the FT website.