| Beginning in mid-2001 and extending through 2002, fibre and cable manufacturers have had to confront the collapse of the telecom market, which has led to a steep decline in fibre optic 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 fibre and cable suppliers. KMI Research, USA, a provider of market research and strategic consulting services for the optical networking industry, has tracked these changes and published them in the latest version of its annual report: �World-wide markets for optical fibre and fibre optic cable: market developments and forecast�. For example, the report, released in December 2002, shows that plant closings have reduced the number of fibre-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.
Mr Patrick Fay, lead author of the KMI report, said: �Some of the larger market participants with fibre 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�. Mr 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, as well as application and geographic segments. For example, he noted that world-wide fibre optic 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 USA and Western Europe. In 2002, terrestrial (not submarine) long-distance applications used 12 million km of cabled fibre, down from 26 million km in 2001 and 36 million km in 2000. This segment largely used more expensive non-zero dispersion-shifted (NZDS) fibre, so the changing mix of applications has had a major impact on the market in terms of sales. Mr. 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 USA was 37% of world-wide fibre optic cable installations. In 2002, this percentage had fallen to 21%. The amount of cable installed in the USA and Western Europe was 59% of the world-wide total in 2000, and this dropped to 34% in 2002. The fibre installed in the Asia-Pacific region was 54% of the world-wide total in 2002, and this percentage will remain above 50% throughout the five-year forecast (refer to graph). Mr. Fay said the strong demand in China, India, and Japan means 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 fibre 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, fibre count, fibre type, and other factors. Mr. Fay said KMI forecasts continued industry restructuring next year as the USA remains a weak market and as world-wide installations of fibre optic cable show only gradual growth. Slower growth means that in 2007, the world-wide fibre optic 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.
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| World-wide fibre optic cable installations by region, 2002 to 2004 |
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