Fibre makers ride the AI wave

• The ongoing massive investments in AI infrastructure are driving increasing demand for optical fibre products
• India’s HFCL and STL, as well as Corning and Prysmian, are reaping the benefits

One of the ‘picks and shovels’ tech sectors benefitting from the current AI infrastructure investment cycle is optical fibre, an essential component inside datacentres and in the data transport networks that connect them.  

New Delhi, India-based HFCL, which manufactures optical cables and networking equipment, has told investors in this stock exchange announcement that due to its “strong order book for optical fiber cable (OFC) and optical connectivity products” as well as “a strong pipeline” of medium-term business opportunities and “the favourable long-term demand outlook globally”, it has decided to invest 4bn rupees ($42m) to expand its optical fibre and OFC manufacturing capacity. 

That expansion is in addition to an existing expansion programme that will result in HFCL’s optical fibre manufacturing capacity increasing from 28 million fibre kms per year to 33.9 million  fibre kms per year and its OFC manufacturing capacity from 34 fibre kms per year to 42.36  fibre kms per year. 

The company noted that optical fibre product demand is being driven by “increasing investments in artificial intelligence (AI) infrastructure, hyperscale datacentres, cloud computing, high-performance computing, 5G deployments, FTTH and broadband expansion, enterprise fibreisation [sic], rural connectivity initiatives and telecom network modernisation programmes.”

That news followed the recent earnings announcement from giant US fibre maker Corning, which reported a 32% year on year increase in second quarter revenues for its Optical Communications division to almost $2.1bn. Optical Communications is the largest by sales of Corning’s five divisions, the others being: Glass Innovations (the next largest unit); Automotive; Solar; and Life Sciences and Emerging Growth Businesses. Across all divisions, Corning reported a 17% year on year increase in revenues to $4.74bn. 

At its investor day held in May, Corning updated its internal Springboard Plan, which includes annual revenue targets of $20bn by the end of this year, $30bn by the end of 2028, and $40bn by the end of 2030. Corning recently announced a multibillion-dollar agreement to supply its optical fibre, cable, and connectivity solutions to Amazon Web Services (AWS) to support the hyperscaler’s datacentre expansion in the US. 

And in May, as part of a multiyear commercial and technology partnership with Nvidia to “dramatically expand US-based manufacturing of the advanced optical connectivity solutions needed to power next-generation AI infrastructure”, Corning pledged to “increase its US-based optical connectivity manufacturing capacity by 10x and expand its US fibre production capacity by more than 50% to meet the accelerating demand driven by AI factory buildouts.” 

They aren’t the only optical fibre vendors benefiting from the AI infrastructure investment cycle. Mumbai-based STL (Sterlite Technologies Ltd) recently reported its highest ever quarterly revenues and highlighted a number of major orders, including a multi-year deal with a hyperscaler worth $1.1bn to “supply optical connectivity products for next-generation AI datacentres”. For its fiscal first quarter that ended on 30 June it reported revenues of 19.1bn rupees ($201m), up by 87%, and EBITDA of 3.97bn rupees ($42m), up by 184%. 

Ankit Agarwal, the vendor’s managing director, noted that the fiscal first quarter had been “the strongest quarter in STL’s history. Our highest-ever revenue and profitability reflect the strength of our AI-ready digital infrastructure portfolio and the trust hyperscalers and telecom operators are placing in us. The rapid scale-up in our Data Center business shows how decisively we’ve aligned with the AI infrastructure buildout. With a record order book and customer trust, we expect to continue delivering innovative, reliable solutions that propel our customers’ growth.”

And in July, Italian fibre cable manufacturer Prysmian signed a deal worth up to €5.5bn (including a €550m upfront payment) with Lisle, Illinois-based interconnect technology developer Molex for the supply of optical fibre to be deployed in datacentre facilities. Prysmian noted that the deal “is part of an overall set of new agreements and commercial initiatives with hyperscalers and datacentre infrastructure providers, foreseen to bring in an additional cumulative value of over €10bn on an incremental basis up to 2035, versus the 2025 baseline. This includes up to €1.1bn of revenues on a yearly basis from 2031.”

- Ray Le Maistre, Editorial Director, TelecomTV