Current Situation of China's Optical Fiber Preform Industry from the Perspective of Anti-dumping
The Ministry of Commerce issued an announcement last Wednesday, deciding to initiate an anti-dumping investigation into optical fiber preforms (Optical Fiber Preform or Fiber Preform, referred to as preforms) imported from Japan and the United States. According to public documents, the investigated companies include Shin-Etsu Chemical, Sumitomo Electric Industries, Fujikura, Furukawa Electric, and Corning, OFS-Fitel, among other international optical fiber giants.
Over the past decade, China has launched two anti-dumping investigations on optical fiber, and this is the first anti-dumping investigation on optical fiber preforms, the parent material of optical fiber. Both previous anti-dumping investigations confirmed the dumping practices of foreign optical fiber manufacturers and imposed penalties, playing an important role in creating a fair market competition environment. This anti-dumping investigation on preforms is believed to similarly contribute to fair competition in China's preform market. C114 has also noted from the public documents of this anti-dumping case the favorable and unfavorable development situations facing China's preform industry, summarized as follows:
9 Preform Manufacturers
The three applicants in this anti-dumping investigation are YOFC, Hengtong Optic-Electric, and Futong Group, which are also the three largest optical fiber manufacturers in China. Companies supporting the application include Faer Photonics, FiberHome Telecommunication, and ZTT. In addition to the above six companies, other Chinese companies with preform manufacturing capabilities include Jiangsu Aoweixin Hengtong Optical Technology Co., Ltd., Shin-Etsu (Jiangsu) Optical Fiber Preform Co., Ltd., and Samsung Hainan Optical Communication Technology Co., Ltd., totaling 9 companies.
Among the 9 manufacturers, there are multiple Sino-foreign joint ventures and wholly foreign-owned enterprises. Some manufacturers have both independent preform manufacturing capabilities and cooperation with foreign manufacturers, such as Hengtong Optic-Electric. In addition to these 9 manufacturers, some domestic optical fiber manufacturers are also initiating preform projects, such as Zhongli Technology, as well as Tongding Group, Kaile Technology, etc. Overall, Chinese optical fiber manufacturers have made significant progress in the R&D and manufacturing of preforms over the past five years, transitioning from basic dependence on imports to initially possessing the capability to compete with foreign optical fiber giants.
Rapid Growth in Preform Demand and Production
In terms of materials, China's preform demand has shown rapid growth in recent years, with 2013 demand accounting for more than 50% of global demand. Domestic manufacturers' production has also grown in tandem.
Moreover, data shows that although the volume of imported optical fiber continues to grow, its proportion of total domestic demand is gradually declining. Taking the investigated Japanese and American manufacturers (accounting for over 90% of China's imports) as an example:
Concerning Capacity Utilization and Profit Margins
The rise in absolute preform output and market share of domestic manufacturers is only superficial. Under intense competition where foreign manufacturers may engage in dumping, the capacity utilization and profit margins of domestic manufacturers are both concerning.
From 2010 to 2013, domestic manufacturers' capacity and production both increased substantially, but operating rates were not satisfactory. Especially in 2012-2013, amid the surging domestic demand for optical fiber and preforms, operating rates declined year after year. Taking YOFC, Hengtong Optic-Electric, and Futong Group as three representative manufacturers:
According to the materials, the pre-tax profit margins of the three leading domestic manufacturers' preforms were at most 8.59% and at least only 2%. This is not only clearly disproportionate to the high returns that optical fiber preforms, as high-investment, high-value-added products, should generate, but also significantly lower than the average pre-tax profit margin of approximately 10% for downstream domestic optical fiber products during the same period, clearly at a low level.
Due to the very limited pre-tax profits generated by preforms and the clearly low pre-tax profit margins, the return on investment for similar products of the three leading domestic manufacturers is at an extremely low level. In 2012, the highest return on investment was only 2%, and in 2010 and 2011, it was less than 1%. According to data submitted in the application materials, the dumping margins of Japanese and American manufacturers in 2013 were 24.60% and 25.42% respectively, causing serious damage to the competitiveness of domestic manufacturers.