Fiber optics could be in short supply and threatens digital growth

Fiber optics could be in short supply and threatens digital growth

There are many telecommunications companies that, today, claim to have —in their catalog of services— an internet that promises great speed; both in its home version, as well as for mobiles. However, for this to be true, certain factors must be met, especially the one that refers to fiber optic cabling..

And this is where the issue becomes a bit complex. Why? For a simple, but worrying reason: the increase in component prices.

In this type of market, the greater the scarcity of components, the higher the acquisition cost.At the same time, the longer the delivery times will be. In fact, for smaller clients —of course—, delivery times extend up to 20 weeks or almost a year.

For example, Europe, India and China are among the regions most affected by the crisis, and fiber prices increased by up to 70% from the historical lows of March 2021, from USD $3.70 to USD $6.30 per km of fiber optics.

If we put this scenario into practice, we see that companies like Amazon, Google, Microsoft and Meta are expanding their data center empires to meet the growing demand, including the installation of vast international networks of fiber under the ocean. All this means that the scarcity of material continues to increase, and logically, so does its price.

Something similar happens with governments that have set ambitious goals for the deployment of broadband and 5G in their respective countries.

Michael Finch, an analyst at Cru Group, a market intelligence firm, noted the following:

With the cost of deployment suddenly doubling, there are now questions about whether countries will be able to meet the targets set for building infrastructure and whether this could have an impact on global connectivity.

According to Cruz, total cable consumption increased by 8.1% in the first half of the year compared to the same period last year. China accounted for 46% of the total, with North America representing the fastest growing region, at 15% annually.

But this does not end here, since the interruptions in the helium plants in Russia and the US have caused a shortage of this component, which is a vital factor in the manufacture of glass fiber optics. This has led to a 135% increase in prices in the last two years.

For its part, silicon tetrachloride —another key component in fiber production— has increased its price by up to 50%, as Cru indicated.

Are we prepared for such a digital stagnation?

Font: Financial Journal

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