Tight Production capacity of ceramic ferrules

As a member of the optical communications industry, you must remember the wave of the sharp drop in the price of ceramic ferrules in 2016.  That year, as the construction of fiber to the home and 4G mobile base stations in China came to an end, the price of ceramic ferrules dropped from nearly 1 yuan/piece in January 2016 to 0.5 yuan/piece at the end of 2016. Since 2017, the price has been maintained at 0.40 yuan per piece.  At that time, the number of manufacturers producing ceramic ferrules reached more than 70, of which more than 30 had a monthly production capacity of more than 2 million. According to incomplete statistics from the Chord Industry Research in 2016, 60% of ceramic ferrule manufacturing enterprises are located in Jiangsu and Zhejiang, and 60% of production capacity is controlled in Chaozhou Third Ring. However, up to the last year or so, the upper and lower reaches of the industrial chain can be said to be hard to find ferrules in cash.




Ceramic ferrule supply status: zero inventory, delivery at least 7 days

It is understood that since the fourth quarter of 2019, the shortage of ceramic ferrules has continued to intensify. The reasons for the correction are: First, around 2017, the main supplier of ceramic ferrules has decreased from more than 30 to less than 6 today. The overall production capacity decrease; Secondly, with this year’s 5G scale construction’s order-tracking effect and the substantial release of overseas fiber-to-the-home demand, which further exacerbated the tight supply of ceramic ferrules, the demand has increased significantly.

“In the recent operator’s connector bidding, in order to ensure normal supply after winning the bid, some peers took the lead in raising prices and bidding. In essence, we also agree to raise a little price to return the product to a rational price.” A person engaged in the connector industry recently A 20-year veteran said that when asked about the reasonable range of the price increase, the other party said that 5% should be within the normal range.

This person’s description is indeed a common phenomenon, because the lack of supply should not be a minority in the past, and the consequent impact is that it is included in the blacklist.
According to optical fiber online, the current ceramic ferrule manufacturers are basically in zero inventory, and the general delivery cycle takes 7-10 days. Some ferrule products with special requirements have a delivery time of up to 30 days. Cash delivery and premium delivery have begun to appear.


Crazy investment will not reappear: the cost is too high

Around 2012-2016, with the large-scale application of the fiber-to-the-home market, nearly 70 new ceramic ferrule manufacturers have emerged on the market. However, with the rapid decline in prices, the ferrule industry entered a reshuffle period, completely allowing Japanese companies to abandon this market, and then the market supply and demand gradually returned to rationality, and the price stabilized at 0.40 yuan per piece.

“Ceramic ferrule equipment cannot be shared with other products. The initial input cost is too high, and the price is too low. In fact, the price of 0.40 yuan per piece is a loss. Five years have passed, and there may be a lot The manufacturer still has not recovered the cost.” said a ceramic ferrule manufacturer located in Ningbo.

We asked multiple ferrule manufacturers whether they would scale up production, and the answer was no. The main reason is that the equipment investment is too large, and the investment return ratio of the five-year cost recovery is too poor.

Generally speaking, prices will naturally rise due to tight market supply, but whether the ferrule industry can truly achieve “price increase”. According to incomplete statistics from Fiber Online, there are currently only 6 mainstream ceramic ferrule suppliers, and there is still a 10-20 million capacity gap in the market. Perhaps the most ideal solution is to increase the price appropriately to stimulate some manufacturers to expand production on a small scale. Many ferrule manufacturers said that the main factor affecting price increases is the mismatch of supply and demand in the overall market. In the current optical communications market, with the popularization of various new applications brought about by 5G and cloud data centers, the market is still good in the long run. It is not ruled out that the price increase caused by the customer’s price increase due to the delivery of orders is not ruled out.

Telhua make lots of stock from September 2020 for our pigtail and patch cord, splitter products, the delivery time is short as before, welcome to quote.