shortage of fiber and rising prices for it
Not so long ago
we wrote about
, which gradually reduces the relevance of the problem of shortage of semiconductor components and systems. Demand for electronics is falling, so device vendors refuse new purchases from suppliers of electronic components. Prices in this industry, although little by little, but began to decline.
But, unfortunately, there are other problems, and they arise quite unexpectedly. One such problem is the sudden shortage of optical fiber and the accompanying increase in its price. Since 2021, the cost of fiber has increased by 70%, as far as we can tell, this is just the beginning. About what led to the emergence of a new crisis and what it can lead to – under the cut.
Price can not be cheap
While the attention of specialists and ordinary users was riveted to the “perfect storm” in the world of semiconductors, a new problem gradually began to appear. Already in the production of fiber optic cables, without which it is impossible to imagine a modern network infrastructure – neither local nor global.
Now the fiber optic crisis, so to speak, has captured Europe, India and China. Prices, as mentioned above, increased immediately by 70%. If at the beginning of last year a kilometer of optical fiber cost about $3.7, now it is already $6.3. It is clear that this is an average value, somewhere prices rose more strongly, somewhere less. But in general, the situation leaves much to be desired.
The beginning of the shortage of fiber was laid by the onset of the pandemic, which led to the need for remote work, and, accordingly, an increase in traffic, an increase in the relevance of online services and related issues. Large and not very large companies began to expand existing data centers and build new ones, which, of course, is impossible without the use of fiber optics. In addition, the largest Internet companies in the world have begun laying new branches of Internet backbones, as we have already written, and more than once.
In November 2021, the length of highways exceeded 1 million km. In 2022, new projects have appeared that are either already completed or are just starting to be implemented. A little lower we will talk about one of them, but now – about the problem itself.
Purchases of a wide variety of fiber have grown by an average of 8.1% since the beginning of 2022. The most active use of fiber is China – the country owns about 46% of global purchases. In North America, this value is somewhat lower, around 15%, which is still a significant increase.
One of the main factors that led to the rise in prices is the increase in the cost of raw materials and components that are used in the production of fiber optics. In addition, there was a shortage of helium, an essential component in the production of optical fibers. This problem is partly caused by plant downtime in Russia and the US, which has driven He prices up by an average of 135% over the past two years. Prices for silicon tetrachloride, another key ingredient in fiber production, have risen by 50 percent, experts say.
Experts say that in the entire history of modern networks using fiber optics, there have never been such problems and such a rapid increase in prices for initial resources and the final product. An interesting point is that prices rose by several tens of percent almost everywhere, except for the USA, where the growth was only 2%.
The total budget of large projects will grow by billions of dollars
Just a few months ago, TeleGeography published data on the current state of the global network infrastructure. So, now in the world there are about 490 submarine cable systems and about 1306 stations for connecting terrestrial infrastructure to these cables. The cost of projects for laying highways of global importance has amounted to about $ 12 billion over the past. According to the forecast of the same company, which was compiled taking into account previous data, in 2022-2024. the cost of laying new highways may exceed $10 billion. Accordingly, with rising prices, this value may well double.
At the same time, the largest Internet corporations cannot stop ongoing projects, as the need for Internet services and high-bandwidth backbones continues to grow.
Accordingly, the gap between the needs of companies and the capabilities of fiber optic suppliers is widening. If the scarcity of resources and the rise in prices do not stop, then we can see a new “perfect storm”, but already in the world of Internet backbones of global importance.
New projects continue to be implemented
Just a few days ago, NEC Corporation announced a new contract with Seren Juno Network Co., Ltd. (founded by NTT Ltd, PC Landing Corp. Mitsui & Co., Ltd. and JA Mitsui Leasing, Ltd.). It consists in the construction of a trans-Pacific submarine fiber optic cable “JUNO Cable System”. According to the plan, it should connect California (USA) with the Japanese prefectures of Chiba and Mie. The length of this cable is huge and will be about 10 thousand km. As a result, the project partners plan to improve the bandwidth of Internet channels between the US and Japan.
The backbone will be implemented using new technologies, which will allow reaching 20 pairs of optical fibers in a submarine cable at once. The total throughput will be about 3350 Tbps, which is a record for communication lines between both countries.
Well, mindful of the failure of the Internet channel of the small island kingdom of Tonga, which was left without the Internet due to the eruption of an underwater volcano, the new highway will be made resistant to possible cataclysms. Of course, Japan itself is located in a seismically unstable zone, so everything here is built taking into account local conditions, including Internet infrastructure.
By the way, Japan is participating in another major project. Far North Digital and Cinia agreed at the beginning of the year to implement a joint project to lay a 16,500 km submarine cable through the Northwest Passage. This is a very expensive project, the cost of which is $1.15 billion. According to the authors of the project, it is the first of its kind – after all, it is a long-range underwater route along the bottom of the Arctic Ocean. The length is from Asia to North America, Northern Europe and Scandinavia.
Most of the highway runs under water. In particular, this is a route from Norway to Japan with exits in such regions as Iceland, Ireland, Norway. The line will also connect to four regions in Arctic Canada and Alaska, plus two regions in Japan.
In general, if the situation remains approximately the same as it is now, then the prices for optical fiber will grow, and, accordingly, the cost of projects for laying underwater Internet highways will also increase significantly. If everything goes wrong with the prices and availability of fiber, then a number of projects to expand the global Internet infrastructure may be suspended. But such a scenario is absolutely undesirable. Well, let’s wait, time will tell whether it is worth building gloomy forecasts or everything will gradually improve (relatively), as is the case with the shortage of semiconductors.