One of the issues facing new fiber projects in 2021 is the backlog and slow ordering time for fiber cable. I’ve heard recently from clients that have been told it will take them from four to nine months to get new fiber.
Part of this delay can be blamed on the pandemic as factories and shippers everywhere have gotten turned sideways during the pandemic. We saw a big slowdown after the first quarter of 2020 for electronics that was due to the pandemic. Some of this was due to the fact that the Wuhan province in China is where a lot of optical electronics are manufactured – and which also was ground zero for the pandemic. Electronics production in Wuhan ground to a quick stop when the local government responded to the pandemic with a total and prolonged shutdown.
The local backlog in Wuhan eventually cleared, but the industry started looking for workarounds. Many of the vendors that were relying on factories in Wuhan moved part of the manufacturing to other countries as a hedge against having all manufacturing located in one concentrated area. This wasn’t easy to do during the pandemic. That’s a shift that has been due for years because eventually, something would have happened locally in Wuhan to pinch the supply chain – be it this pandemic, major weather events, or politics. I think many vendors learned a lesson and are going to diversify their supply chain in the future. This is going to cost a lot of business for Wuhan but will be better for the rest of the world. I’m hoping that at least some of this manufacturing finds its way back to the US – the fact that electronics are all made overseas feels like a national security issue to me.
But the backlog in fiber preceded the pandemic – there was already a backlog before the beginning of 2020. The pandemic added to the backlog, but it’s something that was already building. The backlog in fiber seems like more of a traditional supply and demand issue.
The world has been building fiber at an astonishing and accelerating pace. Just in this country, there are fiber projects everywhere. There are a few big companies like Verizon that have been buying huge quantities of fiber. For example, Verizon announced in 2017 that it was going to buy over $1 billion in fiber from Corning over a few years – up to 12.4 million miles of cable. But seemingly everybody else is also building fiber. Until the pandemic curtailed my travel, it seems like I saw fiber construction crews almost everywhere I went. Just a few years earlier, spotting a fiber crew was a rarity.
There is definitely a backlog in fiber, but the backlog is far more pronounced for smaller fiber buyers and at the maximum for new fiber buyers. This is where normal supply and demand kicks in. A company like Corning is always going to put Verizon at the front of the delivery queue. The largest buyers like Verizon worry about not having enough fiber and so they place large orders that eat up the capacity at factories. When there is word of supply chain problems and shortages, the big companies like Verizon order even more fiber to be safe.
This creates a shortage at the manufacturer which can’t pledge the extra fiber to anybody else. Over time, as the big companies don’t take delivery of all of the fiber, the excess enters the supply chain for everybody else. This creates a fluctuation in the supply that the manufacturer can’t predict. To some degree, much of the perceived shortage is artificial and is a result of fiber being allocated to the biggest buyers. The shortages start to look really long when these market fluctuations get layered on top of real shortages and slowdowns like happened during the early days of the pandemic.
The current shortage is probably not as bad as what buyers are being told by suppliers. Somebody being promised fiber in nine months will likely get it in six, and those being told six months will probably get it in four months. But those are still historically long waits for fiber.
There is not a whole lot that a new fiber buyer can do about the situation. Big carriers buy directly from the manufacturers and it’s not likely that Verizon and other big buyers are waiting long for fiber. Everybody else in the industry buys fiber through wholesale supply houses, and these are the ones seeing the biggest impact from the yoyoing supply. Just like the manufacturers take care of the huge buyers, a supply house takes care of its long-time buyers first, so small and new fiber buyers are at the end of the supply chain. In a true shortage, like the one that happened years ago when one of the major fiber factories burned down, the smallest buyers might not even be able to get fiber.
This current shortage will eventually clear and the market will return to normal – it always does. But for 2021 and even beyond, a new fiber buyer needs to order early or face sitting around waiting on fiber.