If the market position of the “Big Three” in Europe, America and Japan is temporarily unable to move, the competition point of domestic enterprises is undoubtedly the national leader and the fourth in the world.

Editor’s note: This article is from WeChat public account “Optical Communication Observation” (ID: C114-guangtongxin), author Link.

In early June, Hengtong Optoelectronics announced that it is planning to purchase a 51% stake in Huawei Ocean Network (Hong Kong) Co., Ltd. held by Huawei Technology Investment Co., Ltd. through the issuance of shares and payment of cash.

After five months of business negotiations, on the eve of this year’s PT show, Hengtong Optoelectronics announced that the company and Huawei Technology Investment Co., Ltd. signed the “Agreement on Issuing Shares and Paying Cash to Purchase Assets”. After the completion of the transaction Huawei Ocean will become a 51% holding subsidiary of Hengtong Optoelectronics. According to the announcement, the transaction price of the underlying assets of this transaction was RMB 100.87 million. Among them, the number of shares that Hengtong Optoelectronics should make non-public offerings to Huawei was 47,641,288 shares, and the amount of cash payable to Huawei Investment was RMB 301,116,200.

Afterwards, according to foreign media reports, US asset management company HC2 Holdings, Inc. said its holding company, British company Global Maritime Group (GMG), has agreed to sell 49% of its shares in Huawei Ocean to Hengtong Optoelectronics. 140 million US dollars. According to the agreement, GMG will sell 30% of Huawei Ocean’s equity in one lump sum, and the other 19% will sign a put option agreement for two years. The price is the same as the higher of the same equity value ($285 million) or fair market value. Quasi, in the future, Hengtong will hold 100% of Huawei Ocean.

The “cake” is small and has great potential

The marine optoelectronic transmission products and systems are the spires of the pyramids in the field of optoelectronic transmission. The world’s recognized marine optoelectronic transmission products and systems are a large-scale system engineering with high technical difficulty and wide coverage in the industrial field, including cable products and accessories, system design and equipment, and marine construction. They have long been the “Big Three” in Europe. Alcatel-Lucent, SubCom and Japan NEC monopolize, and the market share of the three companies is almost 90%.

Although the submarine cable technology has the title of the crown jewel, and also bears the responsibility of 95% of the world’s international data traffic transmission, the cake in this market is actually not big. In 2018, SubCom’s top sales were about $700 million, and Huawei Ocean’s revenue was $1.825 billion ($260 million).

At the same time, the pattern of the “Big Three” has also undergone some subtle changes in recent years. Subcom was sold by TE Connectivity to Cerberus Capital Management in the US for $325 million in 2018.Division; Alcatel-Lucent cable was also sold on the shelves by Nokia, and ultimately failed to make it.

Huawei founder Ren Zhengfei said when he talked about selling Huawei Ocean: “Huawei’s sale of submarine cable business was sold long ago. This part of the business was sold for a while. The sale was not because it was hit because of The main business is not relevant.”

There will always be some episodes in the development of anything, but the overall development will continue. For submarine cable communication, an important development window is currently ushered in worldwide. First, 40% of the world’s submarine cables were built before 2000, and have gradually entered the end of the life cycle of submarine cable use. Second, in the next few years, with the deepening of the global digital economy, Internet traffic growth will continue. As the data center and data bandwidth requirements continue to grow, coupled with the participation of Internet companies such as Google and Facebook, the global cable will enter a period of new and old replacement.

This is a major historical opportunity for the more concentrated submarine cable market. Compared with the optical module market with the same market cake size, the cakes of each manufacturer in the submarine cable market are quite considerable.

Stirring competition among domestic manufacturers

From a global perspective, the status of the “Big Three” in Europe and America is difficult to shake in a short time. However, in recent years, traditional cable manufacturers in China have entered the market, including the “Big Five” of the fiber optic cable market in Changfei, Hengtong, Fenghuo, Zhongtian and Futong. Among them, Hengtong Optoelectronics and Zhongtian Technology made remarkable progress. In November 2018, Hengtong Optoelectronics announced that the first delivery of submarine cable was 10,000 kilometers in the country and launched the PEACE submarine cable project.

For Hengtong Optoelectronics, after the acquisition of Huawei Ocean, the construction of the global submarine cable communication network will be added on the basis of the original sea cable R&D and manufacturing, submarine communication network operation and offshore power engineering construction of Hengtong Optoelectronics. The business will further improve the layout of the marine industry, open up the upstream and downstream industrial chain, and further promote its transformation from “product suppliers” to “full value chain integration service providers” in the marine industry. In the words of Yin Jicheng, president of Hengtong Communication Industry Group, Hengtong regards the ocean as a cause.

After the acquisition of Huawei Ocean, Hengtong will undoubtedly become a rare sub-industry chain in China, and the submarine communication network provider with all-round solution capabilities will undoubtedly change the competitive environment of the domestic submarine cable market. At present, another manufacturer with such a full industrial chain capability is a bonfire, relying on its full-value chain system in the field of optical communications, radiating the submarine cable business, forming a submarine cable, repeater, transmission and management monitoring equipment, services and total The package’s comprehensive ability to solve.

As mentioned above, for domestic cable manufacturers, it is currently in an important development window, first of all, new and old replacement; and then new demand due to the surge in traffic;At the time, the implementation of the “Belt and Road Initiative” has strengthened communication and cooperation among countries along the route, and put forward higher requirements for the interconnection and interoperability of international submarine cables, and will also bring new market opportunities.

If we say that the market position of the “Big Three” in Europe and America is temporarily unable to move, the competition point of domestic enterprises is undoubtedly the national leader and the fourth in the world. In order to challenge the monopoly of the “Big Three”, domestic manufacturers with the capability of the entire industrial chain of the submarine cable have already obtained the qualifications for the tickets, but there is still a long way to go before they really want to go beyond.