Page 38 - 2016年光通信竞争力报告(摘要版)

6 The competitiveness report on "the Top 10 competitiveness enterprises in the optical communications industry of China & Global market in 2016” (Abstract Edition)

Preface • Work summary

Since 2006, the competitiveness monitoring project among optical communications enterprises has gone through 10 years, during which we have
witnessed the leap of competitiveness of many Chinese enterprises. 2015 was a fruitful year for the global optical communications market. A handful
of optical communications enterprises all yielded satisfying results. With the full implementation of a series of favorable policies and strategies
like "Broadband China" strategy, FDD licensing, "speed improving and tariff cut-down" policy and so on, most of the major optical equipment
manufacturers, optical fiber & cable providers and optical component suppliers around the world enjoyed a period of booming demand.

On one hand, the favorable policies inspired enterprises’ enthusiasm for R & D and production; on the other, the rapid development of Internet of
things (IoT), 4K video and other fields and the increasing demand for larger bandwidth will definitely bring a new round of development opportunity
to the China and Global optical communications industry.

As the first year during China’s 13th Five-Year Plan period, the optical communications market in 2016 continued last year's strong momentum thanks
to the booming broadband market in China, especially in the demand for optical fiber and cable. With multiple favorable policies such as "Internet+",
"Broadband China" and "New Smart City", more and more advanced technologies and research achievements will be applied in fields like information
infrastructure construction, cyber security protection, urban information management and so on. Such policies will also promote the transformation
and comprehensive upgrading of China's optical communications industry so as to stimulate a new round of rapid development. Next 1-2 years
remains to be a golden period for China's optical communications industry. It is estimated that in 2016, China's demand for optical fiber will reach 220
million to 248 million fiber km.

For 10 years, we have witnessed how China's optical communications industry develops step by step to today’s occupying more than half of the
global market share after going through lots of opportunities and challenges. The results of the 10th ranking event of Top 10 competitiveness
enterprises in the global optical communications market during 2015-2016 fully embody the competitiveness situation among enterprises in
different fields of optical communications. Huawei, Corning and Finisar still take hold of the chief positions in fields they belong. Except for optical
component manufacturers, Chinese optical communications industry shows strong competitiveness both in fields of optical fiber & cable and network
transmission with 5 and 3 Chinese enterprises listed in the Top 10 competitiveness enterprises respectively. In terms of the domestic market, Huawei,
ZTE and Fiberhome Communications still occupy the main optical transmission market; whereas in the optical fiber and cable market, YOFC, HTGD,
Fiberhome Communications, Futong and ZTT hold the Top 5; in the optical components field, the gap between Accelink (1st) and the second has
further widened to 70 points. Accelink’s competitive edge is quite obvious. It is worth mentioning that in this year's competitiveness rankings, HTGD
raised to the 3rd place in the Top 10 competitiveness enterprises in the optical fiber and cable field of Global market; ZTT, for the first time, get listed
among the world's Top 10. In the optical components field, Accelink ranks 4th in the world's Top 10, up 1 position. It is glad to see that among the Top
10 competitiveness enterprises in the optical fiber and cable field of Global market, Chinese enterprises have accounted for half, which fully shows
their strong competitiveness.

To better serve China’s optical fiber and communications industry, Network telecom Information Institute started to compile the prosperity index
for China’s optical fiber and cable industry early at the end of 2015. By selecting a series of comprehensive index that are clearly correlated with
the periodic fluctuation of China's optical fiber and cable industry, and by using statistical methods, Network telecom Information Research Institute
strives to comprehensively reflect the current situation of China's optical fiber and cable industry, to effectively monitor its development trend and to
scientifically predict its future. Moreover, it provides an important reference for industry analysis, policy making, policy evaluation, and so on.

The prosperity index of the optical fiber and cable industry in China is classified into 3 types: the leading index, the coincident index and the lagging
index. The coincident index can comprehensively reflect the overall situation of the optical fiber and cable industry while the leading index helps
predict the industry’s future development. Prosperity index refers to the boom degree of a certain industry. It fluctuates up and down around the critical
value 100. If prosperity index of a certain industry is higher than 100, it indicates that the industry is in a state of rise or improvement compared to the
base period (a point in time used as a reference point for comparison with other periods). Contrarily, if this number is lower than 100, it indicates that
the industry is in a decline of deteriorating state.

Through the analysis of prosperity index of China’s optical communications industry, we can conclude that the industry is still in fast development.
Taking Q3 2016 as an example, the coincident synthesis index of China’s optical fiber and cable industry is 105.9 (Q3 2014=100, the same below),
up 0.92 points month-on-month, which is very fast, the leading synthesis index is 106.0, up 0.26 points month-on-month, growth speed slowed. The
lagging synthesis index is 105.2, up 0.87 points. Both leading and coincident index are in the rise, which embodies that China’s optical fiber and cable
industry will keep booming in the future.

Figure 1 Graph of the leading, coincident and lagging index
of the optical fiber and cable industry

Table 2 Prosperity index in the field of optical fiber and cable industry vs.
Prosperity index of China’s macroeconomics9 in Q3 2016

Prosperity index in the field of Prosperity index of China’s
optical fiber and cable industry macroeconomics9

Index MoM Index MoM

Leading index 106.0 0.26 99.0 0.63

Coincident index 105.9 0.92 93.8 -0.48
0.87 91.3 -1.08
Lagging index 105.2

Source: Network Telecom Information Institute.

Source: Network Telecom Information Institute.

By comparing the prosperity index of the optical fiber and cable industry with that of China's macroeconomic prosperity index, we find that the
growth rate of the former is significantly higher than the latter. In the long term, the quarterly average growth rate of the coincident index of China's
optical fiber and cable industry since 2012 is 0.78 while that of China's macroeconomics is only -0.31. In the short term, the leading, coincident and
lagging synthesis index of China’s optical fiber and cable industry all maintained positive growth in Q3 2016, while in the same period, such index of
China's macroeconomics showed a negative growth trend. Moreover, the Top 5 Chinese optical fiber and cable manufacturers ranked 2nd, 3rd, 6th, 7th
and 9th in the list of Top 10 competitiveness enterprises in the optical fiber and cable field of Global market, which reflects Chinese enterprises’ strong
competitiveness.