‘70% is from data centres’: HFCL MD Mahendra Nahata on fibre optic cable demand boom

Rising demand from data centres, fuelled by growing artificial intelligence (AI) workloads and rapidly increasing data flows, has emerged as the biggest driver of fibre optic cable demand, accounting for 70% of the order book of fiber optic cable manufacturer HFCL, according to founder MD Mahendra Nahata.

In an interview with Business Today TV, Nahata said data centres, expanding worldwide but particularly in North America, are increasingly procuring high-fibre-count cables, boosting revenue and profitability. “You know, for example, telecom operators used to procure fiber optic cable with maybe up to 288 fiber, but the data centers are procuring fiber count of up to 7,000 or even 14,000,” he said.

“We have a very nice order book, almost ₹29,000 crore, out of which, ₹19,000 crore approximately is for fiber optic cable,” said Nahata. He said the revenue and profitability gains were sustainable over the next few quarters, supported by the existing order book and ongoing negotiations with data centre customers and telecom operators for additional orders.

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Capacity expansion has also helped the company meet rising demand. It is expanding fibre optic cable manufacturing capacity and developing a preform manufacturing project, a backward integration into fibre production that is expected to improve raw material security and margins.

Demand from telecom operators is also expected to strengthen after a period of hesitation over sharp price increases. Nahata said operators had initially struggled to absorb the higher prices but were now returning to the market, given their need for more fibre to carry subscriber data.

He further elaborated on the demand with an example from China that has floated a tender for 80 million fibre kilometres through China Mobile, while China Telecom issued another tender for 70 million fibre kilometres, taking the combined demand to 150 million fibre kilometres. Nahata said this demand could exhaust Chinese manufacturing capacity alone.

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Prices for the type of fibre covered by the tenders have risen from about $1.80 around a year and a half ago to $13, while smaller quantities can cost $16-$17, he said.  “So, telcos were not able to mentally absorb this. But now they are coming around because finally telcos have to carry data from the subscribers. They need more fiber. So now, they have also started buying, he said.

Defence demand is another emerging factor. Beyond conventional tactical cables, fibre is increasingly being used to control drones, which rely on fibre connections rather than radio signals and are therefore harder to intercept through radio-frequency jamming. Nahata estimated that drone applications had generated an additional demand of 70 million to 100 million kilometres, further tightening supply.

Watch the full conversation here: