Sensitivity Analysis of Corporate Profits to Optical‑Fiber Price Hikes

The boost brought by fiber‑price increases to manufacturers' profitability follows a non‑linear pattern. Its profit elasticity hinges on two core factors: in‑house optical‑preform production capacity on the cost side and client mix on the revenue side.

For enterprises with fully self‑supplied preforms or stable long‑term procurement agreements, price gains can be roughly translated directly into gross profits when raw‑material costs stay unchanged in the short run. Quantitative estimation can be carried out via the formula below: Incremental Profit ≈ (Current‑period Average Delivery Price − Cyclical Bottom Price) × Sales Volume

It is worth noting that profit elasticity is not simply calculated by multiplying the spot loose‑fiber price growth by total sales volume. Instead, it depends on the actual growth of the company‑wide average selling price (ASP). Given the time lag and discounted terms for centralized‑procurement and long‑term‑contract prices, the overall ASP growth of fiber manufacturers generally falls behind the price surge of loose‑fiber spot goods.

To visualize such sensitivity, we establish a simplified model with the key assumptions listed below:

Assumption 1: The enterprise registers an annual sales volume of N hundred‑million core‑kilometers.

Assumption 2: Loose‑fiber sales account for 30 % of total revenue (fully price‑elastic), while centralized‑procurement and long‑term‑contract sales make up the remaining 70 %. The contracted price is set at roughly 80 % of the average spot price.

Assumption 3: Production costs remain unchanged, and all price increments contribute directly to gross profit.

Calculation process: When the spot price of loose‑fiber rises by 1 RMB per core‑kilometer, the growth in the enterprise's composite average selling price is computed as follows: 1 RMB × 30 % + 1 RMB × 80 % × 70 % = 0.86 RMB per core‑kilometer. Accordingly, under this model, every 1‑RMB spot‑price increase for loose‑fiber drives a profit gain of 0.86 × N hundred‑million RMB for the company.

This model does not apply to the following scenarios:

1.Enterprises that purchase optical preforms externally without price‑locked long‑term contracts will face raw‑material costs fluctuating with market prices, which drastically cuts profit increments.

2.The model adopts a simplified premise that pricing and delivery for centralized‑procurement and long‑term‑contract orders take place simultaneously. In practice, contract prices are fixed at the time of bidding or signing. A considerable share of orders fulfilled in the current period are still governed by former pricing terms. As a result, profit expansion lags behind spot‑price increases by one to two quarters.