Operators across the telecom industry have flagged long lead times and other supply chain challenges as key hurdles to their network expansion plans. Corning, one of the largest suppliers of optical cable and fiber, told Fierce it believes the addition of greater production capacity at a new plant this year will free up room to meet increased demand in the U.S. and help slash lead times down to a more reasonable level.
Bernhard Deutsch is VP and GM of Corning’s Optical Fiber and Cable business. He explained there are two primary issues causing supply chain disruptions: raw materials shortages and manufacturing capacity constraints. While raw materials shortages have posed “some of the most serious disruptions to the industry’s supply chains,” Corning has countered this by securing secondary or alternative sources of necessary materials.
In North America, though, Deutsch said capacity is the real problem. He added the issue in the U.S. specifically centers on the optical cable that houses the fiber as opposed to the fiber itself.
As Corning CEO Wendell Weeks put it on the company’s Q4 2021 earnings call in January “if we could make more, we could sell more…the real bottleneck isn't resin, isn't raw materials, isn't labor. It is just us being able to get into place capacity that is more appropriately balanced to the demand that we are experiencing.”
A year ago, Corning announced plans to build a new optical fiber manufacturing facility in Poland, and in September 2021 said it would spend $150 million to expand an existing optical cable manufacturing operation in the U.S. state of North Carolina.
Deutsch noted the facility in Poland is set to become operational this year and once that happens it will “free up U.S. fiber capacity for U.S. demand.” He continued “As we and others in the industry add capacity, we expect lead times to begin improving.”
While Deutsch didn’t quantify the improvement it expects to see, Corning SVP and GM of Optical Communications Michael Bell recently told the Associated Press that lead times are expected to fall “dramatically” as 2022 progresses. By 2023, he said wait times for most customers are “going to be well under a year.”
Among those planning to use Corning for their fiber supplies are AT&T, which is targeting an expansion of its fiber footprint from 15 million to 30 million locations by the end of 2025; and Brightspeed, which is planning to deploy fiber to 3 million locations over the coming years.
Dell'Oro Group VP Jeff Heynen said while the analyst firm didn't have any official numbers to share, he's heard anecdotally that some smaller providers are currently facing lead times of 12 to 16 months. On Corning's Q4 earnings call, one analyst mentioned operators are up against waits as long as 24 months.
Heynen said the delays have become a concern to the point that some operators have asked for waivers from "Buy American" requirements that are part of the recently passed Infrastructure Investment and Jobs Act, which allocated $65 billion for broadband. He added the delays could also impact operators that received funding from the Federal Communications Commission's (FCC) Rural Digital Opportunity Fund (RDOF) and other government programs which attach build milestones to the promised support. For instance, RDOF participants must complete 40% of their deployment target by the end of the third calendar year following the authorization of funding by the FCC. To date, the FCC has said it is ready to authorize over $5 billion of the $9.2 billion awarded through the RDOF Phase I auction in 2020.
Getting the fiber supply straightened out is key, as it is "really at the base level of the overall supply chain," Heynen said.
"If you can't go and build that out, it's going to impact everything from the electronics to the splitters to everything up above that. It has a domino or a snowball effect on all the equipment as well," he explained. "I see it specifically in the backlogs of orders for OLTs and ONTs, where they're also having supply chain issues because they can't get access to some of the components they need in terms of processors and semiconductors, but they have equipment that they ship out that's still sitting in warehouses because the operators, their customers, haven't been able to get fiber into the ground."
Corning is set to report its Q1 2022 results on Tuesday, April 26.