Concentrating on AI and data centres, and redefining a cable maker (2020)

A cable maker redefined, and the risk in a single concentration

The heart of this decision is that a major cable maker, long dependent on the thin margins of copper wire, first steadied its footing through structural reform and then concentrated its resources on new demand — generative AI and the data centre — remaking itself into a high-margin optical communications company. Without the crisis of the enormous loss in 2020, neither the narrowing onto optical fibre nor the principle of competing on technology as an independent would have been carried this far. The crisis forced selection and concentration, and the AI wave happening to arrive just then turned that concentration into the highest earnings in the company’s history.

High earnings, though, are the reverse side of putting everything into information and telecommunications. The growth in sales and profit leans heavily on optical fibre and optical connection products, so a pause in data-centre investment, rivals racing each other to add capacity, or falling product prices feed straight through to results. Fujikura is investing up to $2.0B (¥300bn) in Japan and the United States to expand capacity, on the view that demand will keep growing. But now that a cable maker close to raw materials has been turned by a demand spike into a high-margin company, the question of how far those margins can hold through the next cycle of demand is still open.