On the eve of the "Two Sessions", the State Administration for Market Regulation held a fair competition symposium for some enterprises, and had in-depth exchanges with relevant responsible persons of enterprises on the rectification of "internal competition". Beijing, Jiangsu, and Hunan have also recently deployed measures to combat "involution" competition. In China's fiber optic cable industry, the "anti involution" action is equally urgent.

For the manufacturing industry, the so-called "inward competition" mainly refers to the behavior of "obtaining the market at low prices, low quality, and low cost", which is a common occurrence in the current oversupply of China's fiber optic cable market. A significant characteristic of China's fiber optic cable industry chain enterprises is their strong dependence on downstream users, which is reflected in the fact that the majority of orders from raw material enterprises rely on downstream fiber optic cable enterprises, while orders from fiber optic cable enterprises mainly rely on bidding from operators. This model can indeed provide "meat for everyone to eat and soup for everyone to drink" when the market situation is good, but when the market is at a low level, it inevitably makes manufacturers increase competition for their livelihoods. Literally speaking, market competition is a normal process of market development. However, in fact, the current fiber optic cable market in China tends to be "price based", leading to increasingly serious internal competition among industry enterprises.

Taking the most commonly used ordinary optical cable in the fiber optic cable industry as an example, there were two group level ordinary optical cable procurement projects throughout 2024, and the results of these two procurement projects are quite intriguing: at the beginning of the year, a certain operator's procurement project resulted in 10 companies being selected, with the first place winning the bid with a discount coefficient of 86.83%, while the tenth place winning the bid with a discount coefficient of 95.86%. As a bid with a maximum price limit of over 520 million yuan including tax, more than half of the winning companies' tax inclusive bid prices were over 400 million yuan, with an average discount rate of 85.66%; At the end of the year, for the centralized procurement of general cables with a maximum price limit of nearly 5 billion yuan excluding taxes by a certain operator, the average discount rate for the quotes of the 15 winning candidates was 72.77%. The maximum discount is 60.74%, and the minimum is 96.9%. The difference is 36.16%, close to 40%. It is worth noting that in these two centralized procurement projects, several leading domestic enterprises are either ranked low or eliminated. Industry insiders say that such a winning bid result is worth considering for companies that have neither fiber optics nor optical rods and rely on low prices to make profits.

The centralized procurement rules of telecom operators must be carefully considered based on market conditions, but the phenomenon of "winning bids at low prices" has become increasingly common in recent years, which ultimately transmits production and sales pressure, even survival pressure, to fiber optic cable enterprises and upstream raw material enterprises. This is an undeniable fact. It can also be seen that in the past two years, the phenomenon of "price inversion" among various types of fiber optic cable raw material enterprises in China has gradually increased, and many enterprises are "carrying heavy burdens" in situations of low profits or even losses! The event of low-priced orders for terminal products being transmitted to upstream raw material suppliers to squeeze profits by passing off inferior products as good is not uncommon in various industries in recent years. And how many of these "reckless" incidents were forced to do so out of necessity?

It is understood that some fiber optic cable enterprises adopt the bidding rules of "exclusive bidding" when bidding for raw materials, which actually poses great risks to the purchaser. Article 17 of Chapter 2 of the Tendering and Bidding Law of the People's Republic of China states: "If the tenderer adopts the invitation bidding method, it shall issue a bid invitation letter to three or more specific legal persons or other organizations with the ability to undertake the bidding project and good credit." Article 28 of Chapter 3 states: "Bidders shall deliver the bidding documents to the bidding location before the deadline required by the bidding documents. After receiving the bidding documents, the tenderer shall sign and keep them, and shall not open them. If there are less than three bidders, the tenderer shall conduct a new bidding in accordance with this law Inviting three or more companies to bid is to prevent backup companies from being available in the event of bidders' product quality not meeting standards or insufficient supply capacity, in order to prevent supply chain disruptions. However, under the explicit provisions of laws and regulations, there may be situations where executors act in violation of the law, which will ultimately affect whose cake and cut off whose livelihood?

Of course, this situation will gradually disappear. In recent years, China has been constantly calling for and regulating the use of "abnormally low prices" in bidding and tendering. In the "Administrative Measures for Government Procurement of Goods and Services Bidding and Tendering" (Order No. 87 of the Ministry of Finance of the People's Republic of China) and the "Opinions of the General Office of the State Council on Innovating and Improving Institutional Mechanisms to Promote the Standardized and Healthy Development of the Bidding and Tendering Market", the use of "abnormally low prices" in winning bids is regulated; The People's Daily has repeatedly discussed the harm of bidding at low prices in articles such as "People's Daily Frontline Perspective: Quality should be the foundation of enterprise survival" and "Winning the bid at the lowest price, it needs to be changed"; In the forward-looking topics of this year's Two Sessions, mainstream media, well-known enterprises, industry experts, and others have also focused on criticizing and resisting "internal competition". It is foreseeable and reasonable to believe that the entire fiber optic cable industry and various industries will gradually change and ultimately eliminate the occurrence of "low price bidding" and "low price winning" under the regulation and guidance of national policies and the joint efforts and maintenance of thousands of industries. The industry will also operate more healthily and move towards the goal of achieving "sustainable development".

China's fiber optic cable industry chain enterprises need to 'reform themselves'!