Wire, cable growth driven by fiber-optics

Staff -- Control Engineering, 8/1/2000

Demand for insulated wire and cable in the U.S. will likely increase 5.1% annually through 2004 to approximately $22.7 billion, according to a recent study by the Freedonia Group (Cleveland, O.). Demand is defined as the total amount of wire and cable manufactured and used by U.S. plants, including imports.

Continuing growth in computer networking and communications settings, especially multimedia, will create new demand for fiber-optic wire and cable products. Capital investment in electric power generation—benefiting from ongoing deregulation—will fuel increased demand for power wire and cable.

However, the report forecasts overall advances will decelerate compared to 1994-99 because of sluggish gains in building construction. Likewise, major end-user, original equipment markets, such as industrial machinery, computers, and office equipment, will experience slower production growth, which will adversely affect demand for wire and cable in those settings.

Despite the onset of wireless technology, communications will continue to be wire and cable's largest end-user market due to its wide range of applications. Advances will be limited to some extent by slowing growth for communication equipment, though the study found the outlook for investment in communication infrastructure remains healthy. This is important because cable products ironically support development of wireless networks.

Besides communications, information processing is expected to achieve the most growth of any wire and cable market because of continuing increases in computer networking. The report adds that building construction is expected to have the slowest gains of any end-user sector, which is a result of decelerating spending.

Meanwhile, shipments from U.S. manufacturers of insulated wire and cable are projected to increase 5.2% annually through 2004 to reach $23.6 billion. International gains will be slightly ahead of domestic demand, which reflects an increasing trade surplus. Export opportunities will likely be rosiest for more advanced products, which are used to build telecommunications structures in developing nations. Despite its overall trade surplus, the U.S. will continue to run a significant deficit in some categories, such as telephone cable and wire used in motor vehicles.

The best growth prospects will be for high-end products, such as fiber-optic, coaxial, and multiconductor wire and cable. Fiber-optic cable is expected to have the strongest growth prospects as it continues to extend beyond long distance communications applications and into new markets, such as multimedia. Coaxial and other copper-based electronic cable will continue to register gains, benefiting from technological innovations in advanced electronic signal transmission methods.

The most sluggish outlook is for products with relatively little potential for performance/price upgrade, such as building wire and apparatus wire, which includes flexible cordage and appliance wire.

More than 200 companies produce insulated wire and cable products in the U.S. The top seven producers—Alpine, General Cable, Southwire, Corning, Lucent Technologies, Belden, and Alcatel—accounted for 42% of total U.S. demand in 1999. Alpine, General Cable and Southwire are dominant among these leaders, with over $1 billion each in U.S. wire and cable sales.

Merger and acquisition activity in the industry was brisk during the 1990s, and further consolidation is expected as the competitive environment intensifies and markets continue to mature. Nevertheless, due to the comparatively low barriers to entry and extensive niche market opportunities, small and mid-sized manufacturers will remain prevalent in the U.S. insulated wire and cable business.

For more information, visit www.freedoniagroup.com or www.controleng.com/freeinfo.