Via Nikkei Asia, a look at how subsea cables are set to become an even hotter battleground between the U.S. and China:

Arguably the most important market is in China’s own backyard.

The Asia-Pacific region is the global leader in subsea cable investment, recording more projected spending from 2024 to 2026 than anywhere else in the world, according to data from Washington-based research company TeleGeography. At least three major China-led projects are under construction in the Asia-Pacific region, linking China and Hong Kong with multiple Southeast Asian nations such as the Philippines, Vietnam, Cambodia, Malaysia, Indonesia and Singapore. 

The region was already in Beijing’s sights in 2013, when President Xi Jinping proposed a “21st Century Maritime Silk Road” as part of the Belt and Road Initiative, aiming for “diversified, self-sufficient, balanced, and sustainable development for China.” This vision was later expanded to include a “Digital Silk Road,” with subsea cables playing a key role in extending China’s global influence. 

These Silk Road policies kickstarted China’s subsea cable industry. Over the course of around 10 years, the country has gone from being only a partial investor in undersea cable consortiums to actively financing, building and upgrading at least 65 international projects, according to Nikkei Asia’s analysis of company and government documents. 

Chinese companies are also expected to contribute 45% of the total 770,000 km of cable set to be installed from 2023 to 2028, according to the China Academy of Information and Communications Technology (CAICT), the country’s top think tank on telecommunications.

The rise of China’s cable industry has challenged the entrenched dominance of America and its allies. Until recently, only a handful of companies have had the money, experience, technology and government connections to build major cable networks: SubCom of the U.S., Alcatel Submarine Networks of Europe and NEC Corp. of Japan. 

“Subsea cables are pretty well-established technologies,” said Antonia Hmaidi, senior analyst with the Mercator Institute for China Studies (MERICS).

“It’s not like advanced semiconductors, which are changing and becoming much more advanced every year,” Hmaidi went on. In the subsea cable market, “Chinese companies were able to become big just by being able to integrate better.”

That enabled rapid growth – China only in 2017 reached the point where it could manufacture and lay subsea cables on its own, said Zhao Zisen, known as the father of China’s optical fiber industry. 

An early leader in China’s undersea cable push was Shenzhen-based telecom equipment giant Huawei, which in 2019 became one of the first Chinese technology companies to be blacklisted by the U.S.

Through its former unit Huawei Marine Networks, the company had been making progress since the late 2000s by offering its services at heavily discounted rates. “[Huawei] used price to penetrate the market and offer almost free projects at the beginning,” said a subsea cable industry executive, adding this tactic was used especially to sell to developing economies, such as Africa. 

Huawei in late 2019 was forced under U.S. pressure to sell a majority stake in Huawei Marine Networks to the Hengtong Group, a power and fiber-optic cable maker, which rebranded it as HMN Technologies.

Between them, Huawei and HMN Tech have participated in a total of at least 40 international projects and helped lay 94,000 km of cable. HMN Tech is in charge of multiple major projects connecting Hong Kong to Southeast Asian nations. These projects are scheduled to go online over the next one to two years. 

FiberHome, originally a maker of terrestrial fiber cables, followed in Huawei’s footsteps, establishing its marine equipment business in late 2015 and gradually taking on domestic projects. It accelerated its investment after HMN Tech – at that time still a unit of Huawei – was blacklisted by the U.S. 

Soon, FiberHome found itself on a U.S. blacklist as well, accused by the U.S. Commerce Department, alongside a number of other high-profile Chinese technology companies, of violating human rights in the Xinjiang Uyghur Autonomous Region in 2020. The specific accusations against FiberHome were not made clear, however, and the company has declined to comment on the charges.

With access to U.S. technology shut off, FiberHome has taken a self-reliant approach to the business, from building critical components to acquiring its own cable-laying vessels. FiberHome has invested in several Chinese optical chip developers and has partnered with China’s top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), with which it shares a major stakeholder – the state-owned China Information Communication Technologies Group – to build undersea cable components, according to sources with direct knowledge. 

In less than 10 years, FiberHome says it has completed projects to build or upgrade subsea cables spanning thousands of kilometers, in the Philippines, Malaysia, Indonesia, Chile, southern Europe and the Middle East. And the company is keen to expand further – to anywhere that will not bring it too close to U.S. territories or allies, which could give Washington the ability to block its projects, FiberHome representatives told Nikkei Asia. 

“It’s more difficult for us to expand in the U.S. and some parts of Europe,” one FiberHome representative told Nikkei Asia. “But that’s OK. We can do Southeast Asia and Latin America.”

“The subsea cable industry is like a membership club … This is a diplomatic race.”

The landing of Google’s Atlantic sub-marine cable, Dunant, in Saint-Hilaire de Riez, western France, in 2020. (Photo by AP)

China is also a major supplier of fiber-optic cables, with four companies – Yangtze Optical Fibre and Cable Joint Stock (YOFC), Hengtong, FiberHome and Jiangsu Zhongtian Technology – controlling more than 35% of the global market. To boost its local supply chain, China in 2023 increased the anti-dumping tax for foreign fiber optic cable players like Corning of the U.S. to 41%.

“Our main focus [for subsea cables] is still in the Asia-Pacific oceans,” Rebecca Zhou, deputy CEO of YOFC, told Nikkei. “Our advantage is that we are building all types of cables for land and sea, and we also have our own marine engineering ships [for offshore wind farm uses],” she said. The company’s vertical integration strategy is similar to that of FiberHome. 

Another YOFC representative told Nikkei that Europe is also a key area for growth. Like FiberHome’s expansion in multiple overseas production sites, such as Thailand and Hungary, YOFC also has production sites in Indonesia, South Africa, Brazil and Poland.  

One of the most capital-intensive parts of the supply chain is cable-laying ships, which are critical not only for installation but also repair and maintenance. 

China owns fewer than 10 of the world’s 60 cable-laying ships currently in operation, according to CAICT, despite launching several more this year, including the Qi Fan 19, the largest domestically built cable engineering ship, according to China State Shipbuilding Corp. 

Experts say China has not built up this supply chain to serve its own needs.

“You don’t raise your own cows just because you want to eat a bowl of beef noodles,” Kenny Huang, chairman and CEO of Taiwan Network Information Center, told Nikkei. “But China has the capital and the massive demand to cultivate its own fleet of cable-laying ships, which become a strong advantage for it to expand in the subsea cable industry. … Looking forward, China will only continue ramping up investment and lure more diplomatic allies to its camp.” 

Still, success in the subsea cable market does not come overnight. 

Julian Rawle, an undersea optic cable specialist and consultant, told Nikkei that it took Huawei almost 20 years to get to a point where customers were willing to take a risk on a new supplier.

“The last thing you want once you put [a cable] on the bottom of the sea, thousands of meters [deep] … You do not want to have to pick it up again to fix something, so the systems have to be very reliable,” he said. “It will also take FiberHome significant time to become a competitive player.”

Cables get political

Networks and network infrastructure have become an increasingly sensitive issue for the U.S. in recent years. 

The administration of former U.S. President Donald Trump launched the “Clean Network” initiative in 2020 to ensure, among other things, that subsea cables connecting the U.S. to the global internet “are not subverted for intelligence gathering” by China. 

The Biden administration has maintained that approach, urging American companies to avoid connecting new cables to landing points in Hong Kong, formerly a data center hub, or laying them through the South China Sea, citing security concerns. The U.S. also aims to prohibit subsea cables with Chinese investment from landing in American territories, including Guam, industry executives and analysts said.

China has responded by leveraging its geographic advantage to stall landing permits for cables with U.S. company involvement, particularly around the South China Sea. 

These tit-for-tat tensions have resulted in at least six subsea cable projects spanning more than 50,000 km being delayed, suspended or needing a redesign over the past five years, Nikkei Asia’s analysis found.

One of these is the Hong Kong-Americas Cable System, or HKA, intended to link Hong Kong to California via Guam. Backers include Meta of the U.S. and telecom carriers China Telecom, Tata Communications and Telstra. The project was announced in 2018 and was supposed to go online around 2020, but it is now in limbo and likely to be scrapped due to pressure from both the U.S. and China, according to people with knowledge of the project.  

“I never thought submarine cables could become so political,” an industry veteran involved in the HKA project told Nikkei Asia. “Can you believe that 85% of the cables were already under the sea, installed and completed, but we just can’t finish the last miles from the two sides [the U.S. and China] and put it online?” 

The executive said the project was unable to move forward because the U.S. did not want any cable with Chinese investors docking on its territories, while China was able to block permits for any cables with U.S. involvement in the vicinity of Hong Kong. “Some intense meetings between consortium members are discussing whether Chinese investors can drop out,” the person said. 

The Bay to Bay Express Cable System, or BtoBE, a collaboration between China Mobile, Meta, Amazon and others, has also faced setbacks. The original plan was to connect Hong Kong, Southeast Asia and California but this has been scaled back to avoid Hong Kong. Plans now call for a connection between the Philippines and the U.S. 

Meanwhile, the Southeast Asia-Japan Cable 2 (SJC2)  is well behind schedule. Funded by Meta, Japan’s KDDI and others, the 10,500-km cable connecting Japan to Singapore with branches reaching mainland China, Hong Kong and Taiwan was supposed to be completed in 2020. 

A license is required to lay subsea cables within a country’s territorial waters, but not, typically, within its exclusive economic zone, an area extending 200 nautical miles from its coast. Chinese authorities have nevertheless instituted a lengthy approval process for projects that fall within its controversial self-proclaimed “nine-dash line,” according to multiple people directly involved in the project. 

The area that nine-dash line carves out significantly overlaps with the territorial claims of other countries bordering the South China Sea, including Vietnam, the Philippines and Malaysia, and poses the potential for conflict.

“New cables associated with the United States are all avoiding the nine-dash line. … None of these cables are ever going to land in Hong Kong again,” said Jonathan Brewer, consulting engineer of Telco2, a telecom consultancy. “If there’s a cable cut and it’s within the nine-dash line, then you know there can be some problems to get [maintenance] ships in, especially if some areas are being occupied by the Chinese military.” 

Operators are also increasingly bypassing the contested sea to avoid delays. This includes Meta and Google, which are jointly building Echo, a subsea cable linking California to Singapore via Guam and Indonesia. Google, Japan’s NTT, and other parties hope to finish Apricot, an intra-Asian cable that passes through the eastern waters of the Philippines and Indonesia.

In some instances, authorities have requested cable suppliers to reroute lines to different landing points. “We have had to backtrack part of some projects,” one cable supplier told Nikkei Asia.

“I never thought submarine cables could become so political.”

Data centers, like this one in Taipei, rely on subsea cables to conduct cross-country data transmission and communication. (Photo by Chungi Chen)