Read about Forecasting During a Pandemic, Quantum Photonics, Special Events, New Reports and Other Noteworthy News, Opinions & Opportunities
In this Issue:
OSA COVID-19 Message
The Optical Society (OSA) is committed to ensuring our staff, members and customers are supported during the COVID-19 (Coronavirus) pandemic and will continue to implement measures to protect the health of our global community while maintaining business operations and programs to the extent possible. Learn more.
How Do You Forecast in a Pandemic?
Our sympathy goes out to those caring for family and neighbors through this pandemic; to companies and their workers struggling to keep operations open; and for anyone experiencing anxiety as we all hope for a swift and safe global public health response.
The cartoon evokes a time many may have felt before the pandemic struck the globe. And yet, at this writing at the end of March 2020, here we are in the Age of SARS-CoV-2 virus. We are in a Black Swan, a singularity, an unexpected event which makes previous forecasts invalid. Market forecasts are most valuable when markets are neither too predictable nor too chaotic. Is a forecast even possible right now?
Source: Office Guy Cartoons.
The view will clear with time, but any scenario planning is better than none. One can prepare for one or more scenarios, and then adjust as events unfold. Here are some heuristics that may be helpful as this crisis proceeds.
- Capital spending will be delayed. Most optical products go into capital equipment, such as machine tools, networking systems, military equipment and so forth. Facing uncertainty, companies preserve cash by delaying spending on new capital equipment. Capital spending in some segments can drop as much as 50% for the year in a "normal" recession. This one isn't normal; factories are not just running below capacity, but shut down altogether. Buying new capital equipment is a low priority for many right now.
- Downturns can accelerate outcomes. Crises force companies and their investors to make choices. Many companies that were barely surviving before the crisis will be forced to consolidate or exit markets. Sketchy business ideas may not survive, while solid ones will take root and thrive. Market shares may shift as companies struggle to react. But there may be positive outcomes as well, such as pressure to upgrade communications infrastructure to meet accelerated demand for online services, or to commercialize and deploy ultraviolet LED sanitation technology to mitigate the spread of pathogens.
- Performance will vary by sector. The disruption of supply chains and productivity impacts everyone, but some sectors were in better positions entering 2020. For example, the military sector was doing well going into Q1 and may get back online more quickly, while the machine tool industry was soft and already cutting spending in 2019.
- Supply is affected first, then demand. A business concern early in this crisis was that it would disrupt supply chains for optics and photonics products, upsetting near term business results. Now the crisis and intervention is so widespread that the fear is that the demand for optics and photonics goods and services will decline for the longer term. Much will depend on the speed and scale of government measures to mitigate the damage in this intervention period.
- Extremes are possible but statistically unlikely. The point of a singularity is that anything is possible, and extremely bad outcomes are very possible. But there are statistically more outcomes that lie between the extremes. Consequently, outcomes rarely turn out as well as one hopes, but neither do they usually turn out as bad as one fears. This is also because we adapt as we go, and there is a belated but massive mobilization to avoid the worst case. The situation today is already as bad, or worse, than many expected just weeks ago. We have already lowered our expectations for this year.
- We tend to overestimate the near term, and underestimate the long term. The near future is most uncertain, but if history is our guide, we will underestimate the recovery in the coming 6 to 9 months. A full recovery may be unrealistic; it took nearly a decade to rebuild after the 2008 recession. But the worst damage happened at the beginning. A new study from the U.S. Federal Reserve Bank and MIT suggests that, while pandemics depress the economy, public health interventions like social distancing do not, based on data from the 1918 Influenza Pandemic. The situation today is very different from that of 1918, but the study offers some hope for the mitigating effects of early and strict interventions.
- Western society will learn from Asia. For the most part, Western societies overlooked or forgot the impact of SARS, H1N1 virus and swine flu, but Asia remembered. Now China's workers have been returning to factories, and some flights between Shanghai and San Francisco have resumed. We are likely to toggle between periods of tight and relaxed restrictions for months. Western societies may have been poorly prepared for the pandemic, but they will adapt.
- Asian manufacturers are returning to normal production. The contract manufacturing giant Foxconn recently announced it expected to be back to normal production in its Chinese factories by now, and that first half 2020 revenues might end up flat with H1 2019. The chart shows Foxconn's revenues so far this year, with the usual seasonal declines in the late fall and continuing to February. The decline through February was dramatic, but Foxconn was not completely offline through the period.
Source: Foxconn financial statements.
The Taiwanese lens manufacturer Largan Precision showed satisfactory results so far this year, thanks to Taiwan's rapid response to the pandemic threat. The company had nearly US$ 2 billion in revenues in 2019, selling lenses mostly to mobile phone handset manufacturers. The company normally has a seasonal decline through February by as much as 65% of the previous October, but so far in 2020 it suffered only a mild decline.
Source: Largan Precision financial statements.
- There are still nine months left in 2020. Even if the first half of 2020 shows a steep decline, a recovery in the second half can bring Q4 2020 at least to the 2019 average. The illustration below provides an example. The chart shows OIDA's estimate of the trajectory of the optics and photonics market in 2019, followed by a fall in the first two quarters of 2020. A seasonal decline in Q1 is normal, but we expect a much steeper drop this year from the coronavirus crisis, falling by 1/3 from Q4 2019 to Q2 2020. The chart shows the usual second half seasonal growth, as well as some additional recovery. The example continues in 2021 with a more typical trajectory: the seasonal drop in Q1, followed by the seasonal pattern of growth through the rest of the year.
Source: OIDA (2020).
- This example assumes that our sector will respond to this crisis at about 4X the rate of the (real, adjusted) growth rate of the U.S. economy, using estimates from the major Wall Street banks as of this writing. The optics and photonics industry fluctuates more widely than the overall economy because of our role in the capital equipment sector. In this example, the optics and photonics market would decline about 16% from 2019 to 2020, and 2021 would still end up about 9% short of the 2019 value. There are many other possible scenarios, of course, and this one may be optimistic. But the value of the forecast isn’t only the predicted values. It’s also the logic that led to the values. The readers can then make adjustments and judge for themselves.
- In-person events will endure. There is a lot of talk that the coronavirus crisis will force a permanent migration to more virtual conferences and telework, as many have long expected and advocated. Perhaps. But there is a deep human urge to live our lives in person: we live in cities, attend live sports events and do business deals in person. Even tech-intensive companies like Apple and Facebook have relied strongly on in-person meetings. Pandemic, political violence, rising fuel prices or other travel restrictions may reduce the size, number and frequency of live events, but in-person conferences and trade shows will endure. They are like the souks in North Africa: every village needs a weekly gathering to exchange goods and gossip.
- ZM and ZOOM are doing just fine. You may be wondering how Zoom is doing as a company—the one that operates videoconferencing software. The company is officially named Zoom Video Communications, Inc., and goes by the stock symbol ZM. It is doing very well, doubling its price per share since the beginning of 2020 and boasting a whopping US$ 35 billion market capitalization, as of this writing. However, the company that goes by the stock symbol ZOOM is actually Zoom Technologies Inc., a company based in China. This other Zoom used to supply modems, but hasn’t reported revenue since 2011 and has a market cap about 1/1,000th of big Zoom. Yet little Zoom has enjoyed a greater surge in stock price than big Zoom, thanks to confusion in the names. Stock trades for little Zoom were suspended on 26 March through 8 April for that reason. It's an example of how irrational the investment market can be in times like this.
Source: OIDA (March 2020) from daily adjusted closing prices.
Our industry is helping to get through this pandemic.
It will take a lot of leadership and teamwork to get through this pandemic, and now is the time to put others first and demonstrate how we can help. It's worth noting that the optics and photonics industry plays a positive role in many ways in this crisis. Genome sequencing instrumentation is used to identify and understand the SARS-CoV-2 virus. Ultraviolet LED equipment may be helpful to eradicate the virus from surfaces. Videoconferencing and telecommunications technology today makes it far easier to send workers and students home than even a few years ago, for those who are in a position to do so. And there is much more. All of this helps, and it will take all of us to stem this crisis.
Quantum Photonics and FOMO
It's now official: OIDA's new report, OIDA Quantum Photonics Roadmap: Every Photon Counts, is available to members (see here). The report was launched on 10 March at OFC 2020, and created in collaboration with Corning Incorporated. We last wrote about the roadmap project in the February 2020 OIDA newsletter (here).
Quantum sensing is the most commercial quantum photonics segment so far. Yole Développement estimates that in 2019 quantum sensing was a US$ 400 million market, for optical clocks. Most of the market growth will come from quantum computing and quantum cryptography, but the technology hurdles and risks are greater too. A fully commercialized quantum computer that generates a return on its investment for its owner is at least a decade or more away.
Source: OIDA (2020).
The size of the market for quantum products is expected to be relatively small—Yole forecasts US$ 3.2 billion by 2030—but the impact could be substantial. An important driver for funding research and commercialization of quantum technology is "FOMO"—the Fear of Missing Out. While companies like IBM and Google may worry about missing out on commercial quantum computing, national governments are worried about missing out if quantum computing amounts to a threat to security, as well as national competitiveness. Even if much of the research turns out to be fruitless, no government wants to find out in ten or twenty years that it is behind in quantum computing, leaving it vulnerable to adversaries, but too far behind to catch up. Even small nations that don’t have a domestic quantum technology industry would be wise to fund research. The research can establish a pool of local talent that can expertly procure and operate quantum technology imported from abroad for its needs.
For more details, download the report here. For questions or problems with access to the report, contact the OIDA membership team at firstname.lastname@example.org.
Welcome New OIDA Members
RSVP for Virtual OIDA Member Benefit Orientation on 8 April
RSVP for OIDA's member benefit overview orientation on 8 April at 13:00. This is an opportunity to learn more about key membership benefits you and your company should be taking advantage of and explore how to maximize performance and grow your business.
Whether you have been an active member for years and need a quick refresh or are transitioning to the new OIDA membership model — this orientation is a must-attend! Please feel free to share this with your colleagues. When you join OIDA, everyone at your organization becomes a member.
"With our corporate membership, we're able to participate in networking events and obtain industry reports that help us make more informed decisions" - Chris Maloney, Director of Business Development, VPI Photonics
Registration is Open for the OSA 5G Summit
The OSA 5G Summit provides a platform for industry leaders, innovators and researchers from the industry, academia and government community to collaborate, learn and exchange ideas with this new emerging technology.
The Optical Society's Second Annual 5G Summit in Washington, D.C., is a two-day program providing an overview of the entire 5G Ecosystem. This event is designed to examine key critical 5G technologies that will become core features with many businesses. 5G technologies promise to offer increased network speeds, expanded interactivity on the network, much lower latency and provide vastly elevated conductivity.
Our 2019 speakers included experts from Sprint, China Telecom, Nokia, Futurewei, II-VI, Lumentum and ADVA Optical. Stay tuned for the announcement of the 2020 speakers!
Topics will include the 5G Ecosystem Use Cases, Massive MIMO, Cloud-RAN, RF Technologies, Optical Technologies and Open RAN AI and Virtualization.
Summit attendees will be provided with the latest approaches to introduce and implement 5G technology.
Present Your Research at the Laser Applications Conference
12-16 October 2020, Québec City Convention Centre, Québec City, Québec, Canada
This meeting will be held as scheduled.
OSA continues to monitor advisories related to COVID-19, and commits to being responsive amidst changing conditions to facilitate maximum participation for speakers and attendees while ensuring the well-being of all participants.
The Laser Applications Conference (LAC) is now accepting papers for posters and may upgrade some of the posters to oral presentations. In addition to posters, the meeting is an all invited speaker format for industry in Laser Applications at the OSA Laser Congress. This 3-day meeting focuses on two main topic areas -- Materials Processing and Applications for High Power Lasers.
View the complete list of topics.
One of the themes of this meeting will be to initiate discussions on what engineering and production advances are needed to translate promising technological advances into marketable products.
At LAC, you'll be immersed in an innovative learning environment that introduces new, groundbreaking information, offers insightful knowledge, showcases cutting-edge products and engages your active participation in important debates and discussions.
Submit your research by 11 June. Learn more.
Ball Aerospace & Technologies, United States
Trbola Engineering, Germany
OSA Technical Group Webinars—Live and On-Demand
OSA Technical Group webinars are your source for free online content curated by your peers and tailored to your interests in optics and photonics. Each webinar is organized by one of our 44 technical groups and features an hour long presentation by selected speakers.
You can learn more about and register for any of our upcoming webinars here. Previous OSA Technical Group webinars are also available to view on-demand in their entirety.
Call for Nominations – Paul F. Forman Team Engineering Excellence Award
We are currently accepting nominations for the 2020 Paul F. Forman Team Engineering Excellence Award. This is a great opportunity to highlight the important work of optical engineering teams. The award recognizes technical achievements such as product engineering, process/software development, and patent development, as well as furthering public appreciation of optical engineering. Submit a nomination by 10 April.
Business Leaders Recognized with OSA Awards
We congratulate OSA Past Presidents Susan Houde-Walter, LMD Power of Light Corp., USA and G. Michael Morris, RPC Photonics, Inc. & Apollo Optical Systems, Inc., USA who have been honored for their outstanding contributions to OSA and our field. For more information on this year's winners and the OSA awards program, visit osa.org/awards.
- Stephen D. Fantone Distinguished Service Award: Susan Houde-Walter, LMD Power of Light Corp., USA for outstanding service to the Society through numerous advisory and leadership roles, including 2005 President, Board of Directors Member and Chair of the Optics and Photonics News Editorial Advisory Committee.
- David Richardson Medal: G. Michael Morris, RPC Photonics, Inc. & Apollo Optical Systems, Inc., USA for contributions to the commercial development of diffractive and beam shaping optics, along with significant achievements in entrepreneurship, the founding and development of two highly successful companies and ongoing support of education in optical engineering.
Invitation to Join the OIDA Optics and Photonics Industry LinkedIn Group
Join 3,500+ of your colleagues in our OIDA Optics & Photonics Industry Network LinkedIn Group. This one-of-a-kind Forum for Industry lets you participate in discussions about cutting-edge issues. Extend your professional network. Exchange information about problems, ideas and solutions. Collaborate with experts in your field. Now is the perfect time to build a relationship with fellow optics and photonics professionals!
OIDA (OSA Industry Development Associates) Council
Thank you to the volunteers who oversee the programs and services available to the Industry Community.
- Simin Cai,
- Claudio Mazzali,
Corning Research &
Development Corp, Past Chair
- John Dexheimer,
LightWave Advisors, Inc.
- Turan Erdogan,
- Amy Eskilson,
- Christoph S. Harder,
- Anjul Loiacono,
- Debbie Wilson,
Lumentum Operations Inc.