OIDA's Outlook for Photonics in 2016—Part 2
Last month we wrote in the OIDA newsletter that photonics production declined in 2014 and 2015, but is likely to stabilize in 2016. The chart below shows the performance of the major sectors of photonics production since 2013, with a preliminary estimate for the second half of 2015. Other than the usual seasonal upswing every second half, there isn't much upward movement over three years. The largest sector, displays, is expected to end up lower than even H1 2013, dragging down the overall total. The sizeable and typically volatile solar sector is also expected to drag down the average. Machine tools appears better in this chart, but is still where it was in 2H 2013.
Some of this behavior—but not all of it—can be explained by currencies declining against the U.S. dollar. The devaluations have the effect of discounting the performance by companies that report in foreign currencies. OIDA has examined company results in the original currencies, though, and the performance still appears weak for 2015.
There are fears that China's massive debt will spiral into another global crisis, like the one precipitated by the mortgage crisis of 2008 in the U.S. that spread globally. This scenario suggests that China may borrow yet more to bail itself out of the current crisis, rather than restructuring mountains of bad investments. And countries may resort to a downward price war of currency exchange rates to stay competitive—even the U.S. cannot allow the dollar to rise indefinitely. A strong dollar makes U.S. imports less expensive, helping exporting countries, but hurts the U.S. export sector and domestic competitors.
A more favorable outlook is that this is just another "micro correction" in what is becoming a decade-long recovery of a larger kind. The U.S. housing bubble grew over decades, and the current growth rates in the U.S. economy are likely to become the "new normal." Europe's issues with debt, and China's too, didn't happen overnight and take time to repair. And Japan is still in the same economic doldrums it was two decades ago. The market appears volatile as long as stock markets correct for expectations and currencies adjust, but much of the long-term correction is already behind us. And with micro-corrections come "micro-opportunities."
The first half of 2016 is likely to be troublesome for photonics suppliers as the global economy continues to adjust to the slowing China economy and currency changes. But we expect H2 2016 to improve, and the year overall to be an improvement over 2015 by as much as 5% for photonics companies.
Stay tuned through 2016 for updates from OIDA. More detail appears in the most recent OIDA Market Update. And don't hesitate to write or call with your questions and comments!
Update on U.S. Export Control Reform: 2nd Draft Due in Mid-February
OSA and other scientific societies sought out members of Congress to voice their concerns about restrictive proposed rules for export control reform released last year by the Obama Administration. In December Rep. Michael Honda (D-CA), Rep. Zoe Lofgren (D-CA), and Rep. Anna Eshoo (D-CA) sent a letter to the Administration expressing concerns over these rules. Read the letter.
The proposed rules for the International Traffic in Arms Regulations (ITAR) control the export and import of defense-related articles—specifically Category XII of the U.S. Munitions List, and also the Commerce Control List. Category XII includes optics, photonic laser commodities and components. The agencies intended to streamline the regulatory process, but received a lot of feedback from the community in the first comment period, including comments from OSA.
The second round proposed rule should be released by mid-February and is expected to be very different from the first draft, in response to the comments. Industry will once again have an opportunity to provide comments during a 45-day period that is expected to close by the end of March. The government will then draft the final version of the rule for publication by mid-2016, within the term of the Obama administration.
Stay tuned for the release of the revised draft in February. Once again, this 2nd comment period will last only 45 days, so OSA-OIDA will need your feedback promptly to craft a response. If your company will be severely impacted by the proposed rules, please contact Laura Kolton, Government Relations Director, at 202.416.1499.
Why Volume is Not Necessarily a "Stepping Stone" to Commercialization
Is it always better to access a large market than a smaller one? Not if the risk to get there is too unrealistically great. This is a point that OIDA made at the recent semi-annual meeting of the MIT Microphotonics Center and the Photonics System Manufacturing Center (PSMC). The meeting also served to bring together the new AIM Photonics institute stakeholders.
OIDA often hears the comment that low-cost devices would open new markets. This is essentially the "built it and they will come" argument. The investment can become expensive, however, if those markets cannot be accessed quickly.
Consider a fab that yields 10 million chips per year at an annual operating cost of $200M—a manufacturing cost of $20/chip. If the packaging and testing cost is 4x the chip cost, and the gross margin is a healthy 50%, then the manufacturer must sell at least $2 billion in product per year. The available market must be even greater, since the manufacturer is not likely to have 100% market share, if only because the customers will insist on second sources.
It's hard to find a $2 billion market to exploit, especially for an emerging technology like integrated photonics. The new technology has to displace the incumbent technology on cost, or find a niche where it provides a novel advantage and build from that. Either way, that market development takes time, if it's successful at all.
Alternatively, consider a fab that yields only 100,000 chips by leveraging a larger, existing fab for an annual cost of $20M. This amounts to $200/chip, but if the manufacturer can reduce the packaging and testing costs to 1x the chip cost, then it needs to sell only $80 million in product per year. There is a much greater probability of success that the manufacturer can identify and penetrate an $80 million market than a $2 billion one.
The takeaway? Reducing cost by increasing the volume is not necessarily the best way to commercialize a technology—it's too big a leap. In the case of integrated photonics, reducing the cost of packaging and testing creates "stepping stones" to commercialization.
More details appear in the most recent OIDA Market Update.
Welcome New Industry Development Associates Members
New Brochure: Lighting the Path to a Brighter Future—How Optics and Photonics Impacts the Global Economy
Download this OIDA brochure about how optics and photonics impacts
the global economy in communications, energy, medicine, security,
lighting and manufacturing.
The brochure answers questions such as:
Read the brochure now.
- How fast are laser sales growing in the US? What are the industry's revenues in the last five years?
- Where is R&D funding coming from?
- How is the R&D funding broken out?
- What are the key vertical markets enabled by optics and photonics?
- How do the vertical layers of the telecommunications industry enabled by optics break down in US$?
- What's the production value of ten top vertical markets enabled by optics?
- What's the production value of optics by region?
- How many jobs does optics create?
Prices Go Up on 22 February—Register Now for OSA Executive Forum & OIDA's Integrated Photonics Workshop at OFC
Going...going...gone? Not yet, but prices go up on 22 February. OIDA is presenting two special all-day events this year. You are invited and encouraged to attend both of these events. Note that these two events require a separate registration from your OFC registration.
OSA Executive Forum
21 March 2016 at OFC in Anaheim, California, US
This is the premier annual event for leaders in optical networking and communications. Meet executives from Google, Microsoft, Verizon, Facebook, Broadcom and more. OSA Executive Forum is your exclusive opportunity to hear insider perspectives in an uncensored environment, while participating in high-level networking. Learn more about the program and the speakers who will participate. Register Now
OIDA Workshop on Integrated Photonics High Volume Packaging
20 Mar 2016 at OFC in Anaheim, California, US
Attend this workshop and get a deep look at integrated photonics high volume packaging. Learn about new opportunities for your company. Network with top experts in the field. Attend three presentation sessions, one discussion session, lunch, poster display and a special evening networking event. Learn more about the program and the speakers. Register Now
These two events offer substantial discounts to OIDA members until 22 February and ODIA members can bring a colleague for free to Executive Forum. Not an OIDA member? While at OFC, please stop by the OSA booth and learn more about OSA Industry Development Associates and the benefits of membership.
March 23 OFC PIC Workshop: All You Need to Know in Order to Make a Photonic IC
This year's OFC will feature the 3rd workshop on Photonic Integrated Circuits (PIC). Last year's PIC Workshop at OFC attracted over 250 attendees and had a unique format consisting of sponsor presentations, then a networking break with catering and a mini market fair, followed by several use case presentations. The 3rd PIC workshop will have a broad group of sponsor companies and will be held during OFC, on Wednesday, 23 March, in Room 210AB, at the Anaheim Convention Center from 5:45pm-8:30pm with registration starting at 5:15pm.
Driven by 100Gbps in long-haul as well as in datacenter applications, photonic integration is picking up increasing momentum as it is becoming an indispensable part of those solutions. The purpose of the workshop is to create a one-stop-shop for everyone interested in photonic integration as it brings together all the key players offering solutions, whether foundries, simulation software, packaging, or turn-key solutions. A specific emphasis is on multi-project wafer shuttles (MPW) plus the accompanying Process Design Kits (PDK) as this provides an important toolkit to reduce the cost for developing a new chip.
The workshop will provide the audience with a good overall picture of the state-of-art in PICs as well as how to take advantage of existing suppliers to save time and cost. The workshop is free of charge, but does require advance registration. Food and drinks will be provided, and there will be plenty of time to network with the sponsor companies. The workshop is organized by 7 Pennies and OSA Industry Development Associates and is sponsored by LioniX, Lumerical, PhoeniX Software, VLC Photonics, Chiral Photonics, and many more...
For more information and/or registration, please go to : http://www.7pennies.com/news-events/pic-ofc-2016/
Is Your Organization Ready to Apply for Funding?
The U.S. Department of Commerce's International Trade Administration is soliciting requests for up to $300,000 per export-development project. (Applications are due March 15, 2016.)
Dial in to any of the conference calls scheduled in February and March.
New Applied Optics Engineering and Laboratory Notes Now Online
Applied Optics now publishes articles called Engineering and Laboratory Notes (E&L Notes). These articles are intended to give engineers and technicians a venue to highlight laboratory techniques and hands-on skills required for the design, analysis, fabrication, integration, alignment, and measurement of optical components and systems.
Check out these recently published E&L Notes:
Want to publish an E&L Note? Submit your manuscript today! If you aren't yet ready to submit, read this editorial by the E&L Notes Editor Brian Monacelli to learn more.
Participate in Congressional Visits Day 2016
OSA and its National Photonics Initiative (NPI) partners are participating in the annual Congressional Visits Day (CVD) taking place in Washington, D.C. on 12-13 April 2016. As OSA celebrates its centennial this year, this is a great opportunity to educate your members of Congress about the impacts of optics and photonics over the last century and an opportunity to establish a relationship with your Congressional offices.
The NPI will be participating in this annual event to talk about the importance of R&D funding, the NPI and discuss other relevant legislation. Society staff will schedule and coordinate your day and will escort you to all of your meetings. Each participant will be placed on a combined society team. Training will occur on 12 April at The Optical Society's headquarters with a reception that evening on Capitol Hill. On 13 April, visits to your Congressional representatives will occur. Sign up to participate
Market Update is Available to OSA Industry Development Associates Members
Have you read the January Market Update yet? Highlights in this OIDA Update include:
All OSA Industry Development Associates members have free access to all reports. We encourage you to browse the Publication Library to see everything available to you.
- Review of the photonics market in 2015 and an outlook for 2016. This material is expanded and updated from presentations given at a University of Arizona Industry Affiliates event and a meeting of the Florida Photonics Cluster.
- Highlights from OIDA workshops and other efforts related to roadmapping of integrated photonics. This material is expanded from a presentation given at the Fall semi-annual meeting of the MIT Microphotonics Center, which was also a meeting of the PSMC (Photonics Systems Manufacturing Center) and for the benefit of the new AIM Photonics institute.
- Review of the market and applications for photonics in agricultural applications, a subset of the life sciences market.
Toast a Century of Innovation with The Optical Society
We're celebrating our 100th birthday with a new exhibit recognizing innovators and inventions in optics since 1916. Visit us at the International Year of Light closing ceremony, 4 — 6 February in Mérida, Mexico.
Join us in San Francisco, USA, 16 — 17 February, at Photonics West, Booth 4362, with a special celebration each day from 15:00 — 17:00. Bring this newsletter to Photonics West and enter for a chance to win a centennial gift.
Visit osa.org/100 for updates to the history timeline and exhibit icons or to share your OSA story.
Join Your Competitors and Sponsor the OSA Centennial Celebration
Your company is invited to be part of our 100th Anniversary festivities. Choose one of our three Centennial Sponsorship options and your company will be highlighted in a year-long calendar of special events and programs that will provide you with high visibility in the optics and photonics market. To learn more contact Centennial Sponsorships at +1 (202) 416.1957. A sponsorship opportunity like this happens only once every 100 years! Check out the list of savvy companies who have taken advantage of this opportunity to connect with customers all year long.
Help OSA Recognize Contributions in Optical Engineering — Award Nominations Due 2 July 2016
OSA sponsors over 20 awards and medals that acknowledge a broad array of contributions and achievements in the optics and photonics community. However, there is only one award that recognizes the work of teams. The Paul F. Forman Team Engineering Excellence Award recognizes technical achievements such as product engineering, process and software development, and patent development, as well as contributions to society such as engineering education, publication and management, and furthering public appreciation of optical engineering.
This award provides a great opportunity to showcase the value and importance of the engineer teams in your organization! Team nominations are due 2 July 2015. The award will be presented in October 2016 in Rochester, New York, during Frontiers in Optics 2016. Recent recipients include: Logic Analysis Tool Team (LAT Team), Intel® Silicon Photonics Solutions Group, and ZygoLOT Automotive Precision Optical Team.
Attention OSA Fellows — Nominations Now Being Accepted for the 2017 Class of Fellows
OSA Members who have served with distinction in the advancement of optics and photonics may be proposed for election to the class of Fellow. Nominations are due 15 June 2016.
OSA added the "Business Leadership" category to provide a clearer path to recognize distinction in the business community. Fellow nominees are assessed in the context of their achievements and career path. View a list of recently inducted Fellows from industry.
All current OSA Fellows are encouraged to submit a nomination and recognize their colleagues in the industry realm. More information is available from the OSA Awards Office (email firstname.lastname@example.org or telephone +1 202.416.1960.
Submit an OSA Senior Member Designation Request
If you have significant professional experience in the optics and photonics industry, you are encouraged to request the OSA Senior Member designation in recognition of your accomplishments. Request forms are due no later than 29 February 2016. Find out more.
Want to get even more insight and access to great discussions about optics and photonics?
Join 3,000 of your colleagues in our 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!
Take advantage of your OSA Industry Development Associates Member Benefits
We are committed to ensuring the value of your OSA Industry Development Associates Membership, so please email OSA if you have any suggestions for new programs or comments on your membership.
Forward this message to your colleagues.
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|OSA Industry Development Committee
Thank you to the volunteers who oversee the programs and services available to the Industry Community.
| • Alex Fong,
Gooch & Housego, Chair
• Jean-Michel Pelaprat,
Figulus, Past Chair
• Henrik Skov
• Simin Cai,
|• John Dexheimer,
• James Fisher,
• Fred Leonberger,
• Claudio Mazzali,
| • Mike Mielke,
• Martin Seifert,
• Costel Subran,
• Christoph Harder,
Harder and Partner,