Read about Supply Chains, Special Events, New Reports, and Other Noteworthy News, Opinions & Opportunities
In this Issue:
Optics & Photonics #1 Problem: Supply Chains
The primary concern that optics and photonics companies report to OIDA today is related to supply chain shortages. Companies can't get the parts necessary to make their products or are capacity constrained to keep up with demand. (Companies also cite a perpetual shortage of talent, discussed in the August issue of the OIDA Newsletter, here.)
The most familiar problem is that of sourcing parts from suppliers, with the auto industry a prime example. Early in the pandemic, demand for new cars slowed. Automakers responded by cancelling orders for parts, including electronics. Semiconductor chipmakers were able to transition production to the consumer products industry, which was experiencing high demand. Automakers are selling new cars again, but fell to the back of the line to get their orders filled, and have had to shut down manufacturing lines for weeks at a time while they wait for parts.
Electronics shortages are now expected to continue well into 2022. Shorter-term shortages are not limited to electronics; they seem to plague every sector. Shortages in lumber and container ship congestion have made mainstream news. Optics and photonics companies report shortages in the supply of optical crystals, flash lamp tubes, and even the metal for heat sinks.
Source: South China Morning Post (8 May 2020).
These shortages are enough to make companies reconsider "just in time" manufacturing practices, which save on inventory costs only as long as production is predictable. Instead, optics and photonics companies report to OIDA that they are ordering six months of inventory to protect against shortages for customer orders they already have in hand.
We know what happened with toilet paper in March 2020. Consumers, misperceiving that an empty shelf of bulky products indicated a shortage, bought extra supplies, which quickly cascaded into a true shortage. There is a risk that optics and photonics companies—or their customers—are double ordering supplies or speculating on future orders that they don't have yet. That was the case in 2001 when companies overspeculated on future sales, until the Telecom Bubble popped and waiting lists quickly dried up.
Companies also report to OIDA that they are limited by their own manufacturing capacity. Why is this, given the severity of the pandemic and its economic fallout? Companies say that business was strong before the pandemic, then slowed a little in 2020 as the world adapted to work-at-home and the supply chain disruptions. By 2021, however, customers adapted and pent-up demand filled orders beyond the existing capacity. Now optics and photonics companies must determine whether this is a temporary condition or if they need to expand their own capacity to meet a new normal.
These supply chain issues amount to the same phenomenon: the demand is stronger than the collective ability of the industry to deliver. For a different example of a supply chain issue, read the next item.
Supply Chain Case Study: from Traffic to Components
A major concern during the pandemic was a loss of confidence in the economy, which could trigger a global recession. While the optics and photonics industry was largely spared from recession, some segments of the economy did indeed suffer a steep drop in demand. Let’s examine one of these segments and see how the impact cascaded down the supply chain.
This example starts with airline passengers, the primary set of end-users of the airline industry. The figure below shows U.S. air passenger traffic passing through security checkpoints beginning 1 March 2020. When the pandemic spread, travel restrictions and personal health concerns kept passengers out of airports. Within weeks, passenger traffic plunged to 4% of normal. As restrictions loosened and confidence returned in the second half of 2020, traffic recovered to about 30-40% of normal. As vaccinations proceeded, the throughput has climbed to about 80% of the normal summer throughput of about 2.6 million travelers, with a recent dip as the summer ends.
Source: U.S. Transportation Security Administration, 17 August 2021.
How does this translate to airline revenues? The following figure shows revenues for four major U.S. airlines: American, Delta, Southwest, and United. While airline revenues in 2018 and 2019 were guided by the normal seasonal behavior, revenues declined sharply in early 2020 as the pandemic kept passengers home. As passenger traffic returns, profits returned to some airlines in Q2 2021. The recovery is mainly in leisure travel, however. The higher profit margin business and international travel is still well below pre-pandemic levels, which is why the airline revenues have not recovered as quickly as traveler throughput.
Source: OSA, from company statements (August 2021).
When companies are losing money, they cut or delay expenses. One such expense is new capital equipment purchases, also shown in the chart above. Airlines cut capital spending (capex) as revenues fell, but the recovery in spending since then has been slower than revenues. This is a trait of supply chains: the cycle is usually more profound for layers deeper in the supply chain. Optics and photonics companies are usually deep in the supply chain.
For airlines, capital spending means new aircraft, such as from Boeing and Airbus. The figure below shows Boeing’s revenues by segment. Fortunately for Boeing, it is diversified across three sectors, two of which remained steady through the pandemic: Global Services and Defense, Space and Security.
Source: OIDA, from company statements (August 2021).
While the outlook for airlines appeared dire early in the pandemic, commercial aircraft sales did not stop. Boeing saw some interruption in deliveries early in the pandemic, but it quickly responded and completed orders that customers placed before the pandemic. While the pandemic led some airlines to cut orders for new aircraft, other airlines looked past the current crises to a post-pandemic marketplace and signed new orders for planes. The chart above also illustrates that the pandemic is not Boeing's only challenge: it is also recovering from lost sales due to the grounding of its 737MAX aircraft in 2019.
While Boeing is a manufacturer of capital equipment (i.e., aircraft), the company also must also occasionally purchase new capital equipment to make the aircraft. This could include, for example, purchases of laser-based cutting and welding tools or machine vision inspection equipment. The next chart shows Boeing's capital spending compared to its overall revenues. Like the airlines, Boeing responded to declining revenues by cutting capital spending, but it still spends hundreds of millions of dollars per quarter.
Source: OIDA, from company statements (August 2021).
Given this situation, it would not seem to be a strong market for selling to aircraft manufacturers to replace or expand their manufacturing equipment. However, even in hard times manufacturers may need to buy new capital equipment, for various reasons. For example, United announced in June that it would purchase 15 aircraft from startup Boom Supersonic. The planes will cost USD 200 million each, with plans to fly in 2026 and carry passengers by 2029 (see here). Boom will presumably need to buy new equipment to ramp up its manufacturing. And while Boeing's commercial aircraft revenues have declined, revenues for its other two segments are nearly unaffected. This illustrates the importance of some diversification of revenue, to help sustain a company through hard times.
It's not difficult to apply this same analysis to other sectors, such as auto manufacturing, but one has to be careful in the choice of data. New auto sales correlate to indicators like interest rates and disposable income. Solar panel shipments have everything to do with energy prices and government programs that provide incentives to buy renewable energy systems.
An interesting parallel is the telecommunications supply chain, which is also driven by traffic—in data, rather than passengers. Growth in data traffic drives revenue growth for service providers, which drives new capital equipment purchases, which require more production of optical components such as transceivers, subcomponents and optical fiber and cable. It's a little more complicated than just that, however. For example, the providers have to invest first in new 5G networks before they can capture revenue from end-users. But the basic idea is the same.
Analyzing the supply chain can tell you a lot about an industry and what it means for optics and photonics. We also discussed supply chain economics in the June 2020 issue of the OIDA newsletter.
Join us for the Luminate Finals on 30 September
We extend our congratulations to the Luminate startup accelerator as it approaches its 4th annual awards event on 30 September. The event is the culmination of a year of effort with Luminate's fourth cohort of startup companies. The event will announce over USD 2 million in grants, with the top award of USD 1 million and another one awarded to the audience’s choice. Luminate makes an important contribution to recognize and promote new optics and photonics companies in our community.
We also congratulate all the startup companies who entered the competition for their entrepreneurship and hard work. They bring fresh ideas and valuable dedication that the community needs in order to thrive.
OSA is proud to sponsor the event once again this year. Register for the Luminate Finals 2021 here. For more information on Luminate, click here.
Welcome New OIDA Members
Spotlight—Women in Industry
Elizabeth Rivera Hartling
Subsea Optical Network Architect, Facebook
Spotlight — Women in Industry is a monthly article highlighting emerging and seasoned female OIDA members in which we ask both professional and personal questions. This month features Elizabeth Rivera Hartling, a Subsea Optical Network Architect at Facebook. If you would like to be featured in this section, please email OIDA@osa.org for more information.
- What currently excites you most about working in the optics and photonics industry?
It's actually really interesting time for the optical industry. We’ve been riding the wave of the "coherent boom" for over a decade now, with massive jumps in capacity being delivered with every new DSP generation. But as limits on capacity — spectral efficiency loom (thank you, Shannon), a whole new space of innovation opportunity exists in front of us. There's a lot of great ideas and research going on, and I'm actually really excited to see which technology innovations come to fruition and give us the next big leaps that will enable us keep pace with the world's seemingly insatiable appetite for bandwidth!
- What career advice would you give to your younger self?
No career decision is a bad decision! Don't be afraid to explore new opportunities, because even if they don't work out, they've taught you something about what you do or don't love doing. Every day in any job, love it or hate it, is not just a chance to learn something that can go on your resume, but also to learn something about yourself. This helps you hone in on the path you want to follow. Your career is yours to direct, and it's a long journey with infinite options, so knowing which way to aim helps you find and jump on the best opportunities for you!
- What is a hobby or passion of yours?
I'm an extremely avid beach volleyball player! When I lived in Florida, I probably played 25+ hours a week, only taking days off for hurricane force winds or work travel :) And even then I’ve found games in Singapore, Dubai, Brazil and other awesome work travel destinations. Sunshine, friends and a great workout — it's a hard hobby to beat!
Now Available—New "Ones to Watch" Report Series
Ones to Watch features select early-stage photonics businesses that offer potentially game-changing innovations. Each report takes a closer look at the organization's key technologies, funding overview, market opportunities and product roadmap. The case-study format invites you to consider parallels to your own circumstances. We hope the series stimulates ideas and generates discussion. Download the profiles and get valuable insights into some of the most exciting early-stage companies and their cutting-edge technologies.
Optical Communications Market—ON Bandwidth and More: New Report Now Available to OIDA Members
Read this new OIDA Market Update for exclusive information on:
- Optical network bandwidth update
- Data center compute, and
- 5G fixed wireless access
Stay on top of the latest optics and photonics market insights, news, roadmaps and research. Read our reports today and get the information you need to make better business decisions faster.
Other reports include:
OIDA reports are available to all employees of OIDA member companies who selected the Market Intelligence & Advocacy benefit category. We encourage you to browse the OIDA Publications and Reports Center to see everything available to you. Visit the OIDA Publications and Reports center today.
Learn How to Access Recorded Technical Content and Papers for AIO
Missed the Applied Industrial Optics Topical Meeting in July? You don't have to miss out on the technical content!
For a limited time, conference organizers are offering you the opportunity to register for on-demand, post-event access to ALL recorded technical sessions and other content. Registration includes access to the Technical Digest papers as well. This is a convenient and efficient way to maximize your learning experience, as you can focus-in on the specific talks within sessions that you are most interested in—all on your own schedule, from the comfort of your home or office.
Keynote Speaker: Michael Oshetski
Founder and CEO, Micatu, Inc.
Talk: A Grid Disrupted: How Optical Sensing Manages the Chaos with More Accurate, Digital Measurements
Eight Sessions, Tutorial, Panel and Special Events:
- The Early Morning Spectroscopy Special
- Light and the Material Industrial Complex
- Sweeping Up the Point Cloud
- Making Sense of Biosensing
- Your Daily Dose of Fiber
- Metasurfaces Meet My Reality
- I'm Free, Free-Forming
- Brunch with the Spectroscopy Bunch
- Tutorial Session: Patent Basics
- Panel: From Angels to Acquisition, Sowing the Seeds of Investment
- Professional Development Event: Resilience—Career Growth and Insights
- Diversity, Inclusion & Belonging Within AIO
- Town Hall with Tom: Post-pandemic Update—The Applied Industrial Optics Market and Opportunities
Post-event registration is now open and available. View the schedule and register for access.
Attend the Virtual OSA Laser Applications Conference at the OSA Laser Congress
Join us for the Laser Applications Conference—live and on-demand! The OSA Laser Congress has transitioned to a dynamic new virtual event format taking place 03-07 October. Registration provides full access to the Laser Applications Conference PLUS the Advanced Solid State Lasers Conference. Select what you're most interested in, then watch, read, interact and discover at your own pace.
The Laser Applications Conference (LAC), an all invited speaker format for industry in Laser Applications, focuses on Materials Processing and Applications for High Power Lasers. This is a unique opportunity to learn from leaders in Applied Industrial R&D.
LAC highlights include:
Plenary Speaker Steve Rummel,
Talk: Shaping the Future with Photonics and Advanced Materials
Steve Rummel is the Senior Vice President of the Engineered Materials and Laser Optics Business Unit for II-VI Incorporated. Steve's business unit drives innovation in laser technology for a wide range of applications, including in advanced manufacturing.
Over 25 Invited Laser Applications Conference Speakers
Frontiers in Optics + Laser Science Conference (FiO+LS) Announces Virtual Format
The Frontiers in Optics + Laser Science Conference (FiO LS), originally to be held as a hybrid event, will be presented as an all-virtual meeting, 31 October — 04 November 2021.
Given the recent trends in COVID cases and with the health and safety of participants our primary concern, FiO LS co-sponsors believe it is best to present the conference online only.
This format change modifies how participants engage, not what is presented. We guarantee the programs you have come to expect from FiO LS will be delivered: Plenary Sessions, Visionary Speakers and an exhibition.
In addition, there are thematic, industry-focused sessions comprised of invited speakers presenting on virtual reality and augmented vision, machine learning and autonomous systems. In addition, FiO LS will partner with the Quantum Information Measurement meeting, which provides attendees with dedicated technical content on quantum technologies.
Global Environmental Measurement and Monitoring Summit during COP26
OSA and AGU's joint Global Environmental Measurement and Monitoring (GEMM) Initiative will convene a hybrid Summit, "Cities are the Key to the Climate Solution: Meeting Global Greenhouse Gases (GHGs) and Air Quality Targets Through Real-Time Measurement" on 03 November 2021 in Glasgow, Scotland, alongside the United Nations 26th Climate Change Conference.
Cities account for 70% of all GHG emissions. The Summit will highlight the GEMM Urban Air Pilot Project's low-cost sensors and networks for real-time monitoring of CO2 and air pollutants at the neighborhood scale and information policymakers and other stakeholders need for climate change and air quality actions.
The GEMM Scottish Center at the University of Strathclyde is co-hosting the Summit with: OSA, American Geophysical Union (AGU), University of California, Berkeley, Glasgow City Council, UK Met Office and National Physical Laboratory.
Speakers include: Donna Strickland, 2018 Nobel Laureate in Physics and 2013 OSA President; Susan Aitken, Glasgow City Council Leader; David Miller, C40 Cities Director of International Diplomacy; Tom Baer, GEMM Initiative Chair and 2009 OSA President; Guy Brasseur, AGU and Max Planck Institute of Meteorology; Allister Ferguson, University of Strathclyde and many others.
For more information and to register, please use this link.
Showcase Your Company's Useful Techniques: Submit to Applied Optics' Engineering and Laboratory Notes
Applied Optics (AO) publishes Engineering and Laboratory Notes (E&L Notes)—brief, concise articles that share useful laboratory techniques and practical engineering approaches in the applied optics field. Topics range from design and analysis, to fabrication and integration, alignment, testing, and calibration of optical systems. E&L Notes offers a unique way to publish useful techniques from your engineering notebook in Applied Optics. Read more about E&L Notes and suitable topics for submission and learn about how to submit your contribution.
New Digital Programming Available Live and On-Demand
What are your optics and photonics interests? Our digital library has something for everyone. OIDA management and OIDA members have produced a series of webinars and virtual Technology Showcases that are available at no charge. Our curated playlists feature global thought leaders, optics and photonics pioneers and industry icons, offering actionable advice, information and inspiration. We encourage you to browse our growing list of upcoming events and view on-demand recordings as they become available. And there is much more! Check out the OSA We Are On webpage for more high quality webinars on career development from the OSA Foundation and the OSA Career Lab.
Invitation to Join the OIDA Optics and Photonics Industry LinkedIn Group
Join 4,000+ 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!
Questions or Suggestions about OIDA Member Benefits?
We are committed to ensuring the value of your OSA Industry Development Associates Membership, so please email OIDA if you have any suggestions for new programs or comments on your membership.
Forward this message to your colleagues.
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OIDA (OSA Industry Development Associates) Council
Thank you to the volunteers who oversee the programs and services available to the Industry Community.
Inrad Optics, Chair-Elect
Plymouth Grating Laboratory, Inc.
Cedric F. Lam,
Double Helix Optics
Optimax Systems, Inc.