http://localhost:4503/content/su/en/blogs/opto-insider-blog.html2016-09-02T00:43:33.272ZOpto InsiderAdobe Experience ManagerThe 1% in photonics who make 60% of revenuesnoemail@noemail.orgTom Hausken<div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">Been hearing about the 1% lately?<span style="mso-spacerun: yes;"> </span>Try this one: about 1% of photonics companies make about 60% of the revenues.<span style="mso-spacerun: yes;"> </span>Wow.<span style="mso-spacerun: yes;"> </span>This is a finding we obtained in a recent study completed for </span><a href="" target="_blank"><span style="font-family: inherit;">SPIE</span></a><span style="font-family: inherit;"> on the global photonics industry.</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">The study counted revenues from all types of photonics suppliers, from massive $26B display module suppliers to niche suppliers of sensors and optics. <span style="mso-spacerun: yes;"></span>The 1% value also includes intermediate products (such as materials and subcomponents), equipment used to manufacture the products (such as MOCVD machines), foundries and contract manufacturers, and what we call adjunct products&mdash;those that are dedicated to the photonic product, such as drivers, chillers, image processing chips, etc. </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">The display sector certainly skews the numbers, but what&rsquo;s interesting is that the lopsided revenues are found in just about every sector I looked at.<span style="mso-spacerun: yes;"> </span>For example, for years I&rsquo;ve found that the top 10 non-telecom laser suppliers receive about 75% of the revenues, while the other 100 or 200 receive the other 25%.<span style="mso-spacerun: yes;"> </span></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">It&rsquo;s not hard to see why.<span style="mso-spacerun: yes;"> </span>There are about 100 small companies making a few million dollars for every </span><a href="" target="_blank"><span style="font-family: inherit;">Coherent</span></a><span style="font-family: inherit;"> ($740M) or </span><a href="" target="_blank"><span style="font-family: inherit;">Hamamatsu Photonics</span></a><span style="font-family: inherit;"> ($1.3B).<span style="mso-spacerun: yes;"> </span>And why not?<span style="mso-spacerun: yes;"> </span>It turns out there is a place for all those niche suppliers.<span style="mso-spacerun: yes;"> </span>Coherent can&rsquo;t be bothered to go after most of that business&mdash;it doesn&rsquo;t offer enough opportunity.<span style="mso-spacerun: yes;"> </span>And a lot of those little suppliers are in that intermediate or adjunct market: selling odds and ends that support the bigger market.</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">It&rsquo;s important to understand that none of this says anything about profits.<span style="mso-spacerun: yes;"> </span>One might think that it simply scales with revenues, or perhaps better than that, since large companies can enjoy some economies.<span style="mso-spacerun: yes;"> </span>But the solar cell companies are all losing money right now, so that alone blows up the numbers.<span style="mso-spacerun: yes;"> </span></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;"><br /></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: inherit;">It&rsquo;s been my observation that small companies are often much more profitable than the large ones, but that&rsquo;s a blog for another day. <span style="mso-spacerun: yes;"></span></span></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, money for photonics in data centersnoemail@noemail.orgTom Hausken<span style="font-family: inherit;">The best news that photonics people could hear came last week at OFC when </span><a href="" target="_blank"><span style="font-family: inherit;">Cisco announced that it was buying Lightwire</span></a><span style="font-family: inherit;"> for $271million in cash. </span><a href="" target="_blank"><span style="font-family: inherit;">Lightwire is a start-up making integrated photonics</span></a><span style="font-family: inherit;">, and Cisco is interested in it for making interconnects in data centers, among other things. I try not to get intoxicated with financial ups and downs that ultimately benefit only a few investors (if that),and I'm not fond of buzzwords like "integrated photonics," but this is good news for anyone with a similar technology.</span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">It makes sense that Cisco needs the expertise developed in Lightwire. Companies have spent millions on this; for Cisco to do it itself would take millions more and years of delays. Meanwhile, its competitors--Huawei for one--are encroaching on Cisco's market with technology of its own. Cisco can't rely on the merchant market for everything. </span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">The data center bottleneck is particularly important. I attended four discussions on the topic, including the </span><a href="" target="_blank"><span style="font-family: inherit;">OIDA workshop to develop a roadmap</span></a><span style="font-family: inherit;"> (where I was a moderator and am writing the report). The challenge is for the industry to develop new architectures and inexpensive components that can address the many-to-many interconnects necessary in modern data centers, such as those of Google and Facebook. Traditional data centers are not a challenge: a conventional switching hierarchy can store and retrieve data, and that scales predictably. The new data centers don't scale as well.</span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">Both Google and Facebook made the rounds at OFC, and both claim that the technology is available today, it just has to be commercialized. They say there needs to be a whole new sector of components that don't need to meet Telcordia and NEBS standards. It just has to be good enough for the controlled data center environment. Oh, and make it really really cheap, thank you. </span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">The one problem I have will all of this is that the </span><a href="" target="_blank"><span style="font-family: inherit;">net margins for Google</span></a><span style="font-family: inherit;"> and </span><a href="" target="_blank"><span style="font-family: inherit;">Facebook</span></a><span style="font-family: inherit;"> are about 25% or so. That's net profit, not gross. The optical components suppliers' net margins are a few percent to negative. So how about giving some of that nice margin back to the components suppliers? Especially as many suppliers don't see the return on this new segment justifying the risk.</span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">That's why Cisco's acquisition is such good news. It's a return for the start-up's investors, but it also means that Cisco is willing to fork over some real money for components. </span><br /><span style="font-family: inherit;"><br /></span><br /><span style="font-family: inherit;">The OIDA roadmap report on data center interconnects will be coming out sometime in the coming weeks. Look for it at the </span><a href="" target="_blank"><span style="font-family: inherit;">OIDA web site</span></a><span style="font-family: inherit;"> or </span><a href="" target="_blank"><span style="font-family: inherit;">here</span></a><span style="font-family: inherit;">.</span><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, news and not-so-good news in LEDsnoemail@noemail.orgTom HauskenThere was good news and some not-so-good news at <a href="" target="_blank">our 13th SIL</a> event in February. First the good news: it was another record year for LEDs, and for that matter, for the Strategies in Light event. As my colleague, <a href="" target="_blank">Ella Shum, reported:</a> sales totaled $12.5 billion in 2011, thanks to growth in all major segments except backlights.<br /><div><br /></div><div>The not-so-good news is that growth will continue through 2012 but the market will be tepid for a few years beyond that, ending in 2016 in about the same place, the way things are going. This is because LED suppliers are so successful in reducing the selling price while improving the performance. Growth in sales is countered by reduction in the LED count (per product) and falling prices, making a double whammy. This is good for increasing penetration of LEDs into lighting and other applications, but it&rsquo;s hard on suppliers&rsquo; profits. In fact, it was a bloodbath, in Ella's words, due to overcapacity.</div><div><br /></div><div>Looking at this another way, the LED business is maturing. It still has a long way to go with lighting, of course, and even backlights. But the business is now of such a size that it is starting to behave like DRAMs, to use a clich&eacute;. Penetration into new applications is not enough to guarantee LED industry growth through the coming lull. From now on, LED sales will be highly dependent on the fortunes of the end-product markets for backlights, just as DRAM sales are highly dependent on personal computer sales.</div><div><br /></div><div>To improve margins and market share, LED suppliers will have to stay ahead in scale and performance. LED lighting, in particular, will require larger volumes and high performance devices. <a href="" target="_blank">Suppliers that can manufacture well</a> in volume (improving yield and tightening binning, for example) will fare well. The suppliers that cannot may be relegated to older segments that don&rsquo;t require the performance that lighting does. Or they may simply get squeezed out of the market.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, photonics executives, complexity, and marginsnoemail@noemail.orgTom HauskenLast month's Photonics West went well again. People were in a good mood, including the executives at <a href=";catid=300&amp;event_id=896185&amp;export_id=x13090&amp;ID=x27509&amp;redir=x27509.xml" target="_blank">SPIE&rsquo;s forum</a>, where I moderated. One topic was &ldquo;managing complexity.&rdquo; It sounds like a buzzword, until you think about it.<br /><br />Take Coherent. It has to manage different kinds of lasers (excimer, CO2, solid-state, diode), selling to different end-user sectors (semiconductors, medical, university research, etc.), in different regions and through different types of sales channels. Edmund Optics is another example. It&rsquo;s catalog has 26,000 optics and is available in 10 languages. Just managing that complexity is a task. While there are advantages to scale, it also can create some inefficiencies, compared to a small company with a single product and a few customers.<br /><br /><br />There can be great advantages to complexity. Clayton Christiansen, the Harvard business guru (he coined &ldquo;disruptive technologies&rdquo;), says that <a href="" target="_blank">the margin in the supply chain goes to where there is the greatest complexity</a>. Google, Apple, and Cisco all manage a lot of the complexity that is in their supply chain. Suppliers of standardized components do not. When specifications are standardized, the customers play the suppliers against each other, and the margin gets razor thin.<br /><br /><br />Low margin complexity. Sadly, the kind of complexity that our panelists (from Coherent, Edmund Optics, Hamamatsu, IDEX, Jenoptik, Newport, and Trumpf) have to manage is not the high-margin kind. That&rsquo;s because the customers don&rsquo;t want to pay to manage that complexity. It&rsquo;s simply what the suppliers have to do as large companies. In fact, to the extent that the larger suppliers are just federations of smaller business units, a company like Coherent competes with small companies too.<br /><br /><br />So there you go: larger photonics companies have advantages with their brands and scale efficiencies, but what seemed to be on these executives&rsquo; minds was managing the complexity of it all, when they don't get to charge margins for it.<br /><br /><br /><span style="font-size: small;">Feb 14, 2012</span><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, is a record year for laser salesnoemail@noemail.orgTom HauskenHere's some good news as we weather the winter storms: 2011 was a record year for the laser industry, finishing over $7 billion for the first time ever. That's coming off the deep recession in 2009 and a remarkable recovery in 2010. The previous record was in 2007, just before the recession. This is just out in our<a href=""> new market report on the worldwide laser market</a>. <br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1"><img border="0" height="154" src="" width="320" /></a></div>Who would have thought? I fully admit, it surprised me, as it did my colleague David Belforte of Industrial Laser Solutions magazine. I expected the recovery to track the recovery in employment. After all, lasers go largely into capital equipment, often to make even bigger capital equipment. When you are short of cash, you cut back on capital spending and payroll, at the least. <br /><br />In fact, companies did buy capital equipment. There are the usual reasons, but particularly improving productivity and competitiveness. For example, the auto industry, which was so badly hit by the recession, spent heavily on retooling. Another big factor was China, which has been spending heavily on equipment. Growth in sales of smartphones and tablet computers helped. And some segments just keep rolling along, like biomedical instruments, military, and R&amp;D lasers.<br /><br />As a result, companies improved productivity, earnings are up, and even dividends have been good. What they didn't do as much was to hire workers back. Everyone is working harder. But even so, manufacturing has improved more than, say, service industries.<br /><br />I'm expecting that 2012 will be flat with 2011. The global economy is cooling. The laser industry is soft too, but the fundamentals are good. I'm expecting that things will turn around in a quarter or two, and 2012 will end up being a wash.<br /><br />Longer term, the industry is on track to exceed $9 billion by 2015, and that's only around 7% compounded annual growth from this year. But it's remarkable enough for a market of its type. And anyway, it's still a record!<br /><br />By the way, the numbers are reviewed in the January issues of <a href="">Laser Focus World</a> and <a href="">Industrial Laser Solutions</a>, and in more detail in the <a href="">Laser Focus Marketplace Seminar</a> at Photonics West. But the gritty detail (units, prices, revenues by type and segment)--more than you could ever want--is in the market report.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, the U.S. wired Internet infrastructure weak? Revisited.noemail@noemail.orgTom Hausken<div class="MsoNormal" style="margin: 0in 0in 0pt;">It&rsquo;s time to weigh in on a pet peeve of mine.<span style="mso-spacerun: yes;"> </span>The topic is the state of high-speed Internet in the <country-region w:st="on"><place w:st="on">U.S.</place></country-region>, in a <a href=""><span style="color: purple;">December 4 essay in the New York Times</span></a>.<span style="mso-spacerun: yes;"> </span>My peeve is that once again the <country-region w:st="on"><place w:st="on">U.S.</place></country-region> wireline infrastructure is portrayed as somehow way behind, whereas a reasonable analysis presents a very different picture.<span style="mso-spacerun: yes;"> </span>For a large country, the <a href=";sq=bringing%20high%20speed%20internet%20to%20all&amp;st=cse"><span style="color: purple;">U.S. actually has a very strong and affordable infrastructure</span></a>.</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">It&rsquo;s the author has a point.<span style="mso-spacerun: yes;"> </span>There is a digital divide in the <country-region w:st="on"><place w:st="on">U.S.</place></country-region> and in the world.<span style="mso-spacerun: yes;"> </span>It&rsquo;s increasingly important to treat broadband access as a necessary service for all citizens.<span style="mso-spacerun: yes;"> </span>National averages overlook that large groups people are left out.<span style="mso-spacerun: yes;"></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">The problem is how the point gets twisted along the way. The way the author explains it is like fingernails on a blackboard to me. I've complained in this blog before (<a href=""><span style="color: purple;">here</span></a> and <a href=""><span style="color: purple;">here</span></a>) and I can't let this one go too.</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">For example, the <country-region w:st="on"><place w:st="on">U.S.</place></country-region> is portrayed as 12<sup>th</sup> in the OECD economies.<span style="mso-spacerun: yes;"> </span>That's per capita. <span style="mso-spacerun: yes;"></span><country-region w:st="on"><place w:st="on">Iceland</place></country-region> is number 5.<span style="mso-spacerun: yes;"> </span>It has 110,000 people.<span style="mso-spacerun: yes;"> </span>You get the idea.<span style="mso-spacerun: yes;"> </span>The OECD aggregates across the whole <country-region w:st="on"><place w:st="on">U.S.</place></country-region>, while smaller countries will almost certainly show up in the wings of the distribution.<span style="mso-spacerun: yes;"> </span>We should compare tiny <country-region w:st="on">Iceland</country-region> with, say, a successful regional provider in the <country-region w:st="on">U.S.</country-region>, not the entire <country-region w:st="on"><place w:st="on">U.S.</place></country-region> In fact, larger countries like <a href=""><span style="color: purple;">Germany and France are passing us up.</span></a> That is important. Let's say it.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">The author points out that even <country-region w:st="on">Portugal</country-region> and <country-region w:st="on"><place w:st="on">Russia</place></country-region> are upgrading to optical fiber.<span style="mso-spacerun: yes;"> </span>That&rsquo;s because their infrastructures were so bad in the first place. The <country-region w:st="on"><place w:st="on">U.S.</place></country-region> is rewiring with fiber, but it&rsquo;s a big country, DSL is working pretty well, and someone has to pay for upgrading to fiber.<span style="mso-spacerun: yes;"> </span>A too-rapid deployment would recreate something on the scale of the Telecom Bubble of the late 1990s.<span style="mso-spacerun: yes;"> </span>We know how that turned out.</div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">Broadband is also portrayed as a monopoly, yet residential users can choose from the wireline provider, cable provider, and even wireless providers.<span style="mso-spacerun: yes;"> </span>Competition is good, but we&rsquo;ve come a long way.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">The author says the providers should sell access to their networks to competitors, to reduce prices.<span style="mso-spacerun: yes;"> </span>But the problem is that everyone wants the high-end customers.<span style="mso-spacerun: yes;"> </span>There&rsquo;s a reason that underserved neighborhoods are underserved.<span style="mso-spacerun: yes;"> </span>There&rsquo;s less profit there.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">Having worked in telecom policy in <state w:st="on"><place w:st="on">Washington</place></state>, it is an ongoing process to improve broadband access to underserved groups.<span style="mso-spacerun: yes;"> </span>It&rsquo;s messy, because there is the FCC and Congress, 50 state regulators, municipal governments, and the courts. And it&rsquo;s &ldquo;inside baseball&rdquo;; pretty boring stuff if you&rsquo;re not a lawyer.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;">The author is right, we should be striving for broader broadband access.<span style="mso-spacerun: yes;"></span>I guess it&rsquo;s just something about how she said it.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Top 10 laser suppliers: some tight races but a good year for allnoemail@noemail.orgTom HauskenNow that 2011 is coming to a close we can estimate who are the leading laser suppliers for the year. Once again it looks like <a href="">Trumpf</a> and <a href="">Coherent</a> are neck and neck for Number 1, with over $800 million each. <a href="">Rofin</a> and <a href="">Cymer</a> are in a close race for 3rd and 4th places, with nearly $600 million each.&nbsp; <a href="">IPG </a>will roll in 5th, but this year with over $450 million in fiber laser sales. IPG's 2011 revenues would have put it at #1 as recently as 2009.<br /><br />These players are familiar names. Cymer dropped out of the short list in the recession, but is back again. The order changes depending on the exposure of companies to different sectors. Trumpf and Rofin are highly exposed to heavy manufacturing, while Coherent is more diversified. Cymer is basically a one-product company. <br /><br />I can't really know how the year will end up, of course. But three quarters are finished, and so far it looks like the fourth quarter is behaving as expected. Only the floods in Thailand have created surprises, but that's confined to telecom components, hard drive manufacturers, and the like.<br /><br />I also can't really know what Trumpf is up to. And a lot of revenues for a company like Rofin-Sinar are really system sales, revenues that would not be counted if it were a company like Trumpf or Newport. <br /><br />And then there are the telecom transceiver manufacturers. <a href="">Finisar</a>, <a href="">JDS Uniphase</a>, <a href="">Oclaro</a>, and others are all very strong in that segment, and Finisar is closing in on $800 million itself. With the companies above, and a couple others, that rounds out a list of the top 10.<br /><br />It's also interesting that the Top 10 make up over 50% of all laser sales worldwide. <br /><br />But I don't want to give too much away. There will be more on 2011 and 2012 at January's <a href="">Laser Focus World Marketplace Seminar</a> and our <a href="">upcoming market report</a>.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, U.S. manufacturing growing or shrinking?noemail@noemail.orgTom HauskenHere&rsquo;s a little known fact: U.S. manufacturing has actually been growing as an economic output in the U.S. for at least 60 years. Here&rsquo;s another: China is now the largest manufacturing nation. So there you are: U.S. manufacturing has been growing, but China is now #1. <br /><br />If you don&rsquo;t believe me, <a href=";sq=manufacturings%20share%20of%20gdp&amp;st=cse">here are two charts</a>, published in the New York Times (Sept. 11, 2011). The chart on the right shows overall output, growing steadily over decades with only brief setbacks. Whether the trend will continue upward, or represents the end of an era, depends on whether you&rsquo;re an <a href="">optimist</a> or a <a href="">pessimist</a>. <br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" hda="true" height="129" src="" width="320" /></a></div><br />We&rsquo;re used to hearing that U.S. manufacturing is declining, but the chart on the left shows that it&rsquo;s only declining as a share of overall economic output. Other sectors are simply growing more quickly. The U.S. is producing more output in information-intensive industries (such as finance) and less in labor-intensive industries (such as manufacturing). Even the manufacturing tends to be more information-intensive. The U.S. is strong in things like jet engines and pharmaceuticals, whereas for sneakers you think of Asia. <br /><br /><a href=";scp=2&amp;sq=manufacturings%20share%20of%20gdp&amp;st=cse">There are issues</a>, to be sure. Most importantly, growth in output does not necessarily mean growth in jobs, and a country needs jobs for its people. Also, China&rsquo;s manufacturing output is growing much faster than the U.S. Much of that was done by making the pie bigger, but some was done by taking share from other countries. The gains in share are not just in sneakers, but in things like laptop computers (Lenovo) and telecom switches (Huawei). <br /><br />This is obviously a complex topic--just ask anyone at your next cocktail party or Occupy Wall Street event. And to be precise, manufacturing output did decline during the down years of recessions, when the whole economy slowed. <br /><br />Just the same, it might cheer some of you as we enter the winter to know that U.S. manufacturing has been growing for nearly all of the last 60 years, and more.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, exits opto and ends an eranoemail@noemail.orgTom Hausken<div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Arial; font-size: 10pt;">It seems like the end of an era: <a href="">Kodak is selling its CCD operations and its image sensor patents</a>.<span style="mso-spacerun: yes;"> </span>It had been making CCDs since 1975, one of the early companies to make them, but waited until 1989 to sell them externally. Kodak had a number of firsts, including the first megapixel sensor, in 1986. <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"></span></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Arial; font-size: 10pt;">Then CMOS image sensors took off.<span style="mso-spacerun: yes;"></span>CMOS sensors were conceived early on, but the lithography was too poor at the time. <span style="mso-spacerun: yes;"></span>Omnivision and others brought it to life in the 1990s. Kodak tried several times to break into that product line, but it never worked out.<span style="mso-spacerun: yes;"> </span>Kodak teamed with Motorola in 1997 on CMOS image sensors.&nbsp;In 2004 it acquired National Semiconductor&rsquo;s CMOS image sensor operation, for about $10 million in cash.<span style="mso-spacerun: yes;">&nbsp;</span>Kodak even had deals with IBM and TSMC to manufacture the sensors, and some clever technology. <span style="mso-spacerun: yes;">But it wasn't enough. </span><span style="mso-spacerun: yes;">&nbsp;</span><span style="mso-spacerun: yes;"></span></span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Arial; font-size: 10pt;">In our 1997 market report, we estimated that Kodak was the leading producer of image sensors outside of <country-region w:st="on"><place w:st="on">Japan</place></country-region>, with $38 million in sales and under 6% market share.<span style="mso-spacerun: yes;"> </span>By the time of our <a href="">2009 market report</a>, the image sensor market had grown 10X, but Kodak&rsquo;s sales were stuck for years at about $80 million.&nbsp;Then&nbsp;in April it <a href="">sold hundreds of patents and patent applications to Omnivision</a>, for $65 million. And now it&rsquo;s selling the CCD facility and its 200 employees to&nbsp; Platinum Equity, a private equity firm.</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: Arial; font-size: 10pt;">In a way, kicking out the CCD business has little in common with the rest of Kodak&rsquo;s problems. The operation being sold still makes high performance CCDs for high-end professional and scientific applications--some of it is really amazing stuff. And over the years a lot of companies have handed off their image sensor operations.<span style="mso-spacerun: yes;"> </span>For example, Pixel Devices International was sold to Agilent, which became Avago, who sold the image sensor operation to Micron, which spun it off as Aptina. And of course, Kodak is still huge into imaging, and that's photonics too.</span></div><div class="MsoNormal" style="margin: 0in 0in 0pt;"><br /><span style="font-family: Arial; font-size: 10pt;">It&rsquo;s just the business getting older, but Kodak had been a classic example of a U.S. company deep into optoelectronics--that is, the actual making of the chips. No more.</span></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, lousy laser company marginsnoemail@noemail.orgTom HauskenEver really looked at the margins earned by laser companies? And then looked at margins for companies like Cisco or Google? It's enough to make you weep. <br /><br /><strong><em>Industrial laser company margins are modest but steady.</em></strong> The net profit margins for the industrial laser companies aren't too bad. Since 2006, gross margins on annual sales for <a href="">Coherent</a>, <a href="">IPG Photonics</a>, <a href="">Newport</a>, and <a href="">Rofin </a>are mainly in the 40-50% range. Operating margins range from single digits to 30-some percent. The net profit margins&nbsp;are mostly single digits to low teens (Coherent, Newport, and Rofin), while IPG is running lately at about 23%. <a href="">Trumpf</a>, which sells much more in machine tools than it does merchant lasers, used to have about 9-10% net profit margin, but suffered in the downturn and has recovered in the last fiscal year to 6.7%.<br /><br />All in all, that's decent It's the telecom component suppliers that are really hurting. <br /><br /><strong><em>Telecom supplier margins been mostly underwater until only recently.</em></strong> For <a href="">Finisar</a>, <a href="">JDS Uniphase</a>, <a href="">Oclaro</a>, and <a href="">Opnext,</a> the gross margins are lower, but it's the operating margins and net profit margins that are in the tank. Like, pretty much negative values for annual revenues since 2006. There's some improvement in the last year or so, with positive operating and net profit margins. <br /><br />Now I know that these numbers are fraught with "yes, buts." These companies are generating cash flow, but their official, GAAP, unadulterated income statements show losses. And a company like JDSU is in multiple businesses. I'm lumping everything together. <br /><br /><strong><em>Meanwhile, the customers reap the benefits.</em></strong> Now look at the customers. Cisco has gross margins in the 60% range, and net profit margins around 15-20%. That's net. EMC's net margin is running 12% this year. Juniper is 13%. The carriers aren't doing too badly either. AT&amp;T is consistently in the teens and Verizon is in the single digits. And get this: Google's net margin is a running a whopping 27%!<br /><br />So we know who is getting the margins. It's not the components companies. Nor is it Alcatel-Lucent or Ciena, who have had consistently negative margins too. It's the router and storage companies like Cisco and EMC, and the equipment users like Google and AT&amp;T.<br /><br />The component suppliers may finally be in positive territory for good. I hope so. It's not right that the customers get margins while the components companies don't.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, $12.3B LED market: TVs today, lighting coming fastnoemail@noemail.orgTom HauskenOur new <a href="">report on the LED market</a> is out, and here's the scoop: LED revenues are on track to peak at $16.2 billion in 2014, thanks to sales into TV backlights. It will briefly dip as that segment saturates and prices erode, then lighting will pull it back up again. <br /><br /><strong><em>Early applications in high-brightness LEDs</em></strong> were in vehicles, traffic signals, and signs, in the 1990s. Then in the 2000s, LEDs replaced cold-cathode fluorescent lamps (CCFLs) in mobile appliances, such as mobile phones. As that segment satruated and prices declined, LEDs replaced CCFLs for larger screen TVs. It was just in time. The overall LED market more than doubled from 2009 to 2010, to $11.2 billion. It should reach $12.3 billion in 2011.<br /><br /><strong><em>Meanwhile, LEDs are already being used in lighting</em></strong>, but mostly in niche applications like architectural lighting and so forth. But growth going forward will be at 33%. The first big wave will be for replacement bulbs. These are now in Safeway stores for less than $10, but for that price you don't get much. A bulb that gives off the equivalent of a 60W incandescent would be more interesting, at that price. Then adoption could really take off.<br /><br /><strong><em>Another wave will come with commercial and industrial luminaires</em></strong>. Luminaires are fixed light sources, with the LEDs built in (you have the replacement bulbs for the standard fixtures). There are already some sales of commercial-industrial luminaires, but when the business case is more compelling, that will take off. By business case I mean the life cycle cost, including labor to replace it.<br /><br /><strong><em>Yet another wave will be in residential luminaires.</em></strong> Strong adoption there takes even longer, since individual homeowners don't strictly rationalize their lighting life cycle costs and anyway, the labor to replace bulbs is free. So, the old fixtures stay in place for a long time.<br /><br />But I digress--the new report actually talks about all the segments, high-power and low-power LEDs, different wavelengths, different regions, prices, market share--all that good stuff. Oh, and if you are interested in the markets for the electronic drivers, GaN material, lighting, and other topics, <a href="">we have reports</a> on them too.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, on the fiscal year effectnoemail@noemail.orgTom HauskenI got several questions about <a href="">my chart a couple weeks ago</a> that showed two different curves for the laser market depending on when you count your fiscal year. I'm taking some space here to explain it a little better.&nbsp; The chart is below, and shows the quarterly results of representative laser suppliers aggregated over two different 12-months cycles: January to December and the same data for July to June.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="153" rba="true" src="" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br />The first question is: why does it matter? For one thing, if your company reports revenues on a year from--say--July 1 to June 30, your results will look very different than your competitor that reports from January 1 to December 31. Every company I know of reports their quarterly numbers quarter-over-quarter and year-over-year, of course. For what that's worth, that quarterly information becomes a common denominator. But the quarterly nuances are lost in the annual reports. <br /><br />For example, <a href="">TRUMPF had a rousing year ending June 30</a>, with about 50% growth measured in both dollars or euros. That's fantastic, but keep in mind that TRUMPF doesn't report quarterly numbers. It doesn't have to report numbers at all, since it's a private company. The very good fiscal year followed two years of declines. Most companies reporting on calendar years only had one down year: 2009. So, TRUMPF looked like it was doing worse than everybody for two years, and now it looks like it outperformed. In fact, it's about the same--it just reports on different calendar. <br /><br />The other question is: how can it make that much difference? In this recession, the four worst quarters all fell in 2009. So any company reporting on the calendar year saw a really bad 2009 and only upward results after that. TRUMPF simply split the bad quarters, spreading the bad quarters over two fiscal years. <br /><br />There is one more nuance to this. People are most familiar and emotional about the metrics that they know best, not necessarily the ones that I have to use. For example, salespeople often speak of orders and pricing for sales that haven't happened yet, since that is where they are working with their customers. But those orders and pricing may be unrepresentative of orders earlier this year. <br /><br />Another example is that people rejoice over recent good news and panic over recent bad news--even if it is stripped of its context. Part of my job is to put the context back. <div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Next Cool Things in lasers--in carsnoemail@noemail.orgTom HauskenJust when you think you&rsquo;ve thought of everything, there appears a new application for lasers in cars, this one from BMW: <a href="">laser headlights</a>. An application like this could mean millions of high-power diode lasers per year, which is a lot for that technology, and would amounts to the &ldquo;Next Big Thing&rdquo; if it catches on. <br /> <br /> BMW says that the diode lasers would be more efficient than LED headlights, offering greater overall brightness. LED headlights are just now penetrating models made by Audi, Cadillac, Mitsubishi, and Toyota. The laser output has to be converted through use of a phosphor, of course, as it is with LED headlights. Laser sources could also allow for more refined projection onto the road. <br /> <br /> <b><em>Ten years to one million cars?</em> <i></i></b>BMW plans to introduce the laser headlights in a small number of vehicles in 2014. That&rsquo;s 3 years away. My model for the introduction of features in cars suggests that 7 years after that the feature might reach 1 million cars, if it&rsquo;s popular or required in some way. (That's because they first appear in luxury models, as options, and spread, which takes time.) In 10 years that might amount to sales of 2 million headlights (both sides) of, say, 10W each. Take your pick what the price should be. Be forewarned that carmakers are big, steady customers when you can get them, with long product cycles, but they are notoriously hard on their suppliers. <br /> <br /> <i><strong>Laser spark plugs.</strong> <b></b></i>For years there has been talk of laser spark plugs, another intriguing application. Using lasers to ignite internal combustion can enable a more uniform, greener, more stable combustion. With all the talk about hybrid cars and electric cars, going to a newfangled technology like laser spark plugs sounds expensive and, well, still half-baked. But imagine the market: millions of cars with lasers that never used them before. And after all, the conventional spark plug was patented by Robert Bosch and Nikola Tesla. Isn&rsquo;t it time to improve on it? <br /> <br /> The most recent buzz on this was in 2009, when <a href="">Ford announced a collaboration with GSI and the University of Liverpool</a> called LASIIC (Laser Ignition for IC Engines). More recently, <a href="">work at Toyota and elsewhere</a> was presented at CLEO 2011.&nbsp; <br /> <br /> It's cool stuff, but considering that it's years from introduction as a product, if ever, and adding 10 years to that, we have a good 15-20 years before laser spak plugs could be a million-unit phenomenon.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Laser Market Update--2011 is a new peaknoemail@noemail.orgTom HauskenI just aggregated numbers from the public companies making and buying lasers, slicing and dicing for acquisitions and all that and guess what? The final 2010 numbers beat the previous peak of 2008, and 2011 is almost certain to beat that. The market would have to drop by 1/3 for Q3 and Q4 to go downward from 2010. <br /><br />Moreover, 2011 may amount to a 5-year CAGR of about 6%, which isn't bad for a $7 billion industry. Depending on where you start counting, that's a growth rate a bit above overall economic growth. So in that way, 2011 is looking pretty good. In the figure below, you can see that it was a V-shaped recession, with only one down year.<br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="396" qaa="true" src="" width="640" /></a></div><br /><strong><em>It depends where you start your fiscal year.</em></strong> You get a very different look if you group the quarters by fiscal years from July-June, instead of calendar years of January-December. The figure below shows what you get in the shifted calendar. The market looks like it's just recovering in 2011 after a U-shaped two-year recession. And what growth in the last 12 months! About 40% over the previous 12.<br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="308" qaa="true" src="" width="640" /></a></div><br />The last figure shows the aggregated company data by quarter. Here it is clear that it was V-shaped at that scale.<br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="348" qaa="true" src="" width="640" /></a></div><strong><em>This is company data, not the full market.</em></strong> I emphasize that this is just public data, and heavily weighted toward industrial lasers and telecom components. The missing revenues are heavily in medical lasers, R&amp;D, instruments, and optical storage. <div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, read: Euro report on photonicsnoemail@noemail.orgTom HauskenLooking for some good summer reading last week at the beach in Santa Barbara, I read through the <a href="">final report on the economic impact of photonics in Europe.</a> Okay, I did no such thing, but being a recovering policy wonk in Washington DC, I did look through. Here's the lowdown for those of you who won't read it themselves.<br /> <br /> <em><strong>First, the motivation and impact of the report.</strong></em> The fundamental motive was to justify to the European Commission its own spending on photonics projects. The many EC agencies fight for money just like everyone else, and the interest in the report actually came from the Commission, but working with </a><a href="">Photonics21</a>. It so happens that it benefits the photonics community too, by putting a stake in the ground. And one thing it is, is thorough. It will be hard for someone to prove it wrong.<br /> <br /> <strong><em>The impact: 10% of the economy, or is it 100%?</em></strong> The researchers did some nice work, looking at the impact of photonics on jobs and national product. One major finding is that photonics technologies impact about 10% of the European economy, generated by a Euro photonics market of nearly 60 billion euros (21% of the world market) and employing 290,000 people.<br /> <br /> I can't help but note here that an enabling technology like photonics can be said to underpin the entire economy in one way or the other. Who doesn't use a display or long-haul fiber optics somewhere in their work? It's like clean water or electricity, the value is so fundamental. But that claim, while true, becomes immediately useless and the report came up with a more useful number. <br /> <br /> <strong><em>There is a lot in the report about leverage and improving competitiveness.</em></strong> For example, advances in LEDs and solar cells will have a large impact on Europe at many levels, from photonics jobs to national energy policies. When you work everything out, the most leverage is not necessarily where you might think it is. And there is also a lot on improving European competitiveness, like trying to narrow the Valley of Death of commercialization, help small businesses, stuff like that.<br /> <br /> <strong><em>My view is that the real value of photonics to Europe is in high-value systems, not so much the components.</em></strong> The report notes that Europe has gaps in volume manufacturing in such key photonics products as displays and image sensors. I may be wrong, but this seems to be a particularly European lament. Not that American companies aren't crying about manufacturing moving to China, but it's not seen here as an existential problem for the photonics industry. After all, Apple is beating the pants off competitors and keeping the margin. Yet, it assembles its products in Asia. As do many photonics companies.<br /> <br /> Europe's real strength in photonics, as in the U.S., comes from using photonics in high value applications, like laser-based machine tools, ophthalmic diagnostic and treatment systems, military systems, advanced sensors, telecom and datacom systems, and semiconductor lithography. These all require very deep knowledge of photonics, but many times use components sourced from other countries (sometimes through a subsidiary).<br /> <br /> This is a very deep topic, one that I will return to in a future post. For one thing, it raises a question: when companies are global and commoditized, who captures the value of photonics? Stockholders? Customers? The report looks at two: job-holders and the regional economy.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, drivers--a $2 billion photonics marketnoemail@noemail.orgTom HauskenWith all of us opto folks going gaga over the $10+ billion LED market, stop and consider that the <a href="">LED driver IC market is a sweet $2 billion, and growing at 12% compounded annually</a>. And I'm going to say it: drivers is a photonics market too.<br /><br />OK, I said it. Electronics is photonics too. I'm stretching things a bit, since the suppliers of LED driver ICs are companies like Texas Instruments, Maxim, Analog Devices, and Macroblock who don't know or care about photons. They do know a lot about hand-crafted analog circuit designs and specialty fab processes that enable circuits tolerant to high-voltages--the kind that drive long LED strings in display backlights.<br /><br />But good LED design optimizes the entire circuit for efficiency, reliability, LED uniformity, and many other specs. We call the circuit--minus the LEDs themselves--the driver. It may include zero, one, or multiple ICs for the purpose.<br /><br />Opto people, like myself, tend to think that there is nothing interesting in the system apart from the quantum mechanics of electron-hole recombination and fancy MOCVD epitaxial growth.&nbsp; But when product designers take the electronics for granted, system performance is notoriously terrible, and that's bad for the whole LED industry. Likewise, electronics designers tend to take the LED for granted, but LEDs are requiring surprisingly novel and sophisticated&nbsp;circuits.&nbsp; The only way to achieve widespread LED lighting is if electronics designers innovate enough to meet cost and performance goals.&nbsp; Fortunately, there are those out there who can. Look for example at companies like <a href="">Exclara</a>, <a href="">iWatt</a>, <a href="">Luxera</a>, and <a href="">Lynk Labs</a>, to name a few.<br /><br />The boundary between electronics and photonics is also fuzzy for lightwave transceivers. The laser and detector in a transceiver are typically very cheap, so much of the value is in the electronics: driver and receiver, clock recovery, and so on inside the module, not to mention all the higher level routing and control elsewhere on the board.<br /><br />In imaging, it is even more dramatic. The detector array is sophisticated, but the image processing electronics takes it further, correcting optical limitations and even adjusting focus after the fact. The point is not that the electronics helps the optics, but that optical science actually resides in the electronics, often on the same chip as the sensor array.<br /><br />I'll get back to the LED driver market again, but for now, remember: <strong><em>Electronics can be photonics too</em></strong>.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Part 2--Consolidation?noemail@noemail.orgTom HauskenA question that comes up at every big industry event is, when is the laser industry going to consolidate? It came up in my conversations at <a href="">Laser Munich</a> last week, and it came up in the CEO Roundtable (for a full video, <a href="">click here</a>). This time, I posed the question to the CEOs: is there really an argument for consolidation, or is it just code for "let's get these lifestyle companies out of our way so my big company can keep growing."<br /><br />Their answers were interesting, and were supported in many other discussions I had last week. <br /><br />Stuart Schoenmann of CVI Melles Griot made the argument that <strong><em>consolidation across products produces economies of scale</em></strong> that can enable things you cannot do with smaller companies. Larger scale frees up management to make more optimal and strategic choices, whether it is where it is putting its R &amp; D money or whether to outsource or not. <br /><br />Ulrich Simon of Carl Zeiss Microimaging argued for <strong><em>consolidation in the vertical direction to own core technologies,</em></strong>: providing advantages that cannot be gained in a more stratified supply chain. Trumpf has often made that argument.IPG has gone that route, too.<br /><br />David Marks of Qioptiq acknowleged that <strong><em>the industry needs to continue to support small companies</em></strong>, in part for the innovation that they bring. As much as start-ups must seem like spoilers,VCs have funded a lot of innovation that never paid them a penny in return, and the people and IP often wind up in the big companies. There is a lot less of that nowadays, but it still happens.<br /><br />John Ambroseo of Coherent closed with a rousing argument that <strong><em>the real competition is not other laser companies, but all the other technologies out there</em></strong>--mechanical drills and shears, other medical treatments, other types of sensors. Without consolidation, the laser industry spends inefficiently on redundant R&amp;D, distracting the industry from bigger opportunities. <br /><br />I've always maintained that consolidation means different things to different people. To me, consolidation is only meaningful in specific market segments. It's when a few competitors have most of the market share. (Consolidation is the process. Concentration is the result.) This can happen when companies consolidate internally, by exiting product lines, but it's often hard to know this from outside. The laser industry is highly fragmented into hundreds of niches. It turns a big laser company into what I call a "confederation of business units. They do gain advantages in scale, to be sure, but it is also more complex to manage. It's hard to manage such big, sprawling companies. It's also hard to grow when you are already a big dog.<br /><br />Not mentioned was that some segments seem to favor consolidation more than others. This leads into another topic that came up at Laser Munich: is it too late for a company trying to make it big in fiber lasers? I'll address that in a later post.<br /><br />For other thoughts on consolidation, see:<br /><a href="">Fragmentation depends on your point of view</a><br /><a href="">Consolidation, Part 2--Is Oclaro consolidation or redistribution?</a><br /><a href="">Consolidation in the laser market, Part 1--How much is there?</a><br /><br />Tom Hausken<br />Strategies Unlimited<br /><a href=""></a><br /><a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Munich Part 1--German mood lifts allnoemail@noemail.orgTom HauskenYou can tell that Germany is doing well these days just from going to Laser Munich. And not just Germany. Everyone from Coherent, IPG, and JDSU are all smiles these days. In fact, everyone I met at Laser Munich this week was in a great mood.Of course, it helps that the beer starts flowing in the booths at 5:00 sharp. Even better!<br /><br />The German economy didn't fare as poorly in the financial crisis as other major countries, and <a href=";scp=1&amp;sq=germany%20employment&amp;st=cse">it recovered better and more quickly</a>.German unemployment is now the lowest since reunification 20 years ago. This recovery has lifted German companies, most notably Trumpf and Rofin-Sinar, but many others too.(Read about it from <a href="">David Belforte</a>, here.)Laser sales are back to 2008 levels.The good cheer&nbsp;came out in the <a href="">CEO Roundtable</a>: what did photonics companies do right that they fared so well in the recession?<br /><br />My standard answers are: <br />1.China.<br />2.Semiconductors and electronics (think iPads and smartphones)<br />3.The jobless recovery--buying new laser systems instead of hiring workers.<br />4.Did I mention China?<br />5.Oh and yes, this time photonics companies reacted quickly.<br /><br />These factors affect some companies more than others,but enough is happening that it gets spread around. That said, there was the usual grumbling that there are too many competitors. More on that in a later post.<br /><br />The Munich venue is great, but what if it were somewhere else? Stuart Schoenmann of CVI Melles Griot kept it real in the <a href="">CEO Roundtable</a> when he gave his respects to Japan.The Japanese economy was hit with not one, but two crises: first the financial crisis and now the tsunami/nuclear crisis.The latter didn't take much production out of service, but it did upset the supply chain. Moreover, the <a href="^n225;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined">Japanese stock market</a> has never recovered to the peak of 1990, not even close.And that was 21 years ago.<br /><br />And it's not just Japan that has been hit. I don't know about you, but every company I know was cut to the bone.More on that in a later post too.<br /><br />But that's somewhere else. Here, it felt like a "normal" show. No fads. No gossip. Just a good mood and good beer.<br /><br />Tom Hausken<br /><a href=""></a><br /><a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, big optics/vision opportunity: service robotsnoemail@noemail.orgTom HauskenLooking for a new opportunity in optics and vision systems?&nbsp;&nbsp; Check out this new &nbsp;<a href="">market report on vision for service robots</a>&nbsp;from my colleagues at <a href="">Vision Systems Design</a>.&nbsp; This is a market set to take off.&nbsp; To give you an idea, with industrial robot unit sales in the tens of thousands per year, service robots could potentially sell in the millions.<br /><br />Most robots today are not the futuristic kind we remember from the <a href=";imgrefurl=;usg=__GKQKeShvxdOQGCayb_bjrCEe26A=&amp;h=213&amp;w=250&amp;sz=21&amp;hl=en&amp;start=0&amp;sig2=dalq1XUW8eNAGBJ8U1E87g&amp;zoom=1&amp;tbnid=T5sItfN6KrOf5M:&amp;tbnh=133&amp;tbnw=160&amp;ei=hj3ETZKzH5Gctwej7amxBA&amp;prev=/search%3Fq%3Djetsons%2Brobot%26hl%3Den%26sa%3DX%26biw%3D1055%26bih%3D614%26tbm%3Disch%26prmd%3Divns&amp;itbs=1&amp;iact=hc&amp;vpx=146&amp;vpy=132&amp;dur=3187&amp;hovh=170&amp;hovw=200&amp;tx=44&amp;ty=196&amp;page=1&amp;ndsp=18&amp;ved=1t:429,r:0,s:0">Jetsons </a>or the somewhat creepy <a href="">Actroid</a> kind commercialized in Japan..&nbsp; An industrial robots today is basically just factory automation with an articulating arm that makes it seem like a robot.&nbsp; <br /><br />A service robot is more like the more futuristic version--mobile, uncontained, and diverse--but not trying to act human, like&nbsp;some insecure, fawning android.&nbsp;&nbsp;More precisely, it&nbsp;operates semi- or fully-autonomously to perform service functions, excluding manufacturing.&nbsp;&nbsp;An industrial robot can be a service robot too, if it meets this definition.&nbsp; <br /><br />Examples of service robots include: UAVs, explosive or hazard disposal, automating cow milking, driver assistance, inspection and maintenance of hard-to-reach places, medical rehabilitation, surgery, and scientific exploration.&nbsp; The UAV is the biggest market opportunity, becuase of the sophistication involved.&nbsp; There are many smaller, fast growing segments.<br /><br /><strong><em>This is a big deal for photonics</em></strong> because most service robots requrie machine vision of some kind.&nbsp; This means the use of structured light (like what is used in the Microsoft Kinect), time-of-flight (like what is used in virtual keyboards), LIDAR, and so forth.&nbsp; This has to be fused with other technologies, like GPS, radar, sonar, and inertial guidance.&nbsp; For more sophisticated robots, simultaneous localization and mapping (SLAM) is critical to build maps of unknown environments or to update maps within known environments, while at the same time keeping track of the current location of the robot. <br /><br />The technology is still emerging and remains to be worked out.&nbsp; That means lots of hardware and software, and pretty deep stuff.&nbsp; Imagine that the system doesn't necessarily need to "see" things the way we do--it just has to get the information it needs from its sensors.<br /><br />For more information on the report, <a href="">click here.</a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, on Mid-IR laser marketnoemail@noemail.orgTom HauskenCome see our <a href="">webcast</a> on the market for lasers operating in the mid-infrared range.&nbsp; Well, actually only my part is about the market.&nbsp; The other part will be presented by the esteemed <a href="">Jeff Hecht</a> about mid-IR laser technologies and trends.&nbsp; The webcast is Wednesday, April 20, and archived for those who are away on Spring vacation.<br /><br />The figure below shows our <a href="">market forecast</a> for all mid-IR lasers under 1 kilowatt.&nbsp; I qualified it a bit because big honking kilowatt CO2 lasers comprise a large part of the market.&nbsp;&nbsp;&nbsp; I should also say here that we defined the range for&nbsp;our market report from about 1.8 microns to about 15 microns.&nbsp; <br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="205" r6="true" src="" width="320" /></a></div><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />The growth in the figure comes partly from the recovery from the recession, and partly from new growth in military and sensing applications.&nbsp; The new growth is the result of a fortunate convergence of new demands (e.g., for environmental monitoring) and new technology solutions (e.g., GaSb diode lasers, quantum cascade lasers, and new fiber and solid-state lasers).&nbsp; <br /><br />By the way, we counted over&nbsp;50 companies making mid-IR lasers of some kind, and most of them are headquartered in North America.&nbsp; None has a significant market share across multiple segments.<br /><br />The webcast will be produced thanks to the sponsors, ILX Lightwave and IPG Photonics.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, capex derivative for ICs (Part III)noemail@noemail.orgTom HauskenLast week, <a href="">I&nbsp;reviewed&nbsp;how solar charts</a> can point up and up, yet the sales of&nbsp;lasers&nbsp;into solar fab tools can languish because&nbsp;they go as the derivative, not directly with sales. In this post, I will show how the same thing happens in semiconductor chips. And for that matter, in any capital equipment business. <br /><br />The shipments of the <em><strong><u>end product</u></strong></em> made from semiconductor fab tools tend to go up and up (the Great Recession notwithstanding) because the world keeps getting bigger.&nbsp; The installed base of tools tracks that trend.&nbsp; (The installed base and chip revenues don't completely march in step, since installed equipment can sit idle, or&nbsp;chip prices can fluctuate.)&nbsp; But the shipments of <u><em><strong>new tools</strong></em></u> tracks the 1st derivative of the installed base--you only ship new tools to add capacity&nbsp;or upgrade dated equipment.&nbsp; The laser sales track this trend--the&nbsp;1st derivative.&nbsp; (It's actually the 2nd derivative of the revenues generated&nbsp;by the electronics,&nbsp;but that's not important here.)<br /><br />That's shown in the figure below, using <a href="">actual data for the semiconductor industry</a> over the last several years. The installed base (in units of 10 million 200-mm equivalent wafer starts per month--got that?) ramps up and up. The current recession was an exception, when so many companies closed fabs that the installed base actually declined. But that's rare.<br /><a href=""><img alt="" border="0" id="BLOGGER_PHOTO_ID_5424506616601189042" src="" style="height: 222px; width: 320px;" /></a><br /><br />Source: SEMI<br /><br /><br />While the&nbsp;end product shipments grew and grew,&nbsp;the capex spending itself oscillated dramatically during that time.&nbsp; While&nbsp;the capex business&nbsp;is a sizable business of its own, it isn't really growing so much as it's cyclic. Let that be a lesson. <br /><br />Of course, we could make similar charts for displays, data storage, and any capital equipment business you like. <br /><br />The important thing to remember is that the equipment shipments don't scale with the production, they go as the derivative. That's how component sales can languish even as forecasts for&nbsp;a downstream&nbsp;product go up and up.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 2nd Derivative Capex Paradox Updatenoemail@noemail.orgTom Hausken<a href=";sid=s302946185&amp;url=http%3A%2F%2Flnkd%2Ein%2FTPfDMU&amp;urlhash=gCSu&amp;pk=nprofile-view-success&amp;pp=&amp;poster=25638&amp;uid=5453474154302943232&amp;trk=NUS_UNIU_SHARE-title">Jay Liebowitz recently commented</a> on my Second Derivative Paradox where I explain how capital equipment markets can gyrate wildly&nbsp;even though&nbsp;the end-use product grows steadily.&nbsp; Among other things, he points out that equipment sales can surge even when there is excess capacity because companies need to retool for new products.&nbsp; This can happen because of the steady progress of technology: smaller via holes or more thin-film solar modules.&nbsp; It can also happen if certain lines are specially qualified and others aren't.&nbsp; <br /><br />I can add that the inefficiencies of capitalism play in the equipment makers' favor: the churn in end-product manufacturers moves the manufacturing&nbsp;from&nbsp;company to company,&nbsp;creating&nbsp;shortage in new places and surplus in others.&nbsp; So, even though&nbsp;a manufacturer has excess overall capacity, it may have to tool up a new line because that line has different requirements than&nbsp;its other ones.&nbsp;&nbsp;&nbsp; <br /><br />I am re-running the earlier posts below if you haven't seen them or&nbsp;can't link to them.&nbsp; They are <a href="">here</a> and <a href="">here</a>.&nbsp; I didn't update the solar numbers since my point is more conceptual.<br /><br />******<br /><br />How could equipment sales in an exponentially-growing market be anything but upward? It happens all the time. Welcome to the 2nd-Derivative Paradox. That's my name for the trap that one can fall into when it comes to capital equipment markets. Solar is a great example. It's hard to explain the paradox, though, so bear with me. <br /><br /><br /><strong><em>Start with installed capacity.</em></strong> If you are a power generator, you think in terms of the cumulative installed generating capacity in the world. This is what the users actually use. The figure shows three scenarios how that might play out, and they all look pretty much the same in this chart. Nice, steep slopes. Note how they all start at the same point and end up at the same point.<br /><br /><a href=""><img alt="" border="0" id="BLOGGER_PHOTO_ID_5410816282067290882" src="" style="height: 243px; width: 320px;" /></a><br /><br /><em><strong>Then look at panel shipments.</strong></em> But the solar panel industry isn't interested in what's already out there. It needs to ship new panels every year. The shipments amount to a 1st derivative: the new capacity that's added to the infrastructure every year. Now the differences in the scenarios show through, as shown in the second figure. But the scenarios all show steep upward growth. What's to worry about?<br /><br /><img alt="" border="0" id="BLOGGER_PHOTO_ID_5410816694300324450" src="" style="height: 220px; width: 320px;" /><br /><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><strong><em>Now look at panel manufacturing equipment.</em></strong> The solar manufacturing equipment industry, and that includes lasers--isn't even interested in solar shipments, but the need for more manufacturing capacity to make the panels. You only need more equipment when you are shipping more panels than before. That amounts to a 2nd derivative of the cumulative generating capacity, and can give wildly different results. New equipment is shipped in all three scenarios, but in the "sustaining" scenario the equipment shipments are flat year after year, while in the "slowing" scenario they start out strong, but then decline. Ouch.</div><br /><strong><em>Other traps.</em></strong> Of course we would all like to live in the "growing" scenario. The trouble is, strong positive exponential growth doesn't last indefinitely, no matter what they say. And that's not even considering some ups and downs along the way, like this year. A slight shift in the solar panel shipments wreaks total havoc for equipment shipments.<br /><br /><a href=""><img alt="" border="0" id="BLOGGER_PHOTO_ID_5410817117930244722" src="" style="height: 220px; width: 320px;" /></a><br /><br /><strong><em>Other things that juice equipment sales.</em></strong> The same trap exists in other industries, too. But there are other details to consider. First, there is usually some churn in suppliers. Machines also get obsolete. And there is also the early obsolescence forced by things like Moore's Law. These all have to be considered.<br /><br /><strong><em>Watch that 2nd derivative.</em></strong> Don't get me wrong. I love solar. I had a summer job at TI testing solar cells back in the Jimmy Carter era. We all believe it's going to be a great thing in coming decades. But it's not enough that the cumulative generating capacity will be on a steep upward slope for years to come, because when it comes to manufacturing equipment, it's the 2nd derivative that counts. <br /><br /><br /><strong><em>Some real numbers.</em></strong>&nbsp; What&nbsp;happens when we plug in some numbers that may be more or less what we expect the solar market to be?<br /><br /><a href=""><img alt="" border="0" id="BLOGGER_PHOTO_ID_5421468681847584002" src="" style="height: 233px; width: 320px;" /></a><br /><br />I&rsquo;ve done that in this figure. The first thing to notice is that the cumulative generating capacity&mdash;the top curve and what the power companies think about&mdash;goes up all through the forecast.<br /><br />The next thing you notice is that the new module shipments&mdash;that&rsquo;s the middle curve&mdash;takes a dip in 2009. This isn&rsquo;t too surprising, given the recession, tight credit, and low oil prices. The dip isn&rsquo;t too big and it&rsquo;s in record territory again by 2011.<br /><br />But what is really interesting is the bottom curve. That&rsquo;s the new factory capacity that&rsquo;s needed to make the modules each year. This correlates directly to lasers sold for making cells. That curve actually goes to zero, even negative, for a couple of years. And even in the recovery it only hangs around the 2008 level through 2013. In other words, the laser sales will not rocket upwards like the module sales through 2013.<br /><br />Of course, there are some problems with this simple chart. The new factory capacity (laser sales) probably don&rsquo;t go negative. That would mean companies were taking equipment out of commission. While I have heard of this happening in 2009, it&rsquo;s not widespread. Companies want to be ready for the recovery. And, there are always new suppliers, and old suppliers expanding and upgrading equipment. That raises sales above zero.<br /><br />On the other hand, there is also inventory in the supply chain and used equipment for sale. That pushes the recovery further into the future.<br /><br />To a first approximation, the chart is a good model, and a good example of what I call the "second derivative paradox." At least it&rsquo;s better than looking at the other two curves and assuming something similar.<br /><br /><br /><br /><br /><br /><br /><br /><br /><div class="separator" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; clear: both; text-align: center;"><a href="" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"></a></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, the export regulations and help LEOMA change themnoemail@noemail.orgTom HauskenIt may be a flat economy, but export regulations still matter. Rocky Mountain Instrument and BAE Systems both found out the hard way last year. And meanwhile, the trade group LEOMA is pushing the U.S. government toward more relaxed regulations.<br /><br />First, what happened to <a href="">RMI--Rocky Mountain Instrument</a>? In 2008 it had over $15 million in revenues and 150 employees (<a href="">here's a photo for proof</a>). But it was raided in 2007 for ITAR violations, filed for bankruptcy in 2009, and in June of last year, the Colorado-based company was slapped with a $1 million criminal fine. It pleaded guilty to selling ITAR-controlled prisms and data to such places as China, Russia, Turkey, and South Korea without a State Department license.<br /><br />At the time of the raid, RMI waved off the accusations. Something about a disgruntled employee and that the investigation didn't involve RMI Lasers but rather a supplier. But RMI pleaded guilty in a plea deal in June. It's said that RMI cooperated throughout the investigation, and its web site is now very explicit about export regulations.<br /><br />RMI certainly isn't alone. A recent violation by none other than BAE Systems led to a $400 million criminal fine. And in fact an <a href="">article in Military and Aerospace Electronics</a> points out some common mistakes that can get companies into some nasty trouble, such as:<br /><br />* Misclassifying or changing classifications in the ITAR list<br />* Improper access to IT files for ITAR products<br />* Lack of licensing for non-citizens working on ITAR products<br />* Monitoring only hardware, while not complying on services as well<br /><br />Entirely apart from this, the trade group LEOMA is working to steer the Commerce Department toward more reasonable restrictions. The administration wants to "build higher fences around fewer items" using a tiered system. The thing is, its proposed tiers include a lot of lasers that are already made and sold outside of the U.S. LEOMA wants to be sure that U.S. companies don't face unnecessary barriers to doing business for run-of-the-mill commercial applications.<br /><br />It's tedious but important stuff. LEOMA is asking for support in its effort. Please contact Breck Hitz at <a href=""></a> to contribute.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, LED market data for SIL 2011noemail@noemail.orgTom HauskenWe have some new market numbers for the LED world: HB-LEDs passed into the double-digit billion dollar territory in 2010, while <a href="">LED luminaires will reach $8.4 billion by 2014</a>. These numbers will be discussed at the <a href="">Strategies in Light </a>event in Santa Clara next week.<br /><br />The LEDs market number is up significantly from last year, due to the stronger than expected growth in LED backlights for LCD displays. And by the way, China is coming on strong in both the demand for and supply of LEDs.<br /><br />In LED luminaires, the largest segment is in consumer portables: flashlights, worklamps, and so forth. The transition to LEDs in that segment is almost complete, which is very rapid for a new technology. The strongest growth in luminaires is in residential lighting, but starting from a small base.<br /><br />What&rsquo;s driving this? Heightened awareness of energy efficiency, phasing out incandescent bulbs, and fiscal stimuli certainly helped.<br /><br />Oh and yes, China is now both the largest end market and the largest supplier of LED luminaires. Sound familiar?<br /><br /><a href="">SIL 2011</a> is next week and it looks like it will break attendance records once again. It&rsquo;s going on Tuesday through Thursday at the Santa Clara Convention Center. The conference will feature 66 speakers spanning two main sessions, an investors forum, and workshops and tutorials. There will also be presentations in the Lighting Pavilion each day on the show floor.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, many MOCVD reactors is too many?noemail@noemail.orgTom HauskenWe took a look recently at the bubble in sales of MOCVD reactors for LED production. We set out to sort out who wins and who loses. It turned out more complicated than we first thought.<br /><br />There have never been so many orders in the history of MOCVD. Just to give you an idea of the scale, in January there was a rumor that Golden Concord Holdings in Hong Kong wants to purchase 500 reactors as part of a new $2.5 billion investment in LEDs. Several companies have orders to buy over 100 reactors each. Aixtron and Veeco are working like crazy to deliver them.<br /><br />But it&rsquo;s too many. The figure below compares what we think the world needs to meet near-term LED production to what the world seems to be asking for. Since then, Barclays Capital raised its estimate of MOCVD shipments for 2011 to 900, from 800. While we may disagree about what actually may be delivered, much less what is actually brought into production, this much is sure: there is a big mismatch. Our question is: who wins and who loses?<br /><br /><a href=""><img style="WIDTH: 320px; HEIGHT: 162px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5569938151705079954" border="0" alt="" src="" /></a><br /><br />I suggest that you read the <a href="">full article</a> in <a href=""><em>LEDs Magazine</em> </a>for the whole story. In the meantime, suffice it to say that there will be a lot of winners: end-users of LEDs, China, and the MOCVD reactor vendors, to name a few. Lower-tier LED suppliers may feel the most pressure. And yes, a few investors may get stuck with expensive paperweights.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, weather and a good mood at Photonics Westnoemail@noemail.orgTom HauskenThe mood at <a href="">Photonics West </a>reminded me of a team when it&rsquo;s winning its games. The mood was good and no one wanted to spend too much time second guessing what they are doing. Whatever they are doing, it&rsquo;s working.<br /><br />This is no surprise, really, given that photonics markets were all up in 2010 over 2009 (see the <a href="">annual Laser Focus market article</a>--more on the other markets in future posts). Just showing up is an accomplishment, two years after the recession hit.<br /><br />This is in sharp contrast to this time 2009, when it still wasn&rsquo;t clear how deep and how long the recession would go. While the recession itself wasn&rsquo;t the fault of the photonics industry, the stock market was nervous. Company executives had to go over and over their businesses and make corrections. All the while hoping for a few big wins.<br /><br />If you listen carefully, there were whispers that not everyone is better off than last year. Especially among the smaller, private companies, and among venture financed companies that might be running out of time for a successful exit. And while some said that credit and investment has thawed, others said that the money is going elsewhere. It depends who you are.<br /><br />But that's for another day. The event broke its record with over 19,000 attendees, split approximately evenly among conference attendees, show attendees, and exhibitors. Even the weather was unseasonably warm. <br /><br />No one is second guessing the move to San Francisco anymore either. SPIE is happy with the San Francisco location and has no plans to return to San Jose.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Un-Trends in Photonics Marketsnoemail@noemail.orgTom HauskenIn the last post I ruminated on the best market trends of the decade in photonics. This time we examine that trends that weren't: the Un-Trends.<br /><br /><strong><em>The decline of optical storage.</em></strong> Remember laser disks that were as big as vinyl records? Remember when CDs were displacing magnetic tapes? Remember CDs? The business of optical storage has been hit by a triple whammy: falling sales as downloads increase and falling prices due to commoditization. The iPad is the next big thing and--surprise!--there's no DVD player there. Not now, not ever. The future for optical storage is now in mass storage. And there's a chance that lasers will be needed to take magnetic storage a little further. Stay tuned.<br /><br /><em><strong>The long winter of telecom components.</strong></em> The telecom components business never really recovered from the boom of the late 90s. Or shall we say it's back to the business it always was. Components. There are some successes, and stock prices are back to "normal," but overall it's nothing to brag about. Companies struggled through the decade to fill their fabs, move production to China, and just stay open. It's better now, but somehow it feels like there wasn't closure.<br /><br /><strong><em>The elusive photonic integrated circuit.</em></strong> Twenty years ago it was called the OEIC, the optoelectronic integrated circuit. That was Bell Labs. In the 90s, Japanese companies pushed PLCs, photonic lightwave circuits. Now there are photonic integrated circuits (PICs) and the likes of Infinera and Luxtera. And of course there's the mother-of-all-quests: Intel's search for the silicon laser. (A <a href="">2006 article</a> asks: lasers integrated into CMOS by 2010?) It's all nice work, and we're happy for Infinera--it's done a remarkable job. But the classical idea of the uber-circuit that will integrate smoothly with silicon--it's soooo 20th century. Get over it. What works is very piecemeal: some hybrid pick-and-place here, monolithic integration of a modulator there, and even then the economics can be questionable. The problem is that these approaches work best when you have high volumes, but high volume products are already commoditized in Asian factories. The real successes are much less dramatic. Think optical mouse, not 100G.<br /><br /><em><strong>Optical computing is dead, long live optics in computing!</strong></em> I mean here the type of optical computing where the processor is all-optical. I worked on a project about this in the 1990s, with Japan, and there's still a little funding in it. The closest thing to it nowadays may be the all-optical telecom switch. (The name "switch" doesn't do it justice. They are pretty complex.) The optical processor is a nice idea ("it travels at the speed of light!") but it turns out that electronics is really really good, and really really cheap. Oh, and it's way easy to program. Now if you are talking about "optics <em><strong>in</strong></em> computing", that's another thing. There are optics everywhere inside a computer: the display, the mouse, the camera, the DVD player, maybe even a fiber cable someday (one can hope).<br /><br /><em><strong>The death of CRTs, photographic film, and fax machines.</strong></em> The triumph of flat displays means the death of CRTs. What a great technology. Tubes are still preferred in various niches in electronics (take apart your microwave oven if you don't believe me). But I'm glad to see them go. Ever tried to carry a big CRT? (You can still buy one. Check <a href=";node=979929011#/ref=sr_nr_p_n_feature_three_br_6?rh=n%3A172282%2Cn%3A%21493964%2Cn%3A1266092011%2Cn%3A172659%2Cn%3A979929011%2Cp_n_feature_three_browse-bin%3A724231011&amp;bbn=979929011&amp;sort=price&amp;ie=UTF8&amp;qid=1295031195&amp;rnid=724226011">Amazon</a>.) Photographic film is still around too, although <a href="">the last Kodachrome processor closed </a>after Kodak stopped supporting the chemicals needed to develop it (see photos from the last roll <a href="">here</a>). It's hard to miss film, especially in the dentist's office or the hospital x-ray lab. And fax machines will still be around for faxing legal and medical documents, and for receiving wacky advertisements (does that ever sell anything?).<br /><br />There's more, but isn't 5 enough?<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Decade's 5 Best Market Trends in Photonicsnoemail@noemail.orgTom HauskenWell, it'over: the decade-that-could-not-be-named (2001-2010). Time for a list of the Decade's 5 Best Market Trends in Photonics:<br /><p><strong><em>The triumph of flat displays.</em></strong> Remember the see-through iMacs? Don't CRTs look soooo 20th century now? And how about the touch screens for smart phones? They don't just make a nicer phone. They transform how we live. This is #1 because of the sheer size of the display industry, and its impact on everything else. </p><p><em><strong>Cellphone cameras relaunch the <a href="">image sensor market.</a></strong></em> The first cameraphone showed up in 2000, in Japan. There are now over 1 billion mobile phone handsets shipped every year, and most have cameras. That volume drives lots of other applications. And the quality! Again, transformative, and billions in new photonics revenue.</p><p><em><strong>The Green Revolution: LEDs and solar.</strong></em> <a href="">High-brightness LEDs</a> are all about taking an old technology and improving the brightness to do some new things--a marketing VP's dream. This decade saw LEDs in mobile phones and TV backlights, but the talk now is about LED lighting taking over the world. And how about that <a href="">solar </a>market! Many investors have lost money in solar companies, but they keep coming. Somehow, we all want to be part of it. (I was too, back that was back in the 1970s.)</p><p><strong><em>Molecular imaging and all other thing biophotonic.</em></strong> The average person on the street doesn't know it, but photonics is making a huge impact in biomedicine, from diagnostics to therapy. <a href="">Optical molecular imaging </a>is my favorite because of the promise it brings in finally solving some difficult and costly medical challenges. But there is also <a href="">mid-IR spectroscopy</a>, <a href="">ultrafast surgery</a>, <a href="">OCT</a>, and many more.</p><p><strong><em>IPG and the <a href="">fiber laser</a>.</em></strong> Several companies had fiber laser products in the 1990s, but IPG Photonics gets credit for making it a big name in materials processing today, and the 5th largest maker of non-diode lasers. Ha! No one is laughing now. The fiber laser is one of the laser types you would design if you could pick only one, and if you had the materials you have today. The diode laser is the other.</p><p>There you have it. Next time if I get to it, the Decade's 5 Un-Trends in Photonics.</p><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, a weak dollar means to photonicsnoemail@noemail.orgTom HauskenThe dollar has been declining steadily again (see figure) but how much difference does it make to lasers and photonics? A lot to any salesperson who is competing in an export business. A falling dollar is like a discount in the price given to the buyer. And it can mean a lot to the value that we analysts assign to markets (such as in <a href="">our new market estimate</a>). For example, a falling dollar inflates the value in dollars of the production of Japanese blue-violet diode lasers for Blu-Ray players. But it doesn't mean a lot overall, for a lot of reasons. Why is that?<br /><a href=""><img style="WIDTH: 320px; HEIGHT: 142px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5551350114791277234" border="0" alt="" src="" /></a><br /><br />The conventional wisdom is that a falling dollar makes U.S. goods and services cheaper abroad, and foreign goods and services more expensive in the U.S. That is, it makes U.S. goods more competitive, and it deflates U.S. debt owed others as counted in foreign currency.<br /><br />But many companies don't sell directly to companies abroad. A more complete downstream product may be exported by the customer's customer, but either way, the effect may be minimal--or at least obscure--to the photonics manufacturer.<br /><br />Second, companies commonly import subcomponents from all over the world. A lower dollar then raises the cost to manufacture, erasing some or all of the advantages when it exports the complete product.<br /><br />And, a lot of companies manufacture in the destination markets. This can help hedge against changes in currencies, among other things. In the example of Japanese blue-violet diode lasers, it changes the average prices and overall value, in dollars, that we assign to a market. But that can seem rather artificial when most of the Blu-Ray players are assembled in Asia anyway.<br /><br />More often, the gains and losses from a falling dollar amount mostly to changes in market share: U.S. companies vs. non-U.S. companies, and U.S. importers vs. U.S. exporters.<br /><br />For an explanation how a falling dollar is unlikely to create many new jobs in the U.S., <a href=";sq=economists%20say%20a%20weakening%20dollar%20is%20unlikely&amp;st=cse">read this article.</a> It cites the reasons above, and notes that much of U.S. manufacturing is capital intensive, not labor-intensive. And, many manufacturers are small and not likely to ramp up hiring dramatically even if sales do improve.<br /><br />Just the same, every little bit helps, especially if it means tipping a business from the red to the black or deeper into the black.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, new laser market numbers are out: $6.4 billion in 2010noemail@noemail.orgTom HauskenThe fall <a href="">Laser Focus World survey is done </a>and the estimate for the laser market in 2010 comes out to...(drum roll please)...$6.4 billion. That's a 27% gain over our revised value for 2009, recovering almost to the value in 2008 and not far from the peak in 2007. The strongest gains were in materials processing and communications.<br /><br />A more complete picture will be presented, along with other market perspectives, at the <a href="">annual Laser Focus World Marketplace Seminar</a> in San Francisco, the same week as Photonics West.<br /><br />Nearly every sector saw gains over 2009. But how could they not, considering the first half of 2009 was the worst period of the recession.<br /><br />Nonetheless, the gains exceeded expectations, especially in the sectors related to electronics manufacturing: semiconductor fab tools, solar cell fab tools, flat panel fab tools, and electronics assembly tools. Let's hear it for smart phones and HDTV! China was also a big factor, buying tools at a time when other regions were more cautious.<br /><br />And then there is the <a href="">jobless recovery</a>. Many manufacturers have cash and even credit, but remain wary about the future. Some chose to invest in capital equipment instead of hiring workers. The capital equipment improves the productivity, so it helps in their labor costs too.<br /><br />It's worth a mention in this blog that historical values were significantly revised in two key sectors: excimer lasers for lithography and diode lasers for optical storage drives. These sectors are not relevant to most followers of the laser market numbers, but restating them does change the overall totals.<br /><br />For more information, come to the seminar, or buy the complete forecast and segmentation in our <a href="">market report</a>.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Kinect is a win for lasers and imagingnoemail@noemail.orgTom HauskenBravo to Microsoft this week for launching a new market segment for lasers! The company finally launched the <a href="">Kinect</a>, a laser-based accessory that allows Xbox360 players to use their body as a remote control--gesture recognition. The lasers illuminate a field and an imaging system interprets it for the game console.<br /><br /><a href=";scp=1&amp;sq=pogue%20kinect&amp;st=cse">The reviews so far </a>indicate that Microsoft is on to something here. It is a step up from the Nintendo Wii remote controller and way beyond the Sony PlayStation Eye, neither of which used laser projection to create the image. The main complaints so far seem to be that the Kinect is understandably a little clunky yet, and it doesn't work well in crowded spaces, like dorm rooms.<br /><br />The system needs single-mode lasers to get a strong enough return signal to do the processing. But, they have to operate in the near-infrared to be invisible and at low enough average power to be eye safe. Kinect uses a structured light technique, which is to say that it interprets the distortion in an image created by the object. When the object moves, the field is distored accordingly.<br /><br />The project was born as Project Natal, from two Israeli companies, <a href="">Prime Sense</a> and 3DV Systems. Microsoft bought 3DV in 2009, and this week it bought <a href="">Canesta</a>. Canesta is known for its laser-based 3D imaging system based on the time-of-flight technique. It works much like radar to recreate a 3D form. Years ago Canesta used the technique to read finger strokes on a virtual keyboard. It worked, and although I prefer an actual keyboard for touch typing, it may be useful as an alternative to touchscreens. The product is sold through a joint venture called <a href="">Celluon</a>, created in 2004.<br /><br />The Kinect technique is less expensive than the Canesta approach. Maybe Microsoft has other plans for Canesta. Or it wants Canesta's expertise in imaging. Or maybe it wants to keep it away from competitors.<br /><br />Any way you look at it this is all good news for lasers and imaging engineers. It's the beginning of a new market segment.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, the jobless recovery helps lasersnoemail@noemail.orgTom HauskenSeveral laser segments have recovered surprisingly well in this recession. This is after my warnings over the last two years that <a href="">capital equipment markets take it especially hard in a recession</a>. So what gives? Who needs new capital equipment when factories are running at lower capacity?<br /><br />Enter the jobless recovery. Plant managers are talking about buying more efficient tools that operate more efficiently. In good times, this means buying a new tool to do more with the same staff. In recessions, this means buying a new tool to do more with less. Lasers play a role because they are used in big machine tools like sheet metal cutters. <br /><br />Companies have cash. They are using it to buy back stock, buy capital equipment, and increase their reserves. What they're not doing is hiring workers.<br /><br />There's a lot more to it than just the jobless recovery. There's the turnaround of the electronics industry after a two year slide. There's China. There are segments that are less sensitive to recessions. And so on.<br /><br />But the jobless recovery explains why so much of the laser market is recovering as well as it is.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, new report: the time for mid-IR lasers has finally comenoemail@noemail.orgTom HauskenThe time for mid-infrared lasers has finally come. Never mind that CO2 and certain mid-IR solid-state lasers have been around for years. But change is coming, with new solutions, new applications, and new companies.<br /><br />We finally completed our masterwork on the subject, our <a href="">market report on mid-IR lasers</a>. We found that the new applications should grow 30% per year in coming years. What's exciting is that some new military applications are helping to develop new technologies while other applications in sensing can get some traction. And, there are new solutions in quantum cascade and interband cascade lasers, GaSb diode lasers and OPSLs, fiber lasers, solid-state lasers, and compact OPOs. Not to mention help from other innovations, like QEPAs, uncooled focal plane arrays, and hollow-core optical fibers. <br /><br />Altogether, we counted over 50 companies selling lasers or OPOs and OPAs in the mid-IR range. Over half are headquartered in North America.<br /><br />Of course it's not easy. Some applications are very challenging, and unraveling the technologies and the applications is messy. Not to brag, but we did a nice job in the report to unravel it all for you. <br /><br />There's more going on with mid-IR market information. We worked with Robert Thornton of Ubiquilight in his <a href="">survey of mid-IR laser needs</a>. Please do the survey.<br /><br />And, there will be a panel discussing the mid-IR market at the <a href="">Laser Focus World Marketplace Seminar in January</a>. To make it a little more direct, we're calling it "Quantum Cascade Lasers for Mid-IR Applications: Pro vs. Con." We will have Tim Day (Daylight Solutions), Robert Afzal (Lockheed Martin), Ken Kaufmann (Hamamatsu Photonics), Lars Hildebrandt (nanoplus), and me. The agenda will up shortly, if it isn't already. We hope to see you there.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, went wrong with GSI?noemail@noemail.orgTom HauskenWhat&rsquo;s going to happen to GSI? GSI announced in May that it would emerge from restructuring this summer. We got some interest this summer from investors checking out the laser market. One can imagine that some pieces of GSI will get traded. There will be news soon enough. As one of my smarter bosses used to say, &ldquo;it will all become obvious&rdquo; in due time. <br /><br />The other question is, what went wrong? First, it got slammed in the downturn in the semiconductor and manufacturing sectors. Semiconductors turned down in 2007 and didn&rsquo;t stop until last year. GSI is heavy into the semiconductor tool business, and it got hit hard. Equipment sales dropped as much as 90% or more from the peak. The rest of manufacturing turned down in 2008 with the recession. That business was hit with a 50% drop in equipment sales, plus or minus. That's brutal. <br /><br />Second, GSI is really well positioned in lamp-pumped solid-state lasers, and it has a wide range of other laser and system products in many nice niches. But lamp-pumped lasers have been in a decline for several years while fiber lasers are on the rise. Lamp-pumped lasers won&rsquo;t disappear, but it&rsquo;s just not the place to be these days. <br /><br />Finally, we&rsquo;ve heard comments about certain decisions made by management along the way, particularly regarding the whole restatement thing. The gist of these comments is that the process was badly mishandled. It certainly made a bad situation worse, and it&rsquo;s relevant enough. But, you expect Wall Street types to point that out first. They look at financial statements for a living.<br /><br />To me, I take the macro, long-view perspective. The downturn came at great cost to companies and to the people who work in them. Some got caught out in the storm. Let&rsquo;s hope that things work out for the best from here.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, for the solar marketnoemail@noemail.orgTom HauskenI don&rsquo;t usually venture into solar energy discussions, even though it is also an opto technology. For one thing, it depends a lot on policy decisions and I've been there, done that once before. And there's already plenty written elsewhere. But it's worth pointing out <a href="">Vinod Khosla&rsquo;s recent posting on the requirements of investing in solar.</a><br /><br />Khosla&rsquo;s piece is long with detail, but he basically says that startups have to &ldquo;be competitive with silicon cells at thin film costs or be competitive with III-V cells (well over 20 percent) at silicon costs. Then you have a 50/50 chance of making it. But a billion dollars of capital and billion dollars of debt will be hard to pay off.&rdquo; A lot of is just basic market sense, and that's exactly the point.<br />Khosla echoes more or less what we have seen in solar for years. Strategies Unlimited followed the solar industry for decades while it had steady 25+% compound annual growth. (Don&rsquo;t believe me? Check out the figure below.) Now that solar is finally in the public imagination, overinvestment has become a increasing concern.<br /><br /><a href=""><img style="WIDTH: 345px; HEIGHT: 170px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5486504734352474642" border="0" alt="" src="" /></a><br /><br /><span style="font-size:78%;">Source: Strategies Unlimited and Paula Mints (Navigant Consulting).</span><br /><br />I wrote already about the market for lasers needed for making thin-film cells (first <a href="">here</a> and the sequel <a href="">here</a>). My point then was that the cycle is amplified because it&rsquo;s the &ldquo;second derivative."<br /><br />I worked on solar cells myself, back in 1978 at Texas Instruments. It's great to see it finally make the big time, and if oil prices go up, it will be even bigger. I'm hoping so. A lot of smart people are working on it. Great things are still to come.<br /><br />Meanwhile, if you're following solar, read Khosla's piece, and read the comments, too. It makes interesting reading.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, for customers to pony upnoemail@noemail.orgTom HauskenThere was news this week that <a href=";f_src=lrdailynewsletter">Morgenthaler Ventures is ending its track for funding opto hardware start-up companies, mostly in silicon, but including optical components</a>. This is not good news, to be sure, but maybe it's time again for the systems integrators to finally pony up for components research.<br /><br />The conventional wisdom here in Silicon Valley is that venture-backed start-up companies form the engine of innovation for industries. The venture capitalists are nice enough to invest piles of money in component research, with the hope that they'll make even bigger piles for their investors, when they sell the start-up to a Cisco or an IBM, or they take it public.<br /><br />Trouble is, I don't know how many times I've heard the systems integrators complain that they need new opto technology now. Not next year, not next month. Now! And these are the companies that are getting decent profit margins, unlike the components suppliers (don't make me name names, please). Well, if this stuff is so darned vital, the systems vendors should be willing to pay big bucks for it, right?<br /><br />The VCs aren't investing in optical communication components because they don't see the return in it. If things get bad enough, the integrators will have to take on more risk. If that becomes too expensive, maybe they didn't really need it today, or even tomorrow. My bet is that they do need it, but were happy to let someone else pay for the development.<br /><br />The wild card is whether some Asian government, such as Korea or China, will fill the gap in funding and gain a permanent advantage in the components market. If you think that the venture financing model is driven by a herd mentality or is too narrowly focused to be effective, then that may well happen. But if you think that, for all of its faults, the VC model is mostly rational and market driven, then it's just China's money getting wasted, to the benefit of the systems vendors.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, brightest x-ray source in the Universenoemail@noemail.orgTom HauskenWhat do you do with an aging linear accelerator? You use it to make an ultrafast free-electron hard x-ray laser, that&rsquo;s what. And that laser is now the brightest x-ray source in the universe (so far as we know) and the only hard x-ray laser in the world. Where? At the <a href="">SLAC National Accelerator Laboratory</a>. At Stanford. It&rsquo;s a national lab. Nice place, too.<br /><br />Government labs love acronyms of acronyms, so the laser is called the <a href="">Linac Coherent Light Source, or LCLS</a>. Last month I was able to tour the new laser facility with the local IEEE Photonics Society chapter. It brought back flashbacks of grad school, but without the poverty. It&rsquo;s a plush lab. For you laser geeks, here are some stats:<br /><br />Pulse energy ~ 1 mJ<br />Pulse duration 5 to 200 fs<br />Peak power 10 GW<br />Average power 1 W<br />Repetition rate 120 Hz<br />Wavelength 0.1 to 10 nm<br />Electrical power bill per month: $ 1,000,000<br />Temperature control in beam delivery system: 0.01 degrees<br />Laser design: Self-amplified spontaneous emission (ASE)<br /><br />The laser doesn&rsquo;t sound that impressive, until you consider the infrastructure to build it. About 3 km of accelerator and beam delivery. A massive electrical bill to run the magnets and the air conditioning. A tunnel underground to keep the temperature stable (they used the same company to dig it that digs wine cellers in Napa Valley). The experiments are all done by remote control, just to ensure radiation safety. Not that they need to, with all the shielding and massive ground wires everywhere.<br /><br />There is a great animation video that shows how it works, <a href="">here.</a> The electrons are accelerated to relativistic energies, then run through the free-electron laser, creating coherent hard x-rays. The rest is beam delivery. So, it&rsquo;s just like your benchtop custom-built laser, but on a cosmic scale.<br /><br />And what do they want to do with it? For one, it&rsquo;s like a very fast x-ray camera that exists nowhere else on earth. It&rsquo;s so fast, it can take diffraction images of crystals before the materials degrade from the x-rays. It can do pump-probe experiments on atoms and nuclei. It can reproduce the harsh environments in the universe by imparting a lot of energy into a very small volume. The SLAC SCLS aims a stream of x-rays at a small spot size, creating a huge intensity. (The new Livermore NIF laser also creates x-rays at the target, but they go in all directions. The NIF laser produces higher energy pulses, for fusion reaction.)<br /><br />You can drive over the accelerator on Interstate 280, just near Sand Hill Road, near Stanford&rsquo;s radio telescope and open cattle range. But you can&rsquo;t just drive onto the SLAC national lab campus. There&rsquo;s a guard. And anyway, the laser and beam delivery is all underground.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, numbers are in: $8.8B by 2014noemail@noemail.orgTom HauskenWe've finalized the <a href="">2010 edition of our laser report</a>, and it's official: a 25% decline in the market for 2009, but still among the top 6 years in terms of revenue. And, everything from here is up, with about 9% growth to $8.8 billion in 2014. Some of you saw the draft in March, after the Q4 numbers came in. Here is the chart:<br /><br /><a href=""><img style="WIDTH: 400px; HEIGHT: 197px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5469776468419691106" border="0" alt="" src="" /></a><br /><div></div><a href=""></a><div><strong><em>Fiber lasers are doing well, under the circumstances.</em></strong> Our estimate for fiber lasers came out a little higher than many people expected, including us. We recorded a decline of only 5% overall, to $280 million. IPG took a big hit in 2009, returning to its 2007 level. This is because it is strong in kilowatt fiber lasers. (Other kilowatt laser companies were hit even worse, like Rofin-Sinar and TRUMPF, for the same reason.) </div><br /><div></div><div>But there are several smaller fiber laser suppliers that are selling into various applications from Europe to China. Two very promising sectors are medical systems and military projects. True, one could exclude some of those military projects from a count of the market, but it shows up as revenue to companies so we include them. </div><br /><div></div><div><strong><em>No shopping sprees.</em></strong> Another surprise is that, so far, there haven't been as many acquisitions as one might expect. This is partly due to the tight credit and the uncertainty that weighed on the market last year. There has been consolidation of other kinds, just not the kind of shopping spree that sometimes accompanies downturns. </div><br /><div><strong><em>More coverage.</em></strong> This year, we extended the coverage of the laser market report to include every major market, beyond fiber lasers, beyond even industrial lasers. It now has everything that the annual Laser Focus survey covers, but with the most updated data, forecasts to 2014, and 300 pages of detail not provided in the <a href="">January issue of the magazine</a> or the <a href="">January seminar</a>. (Disclaimer: our numbers also continue to differ in some key places from the LFW numbers due to differences in segmentation.)</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Kucha 20x20noemail@noemail.orgTom HauskenEver wondered why techie presentations are so notoriously bad? You think, am I the only one who's bored or confused? Well, check out this completely new way of doing presentations. I've seen it and it's a breath of fresh air.<br /><br />First of all, you know what kind of bad presentations I'm talking about, don't you? Presenters who assume you love their narrow topic. They have too much detail. The print is too small. Equations that you can't follow. Monotone voice. Wooden statue posture. A nervous laser pointer flitting across the screen. We're all guilty, and sure, photonics is supposed to be technical. But do <strong>so many </strong>presentations have to be so bad?<br /><br />Well, there's a new way of presenting called <a href="">Pecha Kucha 20x20</a>. It's very simple. You present 20 slides with 20 seconds each. That's about 7 minutes. During that time, you can't ask questions--questions come after (sorry, Intel employees). You have to get through your main points fast, like an elevator speech.<br /><br />I've seen it and it gets to the point. It cuts the bull. It's great for those small-ish sessions: internal company meetings, B-to-B briefings, that sort of thing.<br /><br />It started in Japan as a social event in 2003 as a way for architects and other designers to network without boring everyone. It spread to cities all over the world. The subjects can include anything. There's now also a group called <a href="">Ignite</a> in the U.S. that is doing kind of the same thing, for fun. Imagine.<br /><br />Using it as a social scene does sound a bit geeky. After working in the tech industry all day, the last thing you might want to do is to go listen to more Power Point presentations, even if they use 20x20. But, it's kind of the modern equivalent of Toastmasters. Or salons. Or speed dating. That might be fun after all.<br /><br />Spread the word. Managers, start using 20x20 in your meetings. Salespeople, use it in your sales calls. Engineers, use it in your presentations, and leave the other slides as backup for the Q&amp;A. Don't be afraid to try it. Think Pecha Kucha 20x20.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, makes movesnoemail@noemail.orgTom Hausken<a href="">IPG seemed to make a vertical move into machine tools this week,</a> with its announcement that it acquired <a href="">Cosytronic</a>. Well, it turns out that it&rsquo;s not exactly a vertical move. In fact, it&rsquo;s a pretty narrow acquisition, but an interesting one. Where does this put IPG on the longer term roadmap?<br /><br />IPG has done well so far in kilowatt lasers, selling mainly to systems integrators for metal welding. But the huge majority of welders use good old-fashioned electrical welders, not laser welders.<br /><br />IPG aims to change that. Cosytronic has 20-some years of experience in resistance welding, from the &ldquo;Welding Valley&rdquo; in Germany. It has a tool that can make seam welds with a laser head that swaps with the head of a resistance spot welder. The aim here isn&rsquo;t to take on resistance spot welders. The aim is to increase the pie for laser welding. For IPG, it&rsquo;s about the application, not making systems <em>per se.</em><br /><br />I should mention that IPG's main competitor, TRUMPF, aims to do the same thing, of course. But TRUMPF has a machine tool business and lots of internal expertise. IPG is working on that.<br /><br />It&rsquo;s a very different story in sheet metal cutting, by the way. That is the grand prize in materials processing. But, several big tool vendors make their own CO2 resonators for their tools, or have loyal relationships with independent suppliers of resonators, mainly Rofin and Fanuc. It&rsquo;s hard for a new player to break in with a new type of laser. Nonetheless, IPG is making progress there too. IPG plans to continue to work with the systems integrators to gain share in that segment, rather that to make a vertical move.<br /><br />This is IPG's 2nd acquisition in 2010, by the way. <a href="">It acquired little-known Photonics Innovations, of Alabama, in January.</a> That acquisition is also narrowly strategic, aiming at materials and the mid-IR range.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Net Neutrality is above your job gradenoemail@noemail.orgTom HauskenAs a supplier in the photonics or telecom food chain, should you care about the <a href="">landmark decision this week over the FCC vs. Comcast</a>? In short, no. It&rsquo;s above your job grade. Here&rsquo;s why.<br /><br />Much is made about this kind of thing at the carrier level, since it impacts how they do their business. And what the carriers do&mdash;who wins and who loses&mdash;impacts the optical equipment vendors. And that passes on to the component vendors, who win or lose depending on their customers . So far, that&rsquo;s all true.<br /><br />But these kinds of decisions are really for policy wonks and legal nerds. I know, because I&rsquo;m a recovering wonk myself. I once worked on telecom policy for Congress.<br /><br />It&rsquo;s not that technologists are above policy issues, or have nothing to contribute. Technologists are notoriously aloof in policy debates, but badly needed.<br /><br />Rather, the neutrality debate is irrelevant to the optical networking community because it&rsquo;s mostly decoupled from the day to day business of the network. There are so many other factors that are also very important. Think of the 50 states and the District of Columbia. Each has a regulatory agency. There are municipal agencies. Federal courts. The FCC. Congress. European countries. The European Commission. Japan. China. India. And a hundred other countries. Think of Google, iPhones, Facebook, Youtube. Think of refrigerators with IP addresses. (Then again, let&rsquo;s leave that out.)<br /><br />While policies get worked out, traffic just keeps on going up and up. And no one really has a good grasp just exactly how fast the traffic is growing, much less how much it will grow in the future. And even when big policy decisions are made, the consequences take years to work out. There will be more appeals, reactions by competitors, possibly legislation.<br /><br />It&rsquo;s important to take an interest in Net Neutrality as a citizen. It&rsquo;s about whether you think broadband service should be a regulated utility, or if it should be a competitive service. And yes, the consequences do trickle down to the equipment and component vendors. But the ones who stand to gain the most from these debates? Lawyers and government affairs officers (also known as lobbyists). That&rsquo;s a certainty.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, depends on your point of viewnoemail@noemail.orgTom HauskenA recent poster on the Photonics LinkedIn group was impressed by the stratification and fragmentation in the HB-LED business. The self-described newcomer can be excused for being na&iuml;ve, but there are some things I think are worth repeating here. Most importantly, whether fragmentation is good or bad depends on where you sit.<br /><br />A lot of people like to compare photonics with some industry X just before the industry took off. The most common example is silicon electronics in some early stage. Who wouldn&rsquo;t want to repeat that ride?<br /><br />But that&rsquo;s a poor analogy. Photonics components are more like airplane parts than CMOS. Most photonics parts are highly specialized, and the suppliers can often make a nice profit because of the complexity or service they provide. That's good for a lot of companies, including small and medium size companies. For them, fragmentation is good. It means niche opportunities for them.<br /><br />However, it turns out that a lot of photonics parts require an expensive clean room&mdash;a fab. Anyone who has an expensive capital investment, like a fab, wants to get volume through it to pay for the lights, and that favors consolidation. These suppliers want everyone else to get out of the business and leave it to them. Who wouldn&rsquo;t? So, many of these companies look to minimize differences in products, even if it means standardizing the parts a little and giving up some of the profit margin. For them, fragmentation is bad because it limits their volume, and therefore their profitability.<br /><br />If you are a customer or an end-user, there is occasionally a segment where consolidation is needed to lower the price to the customer, and move the market forward. But these opportunities are rare. When they appear, the customers usually have a way of forcing standardization onto the suppliers, not the other way around. Solid-state lighting might be an example where consolidation might help the end-user. (Or not, since it's not the only factor in its adoption.)<br /><br />But watch out what you wish for. What's good for the customer, or for one supplier, may not be good for everyone. Whether the consolidation is good or bad depends on whether you survive the shake-out or not.<br /><br />In summary:<br /> * Photonics markets are notoriously fragmented.<br /> * They always will be.<br /> * That&rsquo;s good for some companies.<br /> * That&rsquo;s bad for some companies.<br /> * Consolidating suppliers can sometimes help grow the industry, but watch out what you wish for.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, countries make 87% of all lasers. Wow!noemail@noemail.orgTom HauskenBet you didn't know this: about 87% of all laser revenues attribute to companies headquartered in only three countries: the U.S., Japan, and Germany. Wow! Who'd have guessed?<br /><br />Don't believe me? Consider that about 1/2 of all laser revenues are for diode lasers for communications and optical storage. These are mostly made by Japanese companies, some U.S., some Taiwan, and a few others.<br /><br />Then, consider that several big laser makers hail from Germany and Japan: TRUMPF, Rofin-Sinar, FANUC, Gigaphoton, and Mitsubishi. Germany is also home to many smaller laser makers, like Jenoptik, Toptica, and (despite the name) Menlo Systems. The U.S. is the official home to many familiar names: Coherent, GSI (including Synrad, Quantronix, and Continuum), Newport, IPG, Cymer, JDS Uniphase, Oclaro, and many, many smaller companies.<br /><a href=""><img id="BLOGGER_PHOTO_ID_5444176999426869506" style="WIDTH: 371px; CURSOR: hand; HEIGHT: 244px" alt="" src="" border="0" /></a><br /><br />I'm counting revenues here, not units. A lot of commodity lasers are made in Taiwan, or even China, for laser pointers and such things. Oh, and of course, I'm talking just the laser, not the system or end-use.<br /><br />True, the assembly may be anywhere from Russia to China, but the companies are headquartered in only a few countries. This means that at least a large part of the revenues (including the profits) flow back through headquarters. (More on that in a later post.) Oh, and of course I'm talking just the laser, not the system or end-use.<br /><br />For the record, this all came about from a question I got from Breck Hitz, the Executive Director of the Lasers and Electro-Optics Manufacturers Association, <a href="">LEOMA</a>, who is trying to advance laser standards at the ISO.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 2010: HB-LED market to grow 53% this yearnoemail@noemail.orgTom HauskenOur 11th annual <a href="">Strategies in Light</a> event ended last week and it was symbolic of the LED and LED lighting market. Booming. In fact, the big takeaway is exactly that. The HB-LED market will surge 53% in 2010 to $8.2 billion, going to $20.2 billion by 2014. Did you get that? That&rsquo;s $20 billion. That's a respectable number compared to other components sectors, like semiconductors and displays. And, it grew 5% in 2009, despite the recession.<br /><br />This is so big, saying much else takes away from the message. And anyway, my colleagues at <a href="">LEDs Magazine</a> were all over the event, so you can go there to find out the details. You might especially like this chart of our LED market forecast, at the magazine&rsquo;s site.<br /><br /><br /><a href=""><img id="BLOGGER_PHOTO_ID_5439667435843542626" style="WIDTH: 359px; CURSOR: hand; HEIGHT: 253px" alt="" src="" border="0" /></a><br /><br />The event was a indication of the expectations in the LED market. We had nearly 3,000 total attendees and 88 exhibitors, each up about 50% from 2009.<br /><br /><br />The LED lighting part of the event is really gaining mindshare, with its separate conference track, LED lighting tutorials, a new Solid-State Lighting Investors Forum, and a new LED Lighting pavilion in the exhibit area. There was also a lot of discussion about broader systems issues like LED-specific thermal management, suitable optics, efficient drivers, LED-friendly controllers, and all that. In short, it&rsquo;s not just about the LED anymore.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, next big imaging technology: OMInoemail@noemail.orgTom HauskenIf you haven&rsquo;t heard of optical molecular imaging (OMI), get ready to hear more about it. OMI is about to move into clinical use as one of the key tools in personalized medicine. Growth of equipment sales is on track to reach $400 million in 2014 and nearly $1 billion by 2020. Yes, you heard that right. <br /> <br />Don&rsquo;t confuse this new imaging technology with OCT (on which we also have a new market report). Think of optical molecular imaging more like CT or MRI, but using visible light emission from molecular agents. OMI can be used in living tissue as a tool for examining diseases or drug effectiveness. It&rsquo;s highly portable, fast, and less expensive than conventional imaging, and it has the potential to be used in the doctor&rsquo;s office.<br /><br />There are a lot of factors in this market rollout, though. The growth hinges on partnerships with key medical equipment vendors, the outcomes of clinical trials assessing imaging agents, regulatory approvals, patent litigation, and decisions about insurance reimbursement.<br /><br />The market will likely expand in two directions: research systems and clinical systems. Recent advances in imaging agents will power the transition of optical techniques from the lab to clinical settings. Large imaging firms, such as GE Healthcare, Siemens, and Philips, are beginning to pursue optical molecular imaging, while over 12 companies are already marketing OMI systems. A large part of the revenues will be from the imaging agents, animal models (that is, genetically-engineered mice), accessories, software, services, and licensing. <br /><br />As always, ours is a high quality <a href="">market report</a>, and the only comprehensive one out there. Kudos to our good friend and lead author, Susan Reiss.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, West--what theatrics and so not 2009noemail@noemail.orgTom HauskenI don't know if it's the new Moscone Center venue, the laser show at the conference reception, or the fact that this is 2010, not 2009, but <a href="">Photonics West </a>was really booming this year. And the statistics say it all: over 18,000 visitors, a new record. That is now more than Semicon West, in both visitors and booths. (Don't believe me? Check <a href="">here</a>.)<br /><br />First, there was the venue. San Francisco is more expensive, and a lot of us locals have easier access getting in and out of San Jose. But there was a classier feel to the show this year. It's like Photonics West moved to a major league ballpark. And the vendors that were formerly in the tents in San Jose must have felt a lot better getting equal traffic at Moscone. At least the roof wasn't leaking on the rainy days like before.<br /><br />Then there were the theatrics. SPIE put on a great reception, with Cirque performers, old clips of lasers from James Bond, and a laser magic show. There was a great exhibit of old lasers in the North Hall. And it helped that Apple unveiled its iPad on Wednesday on the same block. If you go out to a restaurant, you are more likely to recognize someone in San Jose and less likely to encounter panhandlers, but San Francisco has more stuff happening.<br /><br />And finally, there was the economy. The feeling was that if you showed up, that's already an achievement. 2009 was a terrible year, but companies responded to the recession quickly, and the market seems to have bottomed out in mid- to late-2009. This time last year the market was still in decline. We were still looking at the abyss. Now, while visibility is still poor, the most likely scenario is modest growth from the new low, plus or minus in either direction a little.<br /><br />Photonics West is about product development, which still must go on even during recessions. Conference highlights were: OCT imaging, molecular imaging, or for that matter, anything combining bio and imaging. In fact, BiOS was booming. Also mid-infrared, quantum cascade lasers, and terahertz.<br /><br />On the show side, I have to say that there wasn't anything that struck me as especially new this year. But then again, the Photonics West show is all about nuts and bolts, so it's hard to stand out in the middle of all that.<br /><br />I also got to tour the <a href="">National Ignition Facility </a>on Thursday, which is something any laser engineer should see. But, I'll get to that another day.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, report: OCT has a good 2009noemail@noemail.orgTom HauskenHow good is the OCT equipment market these days? It grew in 2009, despite the recession, and that's in units, not just exchange rate adjustments. That&rsquo;s how good it is. What&rsquo;s more, we&rsquo;re expecting 20% compound growth through 2014. This is from <a href="">our latest OCT market report</a>, now officially released.<br /><br />If you don&rsquo;t know what it is, OCT is a great imaging technology. OCT systems use advanced optics to construct micron-scale cross-sectional and 3D images in real time. The technique is non-invasive and can be used in vivo, such as to examine the inside of the human eye. The business is now entering a new phase, beyond ophthalmology to new specialties, such as looking inside arteries for cardiology. Each of these applications has the potential to be as big or bigger than the sales today in ophthalmology.<br /><br />OCT may sound arcane, especially if you have to pronounce its full name. But this is big stuff, with equipment sales now in the hundreds of millions of dollars per year. Much of the activity has been driven by a shift in the technology from time-domain systems to faster Fourier-domain systems, which are also not as limited by patent protection.<br /><br />Carl Zeiss Meditec no longer holds the majority of market share, even as its own revenue has grown. At least 21 other companies are developing and/or marketing OCT systems in 8 medical specialties, as well as in R&amp;D and industrial applications. Many more companies supply the sources, detectors, and related components that enable OCT systems and applications.<br /><br />Oh, and did I mention? Our market report is the only comprehensive report on the topic, a follow-on to an earlier report, also sponsored by PennWell. Kudos to our good friend, Greg Smolka.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 2009 laser numbers are innoemail@noemail.orgTom HauskenThe numbers are in, and the laser market dropped to $5.3 billion in 2009, a 24% decline from the record high of $7.0 billion achieved in 2008. While sales will remain sluggish in many sectors, overall revenues are already on the rise on a quarterly basis, with 11% growth expected in 2010.<br /><a href=""></a><a href=""><img id="BLOGGER_PHOTO_ID_5421480132233923362" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 208px" alt="" src="" border="0" /></a><br /><br />Companies doing better than average were few, but the military and biomedical sectors stand out. For example, the OCT equipment market grew in 2009, <a href="">as reported in our new market study</a>.<br /><br />Other than those sectors, as a rule, the larger the capital equipment, the worse that sector did in 2009. So sales of diode lasers for CD and DVD players didn&rsquo;t do well, but sales of welding equipment for making cars and trucks was particularly difficult. And, companies with fiscal years that ended last September saw even sharper declines in annual sales than, say, those on a July to June schedule.<br /><br />There were surprisingly few changes among the list of suppliers in 2009, including announcements from Oclaro and from Sumitomo. Most consolidation was internal to suppliers in the form of layoffs or securing market share within niches. Much more significant are the mergers and changes at the customer level, whether it is Ciena buying Nortel&rsquo;s optical operation or GM&rsquo;s spin-offs and plant closures.<br /><br />There&rsquo;s much more to the numbers. They are based on the annual Laser Focus World market survey, to be presented at the Lasers &amp; Photonics Marketplace Seminar in San Francisco on January 25.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, capex derivative & solar--Part 2noemail@noemail.orgTom HauskenIn a previous post, I discussed how steep upward growth for a market doesn&rsquo;t necessarily mean steep upward growth all along the supply chain. In fact, solar cell manufacturing is an example where sales can go wildly negative even as the power generators see upward growth. <a href="">In the original post</a>, I considered three different scenarios that made my point very nicely. But what happens when we plug in some numbers that may be more or less what we expect the solar market to be?<br /><br />I&rsquo;ve done that in this figure. The first thing to notice is that the cumulative generating capacity&mdash;the top curve and what the power companies think about&mdash;goes up all through the forecast.<br /><a href=""><img id="BLOGGER_PHOTO_ID_5421468681847584002" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 233px" alt="" src="" border="0" /></a><br />The next thing you notice is that the new module shipments&mdash;that&rsquo;s the middle curve&mdash;takes a dip in 2009. This isn&rsquo;t too surprising, given the recession, tight credit, and low oil prices. The dip isn&rsquo;t too big and it&rsquo;s in record territory again by 2011.<br /><br />But what is really interesting is the bottom curve. That&rsquo;s the new factory capacity that&rsquo;s needed to make the modules each year. This correlates directly to lasers sold for making cells. That curve actually goes to zero, even negative, for a couple of years. And even in the recovery it only hangs around the 2008 level through 2013. In other words, the laser sales will not rocket upwards like the module sales through 2013.<br /><br />Of course, there are some problems with this simple chart. The new factory capacity (laser sales) probably don&rsquo;t go negative. That would mean companies were taking equipment out of commission. While I have heard of this happening in 2009, it&rsquo;s not widespread. Companies want to be ready for the recovery. And, there are always new suppliers, and old suppliers expanding and upgrading equipment. That raises sales above zero.<br /><br />On the other hand, there is also inventory in the supply chain and used equipment for sale. That pushes the recovery further into the future.<br /><br />To a first approximation, the chart is a good model, and a good example of what I call the "second derivative paradox." At least it&rsquo;s better than looking at the other two curves and assuming something similar.<br /><br />January 13, 2010<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, using the downturn and dumb lucknoemail@noemail.orgTom HauskenIt's become a cliche that companies can use downturns to their advantage. Now there's an analyst from Bain &amp; Co. who actually has the data. <a href="">As he says in a piece on NPR this morning</a>, it's like companies use the curve in a car race to gain advantage against stronger competitors, while using the straightaway to hold it. <br /><br />The Bain analyst, <a href=";menu_url=multimedia.asp">Darrell Rigby</a>, has <strong><em>data to show that</em></strong> <strong><em>market share changes the most in the chaos of the downturn</em></strong>. It's not surprising: at best, the downturn changes the game. At worst, it brings out all the weaknesses in a company. <br /><br />Since they start out with the most market share, the biggest companies have the most to lose. They have deeper pockets, but they also have inherent inefficiencies that come with any large organization. These are the inefficiencies of running a global sales network, of running operations across many end-user sectors, across multiple technologies, and so on. There's a cost to doing all that.<br /><br />Companies with the next generation products may not be doing well now, but they will seize market share coming out of the recovery. <strong><em>This favors fiber lasers, LED lighting, and new imaging tools like OCT and optical molecular imaging.</em></strong><br /><br /><strong><em>But let's admit it: luck also plays a huge part.</em></strong> We deal in macro trends at Strategies Unlimited. But it's my view that, at the micro scale, a lot of business is just dumb luck. Companies are simply in the right place at the right time.<br /><br />That may feel insulting to the many hard-working engineers and sales staff who nurture relationships, often over years, to bring a product to market. When things go well, it's natural to give credit to all that hard work. But looking at it from a statistical point of view, some will get the new business and some won't. Many of those who lost the business also worked hard, and even did the right things, but the business simply went elsewhere.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, solar market and the 2nd-Derivative Paradoxnoemail@noemail.orgTom HauskenHow could equipment sales in an exponentially-growing market be anything but upward? It happens all the time. Welcome to the 2nd-Derivative Paradox. That's my name for the trap that one can fall into when it comes to capital equipment markets. Solar is a great example. It's hard to explain the paradox, though, so bear with me. <div><div><div><div><div><br /><div><strong><em>Start with installed capacity.</em></strong> If you are a power generator, you think in terms of the cumulative installed generating capacity in the world. This is what the users actually use. The figure shows three scenarios how that might play out, and they all look pretty much the same in this chart. Nice, steep slopes. Note how they all start at the same point and end up at the same point.</div><br /><a href=""></a><a href=""><img id="BLOGGER_PHOTO_ID_5410816282067290882" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 243px" alt="" src="" border="0" /></a><br /><br /><div><strong><em>Then look at panel shipments.</em></strong> But the solar panel industry isn't interested in what's already out there. It needs to ship new panels every year. The shipments amount to a 1st derivative: the new capacity that's added to the infrastructure every year. Now the differences in the scenarios show through, as shown in the second figure. But the scenarios all show steep upward growth. What's to worry about?</div><br /><a href=""></a><a href=""><img id="BLOGGER_PHOTO_ID_5410816694300324450" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 220px" alt="" src="" border="0" /></a><br /><div><strong><em></em></strong></div><div><strong><em></em></strong> </div><div><strong><em>Now look at panel manufacturing equipment.</em></strong> The solar manufacturing equipment industry, and that includes lasers--isn't even interested in solar shipments, but the need for more manufacturing capacity to make the panels. You only need more equipment when you are shipping more panels than before. That amounts to a 2nd derivative of the cumulative generating capacity, and can give wildly different results. New equipment is shipped in all three scenarios, but in the "sustaining" scenario the equipment shipments are flat year after year, while in the "slowing" scenario they start out strong, but then decline. Ouch.</div><br /><strong><em>Other traps.</em></strong> Of course we would all like to live in the "growing" scenario. The trouble is, strong positive exponential growth doesn't last indefinitely, no matter what they say. And that's not even considering some ups and downs along the way, like this year. A slight shift in the solar panel shipments wreaks total havoc for equipment shipments.<br /><br /><a href=""><img id="BLOGGER_PHOTO_ID_5410817117930244722" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 220px" alt="" src="" border="0" /></a><br /><div><strong><em></em></strong></div><br /><div><strong><em>Other things that juice equipment sales.</em></strong> The same trap exists in other industries, too. But there are other details to consider. First, there is usually some churn in suppliers. Machines also get obsolete. And there is also the early obsolescence forced by things like Moore's Law. These all have to be considered.<br /></div><br /><div><em><strong>Watch that 2nd derivative.</strong></em> Don't get me wrong. I love solar. I had a summer job at TI testing solar cells back in the Jimmy Carter era. We all believe it's going to be a great thing in coming decades. But it's not enough that the cumulative generating capacity will be on a steep upward slope for years to come, because when it comes to manufacturing equipment, it's the 2nd derivative that counts. </div></div></div></div></div></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,"There will be growth in the spring"noemail@noemail.orgTom HauskenOur family recently watched the film classic "Being There" with Peter Sellers. It's the source of the phrase, "There will be growth in the spring." The character's proclamation arose from a misunderstanding, but was quickly seized on by politicians, the media, and a public weary of recession.<br /><br /><em><strong>Modest growth, but better than none.</strong></em> Well, we've updated some numbers and in this recession, it really does look like there will be growth in the spring. Actually, it's happening right now in many segments, just modestly. In fact, the issue isn't whether there will be growth, but how much. We're talking growth around 10% for the most part, which is pretty modest on a quarterly basis. Stronger growth in sectors like semiconductor fab tools and telecom network equipment.<br /><br /><strong><em>Forecasting is harder than it looks.</em></strong> You might think that predicting growth in 2010 is about as simple-minded as the character's observations in the film. Far from it. I cringe at so-called futurists who paint dramatic pictures of the future, without giving some near-term due dates or without working through some fairly obvious contradictions. Likewise for cheerleaders who think that the recession can be just wished away. (See one of my blog entries in April about this form of <em>Coueism</em>, <a href="">here</a>.)<br /><br /><strong><em>Quarterly trends help.</em></strong> Our forecast is based on quarterly trends among key suppliers and customers in leading product sectors. With visibility within the supply chain barely better than at the beginning of this recession, every segment must be evaluated carefully with respect to what's possible. A strong comeback in telecom systems next year? Quite possible. A strong comeback in heavy manufacturing? Not likely at all. Modest growth? Possibly. (See for example comments from Fabtech from my colleague, <a href="">David Belforte</a>.)<br /><br /><p><strong><em>Some context.</em></strong> To add some context, it now looks as if the stock market bottomed in March 2009, the GDP bottomed this fall, net employment will start increasing in 2010, and outstanding home foreclosures will start declining in 2011. You can't point to one thing and say "that's when the economy turned around." It's more complicated than that.</p><p>We will leak out more details as it firms up. Stay tuned. And remember, "there will be growth in the spring."</p><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,'s ahead in photonics stocksnoemail@noemail.orgTom HauskenIn the last post, I noted that some photonics stocks have done nicely in 2009 following the crash one year ago. My very cursory examinations suggests that a few companies in the LED space are doing very nicely indeed. Other are making good progress toward their 2007 and 2008 levels, even if there is a way to go.<br /><br /><strong><em>Why it matters.</em></strong> A rising stock market is a sign that investors think that earnings (that is, profits) will rise over coming years. It also makes all those pesky owners happy so that layoffs will stop and staff can breathe easier. And sometimes the employee is one of those owners (or has an option to become one). So, a rising stock price is usually good news, provided you remember that it is a secondary market, something of a beauty contest. Not being a Wall Street financial analyst type, I generally stay away from following stock prices, but sometimes it's illuminating.<br /><br /><strong><em>High fliers.</em></strong> One of the stars right now is Cree, the LED supplier. Its stock price has tripled from its low, and is well above its 2008 peak. Aixtron is even better, at about 6X above its low, and double its 2008 peak. Cymer has doubled to recover to its 2007 level. I think it's safe to say these stocks are ahead of the overall market average, although it depends on where you start counting.<br /><br /><strong><em>Holding their own.</em></strong> Others are holding their own against the NASDAQ average. Omnivision is up about 3-4X from its low, more or less in its earlier territory. Coherent has approximately doubled, getting closer to its usual territory. FLIR hasn't reached its all-time peak, but it's back to some of its 2008 level. IPG is getting there.<br /><br /><strong><em>In the dog house.</em></strong> Some companies seem to be in a long U-shaped recession, well below the overall stock market. Rofin is deep into manufacturing, where the stock market doesn't expect good earnings for a while. Telecom system vendors like Alcatel-Lucent, Ciena, and Infinera are also well below the NASDAQ average for the period. Especially Infinera.<br /><br /><strong><em>What about P/E ratios?</em></strong> High prices are nice, but what about the P/E ratio? That would say something about the kind of stock bargains that are out there. Here the news isn't so good. High-flying Cree is at 94 today. Cymer is near 300, Rofin at 75. But this is hardly fair, since these companies actually have positive earnings even now, and while many others don't. More down-to-earth, by the way, is FLIR, at a P/E ratio of 20.<br /><br />I couldn't post the Yahoo graphs into this blog, but you can run the charts yourself <a href=";range=2y;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined">here.</a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, photonics market, one year laternoemail@noemail.orgTom HauskenDo you believe the stock market, GDP, or unemployment figures? Are we in a recovery, or still in recession? V-shaped, W-shaped, or U-shaped? As we do our annual survey and forecast for <a href="">Laser Focus World magazine and the upcoming Marketplace Seminar</a>, a lot of this gets mixed up. There will be more to come later, but here are some early thoughts.<br /><br /><strong><em>Many public photonics companies have seen great stock returns.</em></strong> The stock market looks at future earnings--that is, profits--regardless of jobs or where the jobs are. A rising market says that investors think the future is good, and it's good for employee stock options and so forth. Some photonics stocks have shot way up, well beyond the average. LED companies in particular. Even those that haven't are seeing a bounce off the bottom, suggesting that it won't get worse. Stay tuned to this blog for more on this.<br /><br /><strong><em>Small photonics companies span the spectrum.</em></strong> The stock market doesn't say anything about small businesses, but there are far more small, private photonics companies than public ones. I love these companies because many are much more profitable than their more visible brethren. For example, think of suppliers for military contracts, medical systems, and so forth. But, small businesses have very little wiggle room in a recession like this. <a href="">California public radio explained it well in a piece today</a>, using the example of a maker of tortilla-making equipment that sells for up to $3 million. It has gone from 55 employees to 9, and still has problems getting credit a year into the crisis.<br /><br /><strong><em>Large capital equipment to make large capital equipment is hit hardest.</em></strong> The radio piece highlights a point I've been making, that the recession will be especially long for companies that make large capital equipment, and especially large capital equipment that makes large capital equipment. So for example, the market for welding systems for making cars is likely to be slow for another year or two, while the LED market will jump ahead next year.<br /><br /><strong><em>Use economic indicators with caution.</em></strong> Use economic indicators with caution. One tool for forecasting is to look at economic indicators. Of course, they are complicated, but they can be very useful. But you do need to understand some of the limitations of the indicators, though. For example, <a href="">Joe Webb points out in his blog article for the print industry how leading indicators often get it wrong</a>. The blog piece is appropriately titled, "Beware the Cheerleaders."<br /><br /><p>Even as we all bask in the news that the economy grew last quarter, <a href=";scp=30&amp;sq=gdp%20statistics&amp;st=cse">economists are working to correct errors that likely overstate the value of GDP growth</a>. When goods and services are moved offshore, the total value may be counted in the current accounts, but it may not be allocated correctly to specific industries. It's as if you compare two companies that manufacture in China: one outsources it while the other operates it itself. The productivity of the former would look better than the latter if you don't count the outsourced labor. </p><p>A similar issue arises when you look at the trade deficit but not the entire current accounts, or for that matter, capital accounts. So what if iPhones are made in China? China adds only a few percent of the value, Japan adds much more, but the U.S. captures as much as 50% of the retail value. Yet, it looks as if it is imported from China so the other contributions are lost in our trade statistics. It should wash out in China's numbers, but not all of it will wash out in the U.S. numbers. But that is part of a very large topic, better saved for another time. </p><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, in laser sales over 40 yearsnoemail@noemail.orgTom HauskenWondering what the laser business looks like over the last 40 years? If past issues of <em><a href="">Laser Focus World</a></em> are any indication, the industry gets a downturn about every 8 to 10 years. That's what I found looking through 40 years of issues.<br /><div></div><br /><div>See for yourself. The figure shows the estimates for the laser market dating to 1969, using data from the annual market articles. It's charted on a log scale to show the growth rate. I had to make some adjustments to the original data, to account for revisions, changes in categories, and stuff like that. Also, in the early years, there was a large contract R&amp;D business that isn't included in this chart.</div><a href=""><img id="BLOGGER_PHOTO_ID_5395489955025219602" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 211px" alt="" src="" border="0" /></a><br /><div></div><br /><div>The downturns are marked by arrows. If you consider that downturns tend to spread over a few years, from the first signs of slowing to the return of the past peak, then the downturns have been a regular part of the industry over 40 years. Thankfully, the upward climb has made the impact fairly modest, compared to other industries.</div><div></div><br /><div>I don't believe that markets are deterministic. That is, past performance is not an indicator of future behavior. But the pattern of downturns does suggest that there is an underlying cyclic nature to the laser industry, and it will become more important as the upward growth rate slows. </div><div> </div><div>Oh, and don't forget to get your latest laser market information from <a href="">us</a> and at the upcoming <a href="">Laser Focus World Marketplace Seminar</a>.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, in the U.S. vs. small countries--Part 2noemail@noemail.orgTom HauskenRecently <a href="">I wrote</a> that it's nonsense to compare small country FTTH data to U.S. FTTH data, especially if the purpose is to suggest that somehow the U.S. is falling behind in FTTH adoption. I received some good feedback that adds to that argument, and even argues that the U.S. is one of the leaders in last-mile telecom infrastructure.<br /><br />My point in the earlier post was basically that small populations will fill out a wider distribution than the larger groups of which they are members. Small populations will fill the wings of the distribution, as well as the center. So, don't compare Andorra or Iceland FTTH data to that of the U.S. Compare the data to Palo Alto. Or rural Alaska. But not to the U.S.<br /><br />Moreover, many countries have more centralized telecom policies than in the U.S., where policymaking is fragmented among states, municipalities, and multiple branches of the federal government. There are lots of rural coops in the U.S. with advanced telecom infrastructures that rival Andorra. And many that are way behind. But you don't know that from aggregated data.<br /><br />Former colleague and optical fiber analyst extraordinaire <a href="">Richard Mack</a> noted a couple things that suggest that the U.S. is not behind, but arguably among the leaders in broadband infrastructure.<br /><br />First, he says, figures of merit that look at broadband lines per population don't consider that a lot of broadband comes through the workplace in shared links other than FTTH or DSL. When a <a href="">recent report redefined the figure of merit</a> to include all types of use and other factors, the U.S. actually comes out on top.<br /><br /><p>The figures of merit also don't consider what is being done with the broadband. The U.S. is arguably the leader in innovation in applications like YouTube and Facebook, not to mention more substantive computing applications. This has to count for something. Such innovations aren't coming out of Andorra or Iceland (although tiny Estonia is home to the headquarters of Skype, thanks to the flattening effect of telecom).</p><p>I contributed to a Congressional study many years ago that pointed out that investment in telecom infrastructure has been shown to correlate strongly to economic development in poor areas. At some point, however, there are diminishing returns. So, contrary to cheerleading that <a href="">"the global race for FTTH is on," </a>economies should invest in the broadband (and not necessarily always FTTH) that it needs at that time. Too much investment and you have a bubble. Too little and you miss opportunities.</p><p>The point is this: when you see someone spinning FTTH or broadband data, ask hard questions about what it really says.</p><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 3: Image sensors as a case studynoemail@noemail.orgTom Hausken<div><div>I can't think of a photonics market where someone doesn't frequently say, consolidation is a-comin'. The image sensor market is no exception. So when we finished our new image sensor report, I wanted to see how it looked over the 13 or so years that we've tracked that market. And you know what? The more things change, the more they stay the same.</div><br /><div></div><div>At the high level, there hasn't been one iota of consolidation in all those years, despite the fact that the image sensor business has grown about 10X in that time. The first chart shows a simple way of measuring the consolidation. It shows that the top 5 suppliers have had about the same overall share over many years. </div><br /><a href=""><img id="BLOGGER_PHOTO_ID_5384060527039604434" style="WIDTH: 429px; CURSOR: hand; HEIGHT: 189px" alt="" src="" border="0" /></a><br /><div></div><div></div><div> </div><div>I should note here that the membership in the Top 5 has changed during that time. That is, the market share is not static. It's just that there is no sign of a move toward consolidation at that level. </div><br /><div>Individual segments, on the other hand, are often highly consolidated. For example, the sales of image sensors for security cameras, for optical mice, and for certain scientific and professional applications are held by just a few players in each case. In fact, this is typical of photonic products, where the overall category is really a hodge podge of subsegments, and few, if any, suppliers can ever achieve significant market share overall.</div><br /><div>The next chart shows how the number of suppliers has changed over the years. Far from consolidating, the number of suppliers has increased since the commercial success of CMOS image sensors in this decade. In fact, just as one supplier is acquired or exits the market, another pops up. </div><br /><a href=""><img id="BLOGGER_PHOTO_ID_5384061621703813618" style="WIDTH: 392px; CURSOR: hand; HEIGHT: 188px" alt="" src="" border="0" /></a><br /><br /><div></div><div>So, when referring to consolidation, be sure to mention whether you are referring to a narrow segment, or the overall market. Consolidation in narrow segments is common, while consolidation in the overall product group is unusual. </div></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Symposium: Extreme lasers for the next 50 yearsnoemail@noemail.orgTom HauskenIf you think that laser performance is about maxed out, think of this. An extreme ultrafast laser as an alternative to particle accelerators. A high energy laser undergoing testing for initiating deuterium fusion. <a href="">Optical tweezers </a>that have unveiled the mechanical forces of kinesin, the protein that moves cargo within cells. And <a href="">the brightest hard x-ray laser in the world</a>, now up and running at SLAC. These were highlights from this year&rsquo;s Stanford Photonics Research Center annual symposium, which also launched the first event of LaserFest, the official celebration of the 50th anniversary of the laser.<br /><br />Gerard Mourou, from <a href="">Europe&rsquo;s ultrafast ELI project</a>, led off by describing how we are entering a new era in high peak power lasers. The 1960s began the Coulombic epoch, where lasers could excite atoms to higher energy states, but still bound to the atoms. The 1990s saw the Relativistic epoch, where lasers can excite particles to relativistic levels. He said that we are about to enter the Nonlinear QED epoch, where lasers may examine the vacuum itself by scattering off of the virtual particles generated in the vacuum (which is essentially the &ldquo;ether&rdquo; of yore).<br /><br />Such new lasers offer an alternative to giant particle accelerators. An accelerator uses a &ldquo;momentum paradigm,&rdquo; meaning that it imparts high momentum to particles and then observes them in a small volume. An extreme ultrafast laser operates in an &ldquo;amplitude paradigm,&rdquo; said Mourou. It is good for low mass particles, perhaps even dark energy, by observing them with low momentum in a larger volume.<br /><br />At another extreme, <a href="">the National Ignition Facility (NIF) </a>at Livermore, California, will be the most energetic laser system in the world when it is fully operational. In fact, each of the parallel solid-state lasers of the facility is the largest in the world. All 198 of them are combined and focused to a target the size of a peppercorn inside a can the size of a pencil eraser. The overall system takes up a building that covers three football fields.<br /><br />The NIF has three missions. One, to help understand the aging nuclear weapons arsenal. Second, to advance the study of fundamental physics. And third, it offers a path to clean fusion energy, with the aim of following up with a dedicated steady-state fusion reactor. Such a prototype reactor, and the many that might one day follow, would use oodles of diodes for pumping solid-state lasers, a potential killer app not lost on many diode suppliers (and one that I will comment on in a later blog piece). <br /><br />A point that came out was the many years these grand projects can take to launch. In two of the projects here, it took 10 to 14 years to win funding, and another 4 to 10 years for construction. It adds up to 18 to 20 years from concept to completion.<br /><br />Mourou noted that the laser has seen no boundaries, only horizons. If all goes well, these grand projects will do far more than just break performance records.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, small countries will always lead in FTTHnoemail@noemail.orgTom HauskenThis just out today: the <a href="">FTTH Council Europe</a> reported the European countries with top FTTH penetration. The list is revealing, with <a href="">Andorra</a> at number 4. Number 4! This means that once again we have to put up with articles asking why the U.S. is lagging tiny Andorra in FTTH penetration.<br /><br />The council announced that the top 10 countries with more than 10% penetration are: Sweden, Norway, Slovenia, Andorra, Denmark, Iceland, Lithuania, the Netherlands, Slovakia, and Finland. Note that the top country, Sweden, only has about 9 million people. Andorra has about 84,000.<br /><br />Other lists of this type have put countries like Singapore, South Korea, and Iceland at the top of lists of countries with high broadband or FTTH penetration. In the next breath, a policy wonk somewhere will claim that this shows that the U.S. is falling behind these up-and-coming countries. For example, <a href="">here's a policy report </a>from 2006 doing just that. The U.S. trends toward the OECD average over time as smaller countries fill out the bell curve, but that's ignored. Rather, it's spun as a call for action.<br /><br />What is never pointed out is that large populations--like the U.S. or the European Union--comprise a set of smaller, more diverse populations. A grade school student knows that, no matter how you define it, the <a href="">average</a> over the total is somewhere in the middle. Some of the smaller constituents have to end up in the wings. In the U.S., <a href="">progressive rural coops</a> and <a href="">wealthier communities</a> can lead the country in fiber penetration, while <a href="">many tribal lands are far behind even in basic phone service</a>.<br /><br />Moreover, any student of politics knows that countries like Sweden, Singapore, and South Korea are more inclined to adopt centralized public policies than the U.S. In the U.S., the Administration, Congress, FCC, the courts, each of 50 states, and even municipalities make telecom policy. Some of the municipalities are like Andorra, to be sure, but the overall patchwork is far from centralized, thanks to things like the Bill of Rights and the general Wild West temperament of U.S. public policy.<br /><br />Policies encouraging substantial investment in FTTH may be a great thing for the U.S. I'm of the view that it's a lot more complicated than that. But whatever your view, please don't say that the U.S. is falling behind because tiny Andorra has greater penetration than the U.S.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, market on track for strong growthnoemail@noemail.orgTom HauskenWhen a market drops about 4% in a year like this, it's almost a relief that it's not worse. But when it looks to grow 32% per year compounded from 2009 through 2013, that's really good news. That is the situation in the high-brightness LED market.<br /><div><br />In our new HB-LED market report, we are forecasting the worldwide market to decline 3.7% in 2009 from $5.1 billion in 2008 due to the declining sales in the end-user markets, mainly mobile phone handsets and automotive. But we project growth to resume in 2010 on the assumption that the worldwide economy will be recovering by then. </div><br /><div>Meanwhile, there is increasing penetration in new applications, particularly in LCD backlighting and general lighting. As these segments kick in, thanks also to improving technology, the growth rates surge some more, to reach $14.9 billion in 2013. By the way, these values represent packaged LEDs, not chips or lighting fixtures.</div><br /><br /><div></div><a href=""><img id="BLOGGER_PHOTO_ID_5377400446147916834" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 202px" alt="" src="" border="0" /></a><br /><br /><div></div><div></div><div>The top level forecast isn't much different from the forecast we presented at our <a href="">Strategies in Light Conference</a> in February, but now we have a good part of 2009 behind us. The report has a lot more detail than the conference, of course, and is an update of our report last year around this time.</div><br /><div></div><div>Did I mention that the new report is our 10th edition on the HB-LEDs market? We first reported on it in 1995. (We already reported this year on <a href="">lighting fixtures</a> and <a href="">replacement lamps</a>.) </div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, sensor market enters a more cyclic phasenoemail@noemail.orgTom HauskenIt took the recession of 2009 to do it, but the image sensor market will finally take a dip after many years of steep growth. And, not only has the market contracted for the first time since we first started tracking image sensors in 1996, but a rockier period waits ahead.<br /><br />Image sensors have a long history, dating back to fax machines and video cameras, but the recent steep run is largely thanks to the cameraphone. The cameraphone provided a convergence of factors that drove revenues to steep double-digit levels: a simultaneous swelling of handset sales worldwide, growing adoption of cameras in handsets, and rapid migration toward greater pixel counts in those cameras.<br /><br />Now handset sales are taking a breather, dropping an expected 10% in unit sales this year. Other segments are also seeing declines, of course, and unit prices for the image sensors are relentlessly competitive.<br /><br />The figure shows the long steep ride on a log scale, from <a href="">our new report</a>. The log scale makes it easy to see the change in growth rate (a chart with a linear scale is in our <a href="">press release</a>). What's remarkable, perhaps, is that the market decline this year won't be more severe than it is already.<br /><br /><div></div><br /><a href=""><img id="BLOGGER_PHOTO_ID_5374793135770980482" style="WIDTH: 320px; CURSOR: hand; HEIGHT: 182px" alt="" src="" border="0" /></a><br /><br /><div></div><div></div><div></div><div>We still expect single- and low double-digit growth in the recovery, and there are still many new opportunities for growth in unit sales beyond that. The two most notable are automotive and webcams. But, it gets more and more difficult to drive revenues up when it&rsquo;s already near the $7 billion mark. Without the fortuitous convergence of rising cameraphone sales to drive the market forward, cycles will become more prominent. </div><br /><div>By the way, it's not that the suppliers have had an easy time of it up to now. (Sound familiar, anyone?) But that will be a topic in a later blog.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, it takes to drive LED replacement bulbsnoemail@noemail.orgTom HauskenWhat does it take to drive a market to high growth in the middle of a recession? Being a drop-in substitute for an existing product helps. Having a feature that no other technology can do helps, too. A government mandate also helps. If all three happen at the same time? Then the odds improve that strong growth will happen. That&rsquo;s what&rsquo;s happening in the LED replacement bulb market, as described in our <a href="">recent report</a>.<br /><br />Contrary to what you might think, the lighting market has never been completely static. There is a wide range of options for light sources, electronic drivers, and fixture designs, and they continue to evolve. But the sockets themselves are slow to change, since they involve network effects, a form of chicken-and-egg problem. That&rsquo;s where the drop-in substitute comes in. LED replacement bulb are selling today as substitutes for certain high-value applications.<br /><br />What high-value applications? That&rsquo;s where the unique feature comes in. LED bulbs can&rsquo;t compete with compact fluorescent bulbs for general ambient lighting. But for directional lighting, LED bulbs are superior for controllability, dimmability, and a choice of color temperatures.<br /><br />Why not use the existing technology? The government mandate requires that all bulbs achieve a certain efficacy over a coming phase-in period. While this doesn&rsquo;t ban incandescent bulbs outright, it does price ordinary incandescent bulbs above more efficient CFL and LED bulbs. A perfect convergence.<br /><br /><br /><img id="BLOGGER_PHOTO_ID_5374046103062848130" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 313px; TEXT-ALIGN: center" alt="" src="" border="0" /><br /><br />By the way, the terminology in this area can be confusing. The figure shows how the LED replacement bulbs fit into conventional fixtures to complete a luminaire. The eventual goal is to migrate to complete designs where the LEDs are integrated into the luminaire from the get go. (See <a href="">our market report on LED luminaires</a>.)<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Early Peak Effect in the photonics marketnoemail@noemail.orgTom HauskenOur <a href="">new market report </a>highlights something I call the &ldquo;early peak&rdquo; effect that appears a lot in capital equipment sales, including many laser products. It&rsquo;s what happens when you sell some lasers into a new application, and then sales drop off when the customers have installed all the lasers they need. It&rsquo;s so typical of the <a href="">micro materials processing market </a>that I have come to include it in some forecasts.<br /><br />Here are the phases:<br />&middot; Rollout of lasers for a new application<br />&middot; The early peak in sales<br />&middot; Saturation of the installed base<br />&middot; Early wearout and upgrades<br />&middot; A second &ldquo;baby boomlet&rdquo; as replacements for wearouts peak<br /><br /><br /><p><img id="BLOGGER_PHOTO_ID_5364843639945408498" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 263px; TEXT-ALIGN: center" alt="" src="" border="0" />If you don&rsquo;t account for the early peak effect, you can overestimate laser sales by assuming that sales continue at peak levels, year after year. The news of new applications have surprisingly wide reach and long tails, feeding the perception that sales are higher than they really are, especially if the application is really cool, like stent cutting.<br /><br />What keeps the market going is that there are new applications launched on a regular basis that smoothes out the overall growth in the market. But, sales any particular company can be very choppy. And, the mix of products grows more diverse with every new application in the market.</p><p><br /><img id="BLOGGER_PHOTO_ID_5364843137215839122" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 251px; TEXT-ALIGN: center" alt="" src="" border="0" />A laser salesperson will recognize the early peak effect, but it gets lost when you look at overall market numbers. It&rsquo;s not hard to explain to the old-timers in the business, but it doesn&rsquo;t have a ready label, as far as I know. I couldn&rsquo;t come up with a better name for it, so for now it&rsquo;s the &ldquo;early peak effect.&rdquo; If you want to call it the &ldquo;Hausken effect,&rdquo; that&rsquo;s fine with me, too.</p><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,, PW, and gadgets are in; big Semicon West tools are outnoemail@noemail.orgTom HauskenSEMI's still newish <a href="">InterSolar show </a>outshined it's collocated <a href="">Semicon West </a>show this week, and that may be a sign of the future. InterSolar now has 3 floors of Moscone West, has all layers of the supply chain represented, and was simply more exuberant. The building has big windows. It feels more open. The solar industry this year is down, too, and there are still fewer vendors than at Semicon, but it just <strong>seemed</strong> brighter at the InterSolar show.<br /><br />In contrast, Semicon is underground at Moscone North and South. It was cheerful enough, considering the downturn and the lack of windows, but the party was at the solar show. And judging from the signup map for next year, the North and South Halls will be even emptier. In fact, Photonics West is now clearly bigger than Semicon West--at least in exhibitors and floor space, and maybe attendees too. (Rumors that Semicon will be squeezed into the South Hall turned out to be false. They are putting all the wafer processing booths in the South Hall. The North Hall will have everything else.)<br /><br />To be fair, no one was expecting Semicon West to be much of a party this year. After all, <a href="">SEMI just announced that tool sales will drop 50% this year </a>to the unspeakable low of $14 billion. (It was $43 billion in 2007.) But it's notable who is showing there nowadays, or rather who isn't. Semicon is a tool show, but Applied Materials, KLA Tencor, LAM Research, ASML, and many other major toolmakers don't have conventional booths anymore. For example, Applied and KLA only had meeting rooms at Semicon, while they showed their solar tools across the street at InterSolar.<br /><br />Semicon West is now really about the gadgets that the major vendors attach to their systems, the materials they use, and R&amp;D lab equipment. This means that there are suppliers for everything from microscopes and instruments to encoders and bearings. It's a good show for this kind of product development and lab stuff, and some of the specialty tools that are used in North America.<br /><br />But this year, even that was down. In lasers, Cymer, Gigaphoton, Coherent, and JDS Uniphase--each one catering to the semiconductor industry--all didn't show. The laser companies that I saw were Deep Photonics, Eolite, DPSS Lasers, Innolas, Jenoptik, Quantronix, and Rofin-Baasel. IPG and Newport showed their lasers at InterSolar.<br /><br />SEMICON is still the biggest fab tool show of the year for North America, and a very important one. One instrument vendor told me that even in a year like this they expected to get some sales from leads at SEMICON. New tool development still goes on. But it's a shadow of its glory days, about 15 to 20 years ago. The SEMICON shows in Asia are much weightier on the big tool side. And that makes sense, since as much as 75% of the world market for semi tools is in Asia, according to SEMI.<br /><br />And, the industry has grown so big that there are other, more specialized shows to choose from. Like, for examplek, the lithography people like the <a href="">SPIE Advanced Lithography meeting </a>held in San Jose. There are meetings like this for every sort of nuance you can think of.<br /><br /><a href="">Photonics West</a> is also a gadget show aimed at product developers and lab workers, like Semicon, but it spans more industries, particularly healthier ones, like biomedical and security. And it has a cross-cutting technical conference too. (And don't forget the <a href="">Laser Focus World Marketplace Seminar</a>, collocated with Photonics West every year!)<br /><br />I think it's a sign of the times. Solar is in. Photonic gadgets are in. Semi tool gadgets are still in. But the days of the big tool show in North America may be over.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, down the "micro" laser marketnoemail@noemail.orgTom HauskenWe just published our <a href="">special market report on the so-called micro materials processing market</a>. Once the market bounces off the bottom, the growth in the recovery will be good, but the interesting part of the story will be in changes in market share as the technology marches forward.<br /><div></div><br /><div>I should first explain what the micro materials processing market is. These are lasers used for lower power welding, cutting, drilling, microfabrication, additive processes, heat treatment, and lithography. We don't count kilowatt lasers at all, nor do we count marking and decorative engraving. The lasers are used to make semiconductors, solar cells, medical devices, jewelry, electronics, consumer products, and a wide range of various industrial parts.</div><div></div><br /><div>The market will take a 40% hit this year, which is dreadful, but this is not big news any more, and the recovery will bring the market to $460 million by 2013. There is talk that the semiconductor tool business is already turning around, after falling since 2007. Other markets, like solar cells, has a ways to go yet, and automotive may be slower to come back. </div><div></div><br /><div>We found the market share leaders to be Coherent, Rofin-Sinar, and GSI Group, with over 50% of the market. It's not hard to see why. Coherent is strong in CO2 lasers, excimer lasers, and DPSSLs. Rofin is strong in multiple categories too (don't forget that Rofin includes other brands: Lee Laser, etc.) And we counted all of Excel Technology's laser production in GSI's 2008 share, so that includes significant lamp-pumped solid-state lasers and CO2 lasers. There are a lot of players and product segments, so any company that is strong in multiple segments will have greater share. (Of course, many companies are also diversified across other laser applications apart from the micro category, but that isn't counted here.)</div><br /><div></div><a href=""><img id="BLOGGER_PHOTO_ID_5358027410338554962" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 294px" alt="" src="" border="0" /></a> <div>By the way, lamp-pumped lasers may be on the decline, but the sales still amount to something, especially considering that they often involve higher powers, and therefore higher prices. By comparison, a lot of CO2 marking lasers sell for under $2,000, so it takes a lot of them to amount to much.</div><br /><div></div><div>The thing that is striking is that the technology, as mature as it is, isn't staying still, especially in the micro category. Innovations like pulse shaping fiber lasers, higher power green lasers, and picosecond lasers, to name a few, promise to upset the market share at least a little while the market comes back.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, photonics can learn from Two Buck Chucknoemail@noemail.orgTom HauskenRecent news about the crash of the Australian wine business fulfills a prophecy I heard years ago, and highlights parallels to the photonics business. How so? For starters, both carry a certain prestige, but deep down, wine is really about agriculture and photonics is really about manufacturing. Let me explain.<br /><br />One of my favorite characters in the wine industry is Fred Franzia, famous for his Charles Shaw wine, better known as <a href="">Two Buck Chuck</a>. He's the guy that Napa Valley loves to hate, and he loves that they do. He boldly claimed several years ago that the Australian wine business would one day crash because they were planting too many grapes and financing with debt. At some point the world market would go through one of its inevitable cycles, prices would fall, and they wouldn&rsquo;t be able to meet their fixed costs. <br /><br />Sound familiar? A <a href=";scp=1&amp;sq=australia%20wine&amp;st=cse">recent article </a>cites some other familiar factors: relatively high labor costs, an unfavorable exchange rate, and over-association with a single, lower-end brand. <br /><br />All of this has been said at one time or another about photonics companies. Especially the part about overplanting. Who in photonics doesn't dream of starting a company developing high end cool stuff, ramp quickly, and make a ridiculously prosperous exit. It's happened enough to prove that it can. However, the reality is that it usually takes years to build up the business, and a lot of it is about as glamorous as pulling weeds. <br /><br />In the wine industry, you don&rsquo;t start by selling high end wines to collectors. You start by selling bulk grapes. Maybe you can begin making your own wine, or at least contract it out. Then maybe you do some bottling and run a small tasting room on the side. Eventually you may be able to get out of the low-end grapes altogether, except to sell off overstock. That&rsquo;s if a downturn doesn&rsquo;t force you to sell out to a large corporation.<br /><br />I hate to say it, but the photonics business could learn a lot from Fred Franzia. I hate to say it because Franzia is on a crusade to take away the pretense in wine, while many people are obvioulsy willing to pay top dollar for pretense. And in photonics, too, not only is there is a place for suppliers of low volume, specialty products, but I'm hope that everyone can enjoy the highest margins possible.<br /><br />You can learn everything you need to know from Fred Franzia in this <a href="">colorful interview in 2007</a>.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, replacement lamps: new regulations and 100+% growthnoemail@noemail.orgTom HauskenMost people are not aware that new energy regulations in Europe and the U.S. will progressively ban incandescent lamps from the market, creating a huge market opportunity for LED replacement lamps just as they improve in performance and price. <a href="">Our new market report </a>anticipates growth rates in this product of over 100% per year for the next several years, thanks to the new regulations, continuing declines in prices, and the unique features that only LEDs provide. That&rsquo;s great news for LED makers, who see the lighting market as the ultimate application for LEDs.<br /><br />It&rsquo;s not quite so simple as that, however. For one thing, LED replacement lamps are too expensive today for widespread use, so they are relegated today to special applications, such as hard-to-reach places. Manufacturers have yet to realize economies of scale. In the meantime, compact fluorescent lamps (CFLs) are more prominent. Also, customers have to be educated to think in terms of cost of ownership, rather than the initial price. Even the government regulations aren&rsquo;t set in stone, given the big change that it entails.<br /><br /><br />What's so great about LEDs? LED lamps are directional and can be adapted to fit different lamp profiles not possible with other light sources. They come in all possible shades of white, last for a long time, can be dimmed and controlled easily. And unlike CFLs, LED lamps contain no mercury.<br /><br /><br />The LED is in many ways the ideal lighting technology, but actually developing that market is still surprisingly challenging. That's why the new energy regulations will prove so pivotal for the LED business.<br /><br />Oh, and in case you missed the hint earlier, we do have a <a href="">new market report </a>on this topic.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Newport-Oclaro swap--Tipping the scales, a return to barteringnoemail@noemail.orgTom HauskenEver since the <a href=";p=irol-newsArticle&amp;ID=1295603&amp;highlight=">announcement that Newport will give its diode business and $3 million in cash to Oclaro in exchange for its New Focus operation</a>, opinions have been all over the map: from Newport is crazy to give up its internal diode business, to Newport got the better deal. The bottom line? I think it will tip the scales against the least competitive players.<br /><br />Here&rsquo;s how it works. Newport&rsquo;s laser group, Spectra-Physics, got its diode business in 1992 when it acquired OptoPower, located in Tucson, Arizona. For years there was an industry-held view that the diode-pumped laser makers needed to control the diode pump technology so vital to the solid-state lasers. Today, the big laser companies like Coherent, TRUMPF, Rofin-Sinar, and IPG Photonics all pretty much make all their own diodes.<br /><br />Fabs, though, are very expensive operations, costing as much as $30 million or more per year, depending on what you're counting. A classic way to make that work is to get volume through the fab--increase the capacity utilization. But with well over a dozen competitors and a slow market, that's hard to do, and everyone knows it. Spectra's diode operation has certainly seen better days, now that its assembly operations have moved to China and sales are soft for everyone.<br /><br />Meanwhile, Bookham (now Oclaro) has two gold-plated fabs, a GaAs fab in Zurich and an InP fab in Caswell, UK. By shutting down the Spectra diode fab in Tucson and making the diodes in its own fab, Bookham can get much better returns out of its capital. The new volume could even be low margin chips, as long as it helps keep the lights on. Moreover, even Bookham's competitors regard Bookham's R&amp;D highly. And Oclaro is hoping that it can be *the* independent diode supplier to the solid-state laser makers.<br /><br />It all sounds good, but competitors are quick to take pot shots at the deal.<br /><br />For its part, Coherent is keen on keeping its diode manufacturing in-house, in part because it also makes its OPSL gain chips in its fab with its high power diodes. Thus, while Spectra's fab may no longer be as integral to its overall laser business, Coherent's fab is. And the other big laser companies (Trumpf, Rofin, and IPG) are all quite religious about controlling the supply of key components and keeping their fabs in-house.<br /><br />Others suggested that Newport gets a solid business from New Focus (albeit one that is reportedly losing money at the moment), while Bookham-Oclaro could very easily fumble the diode business it's taking over.<br /><br />This is all true, although I would add that at least it plays to a larger strategy for Oclaro. Oclaro shows that it has a plan for its diode business. That's better than no plan.<br /><br />One thing that everyone agrees on is that the New Focus operation fits better with Newport, even though it's reported to be losing money. And it&rsquo;s something of a completed circle for New Focus, since one of the founders (in 1990) was Milton Chang, already then a former CEO of Newport.<br /><br />As for the remaining competitors, one less high-power diode fab has to be viewed as a good thing. Of course, Bookham/Oclaro aims to get most of the benefit from that, which is to say that it makes it all the harder for the least competitive suppliers&mdash;it tips the scales against them.<br /><br />Finally, you have to wonder what this says about the state of the industry when a major deal amounts to a barter, with almost no cash or stock involved. Of course, all deals are swaps of some kind, but bartering is considered the most primitive form of trade--a pre-monetary transaction that happens in primitive societies and war zones. The value of the diode laser business is evidently so low that a monetary or stock transaction these days is out of the question, and perhaps only a trade of this kind can go forward.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Munich--Bottoming out, fiber lasers, and a family reunion fueled by beernoemail@noemail.orgTom HauskenWho can be gloomy at a show where the beer starts flowing before noon and booth parties start before closing? If booth traffic is slow, at least the halls are bright and cheery and everyone is there. It&rsquo;s the closest thing to a family reunion in the laser business, and it only happens once every two years.<br /><br />The number of exhibitors at Laser Munich last week was almost exactly the same as in 2007, but spread out in four halls instead of three. Considering the laser industry is in its deepest trough ever, people were in a great mood.<br /><br />One factor would be that there is now a general feeling that the industry, and the economy at large, has more or less hit bottom. One comment that sums it up is that now &ldquo;there are finally more new orders than cancellations.&rdquo; It&rsquo;s kind of like how you feel when you stop beating your head against the wall.<br /><br />The bright colors may have helped too. Trumpf was touting the Blue Laser, which I was told referred to blue sky, earth as seen from space, earth-friendly, and something about cozying up to Mercedes. Its new-ish acquisition, SPI Lasers, featured its redENERGY and redPOWER lasers--really more infrared than red, but close enough. Coherent, meanwhile, went yellow and featured a more industrial look, evoking images of robots, Caterpillar tractors, and guys with hardhats.<br /><br />The best coverage of the show, including video coverage, is by <a href="">Industrial Laser Solutions</a> magazine (look for articles in the June 15 to 19 timeframe). But, since everyone seemed to ask, "What's new at the show"? here's my general take.<br /><br />Fiber lasers were once again the big thing at Laser Munich. At Munich 2007 we saw several early fiber laser products from players who had been on the sidelines, most notably Trumpf, Rofin, and GSI. This year those companies stepped up their fiber laser offerings. In addition, <a href=";ID=826">Coherent showed a fiber laser prototype based on bar pumping</a> that will be out next year. <a href=";lang=1033&amp;Section=Pricing">Newport quietly relaunched a 100W CW fiber laser </a>for industrial applications. <a href="">nLight featured its fiber laser products </a>from its OptoTools acquisition. And even LASAG, well known for its lamp-pumped YAG lasers but not wanting to be identified only as such, had a fiber laser in its booth.<br /><br />Never one to be outdone, IPG showed a 10 kW single mode fiber laser. Even 3 kW was remarkable just a couple years ago, now they are at 10 kW. Its main application is for military customers developing directed energy weapons, a good business for IPG these days.<br /><br />Direct diode lasers also had some buzz. For the most part, there were the usual players, Laserline being a leader, but acceptance is growing for processes like brazing and welding. <a href=";cHash=6523fdb683">Trumpf was the most notable new player</a>. <a href="">Lumics was able to boast about its "three digit" unit order </a>for 200+ W fiber-coupled diode systems--a nice win in a tough economy.<br /><br />Overall, the booth traffic may have been on the light side, but I wonder if Laser Munich may steal some market share from competing events. Even with companies tight on travel budgets, everyone still wants to be at Laser Munich, to be part of the family reunion.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 2009--The year of mid-IRnoemail@noemail.orgTom HauskenTo name one thing that stands out at an industry event may do an injustice to the many others, but mid-infrared is my pick for CLEO 2009. This is a product category that really seems to be gaining traction. From a market perspective, it has a lot going for it: many new and exciting potential applications, and many new technology solutions. Of course, application development takes time, but there are both near-term and long-term apps. A nice place to be these days.<br /><br />There was a session in the PhAST Market Forum on mid-IR environmental monitoring. There was a plenary presentation by Federico Capasso, now a professor at Harvard, on quantum cascade lasers. <a href="">Daylight Solutions</a>, <a href="">Hamamatsu</a>, <a href="">Alpes Lasers</a>, <a href="">Maxion Technologies </a>, and <a href="">AdTech Optics </a>are some of the companies that make quantum cascade lasers or products built around them. There were also companies showing 2 micron fiber lasers, such as <a href="">Advalue Photonics</a>, <a href="">IPG Photonics</a>, and <a href="">Photonics Industries</a>. And there are usual established players that make OPOs and the pumps to drive them, companies that feature coatings, and so on. Some of the companies have even been hiring through the downturn. MIRTHE, the <a href="">NSF Center on Mid-Infrared Technologies for Health and the Environment</a> headquartered at Princeton, had a booth at CLEO showing off some applications.<br /><br />Of course, there were also lots of other great new products and conference presentations. <a href="">Laser Focus World magazine</a> does a great job covering those topics, I'll leave that to them.<br /><br />The turnout at CLEO wasn't too bad, considering we are going through the biggest economic downturn in decades. Sure, companies cut back in booth size and attendees, but CLEO attendance was only in the lower end of the range of recent years, not drastically different.<br /><br />CLEO really addresses scientific and R&amp;D applications--you see lots of ultrafast lasers and fancy instrumentation. The markets for those applications are as close to flat as any today. Which is to say, really good.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, photonics up, machine vision downnoemail@noemail.orgTom HauskenThe military and security market is one of the few that's faring reasonably well these days. Compare that to machine vision, which is being hit hard with all the other capital equipment markets right now.<br /><br />Here are two companies that are pretty good proxies for the sales in those two markets: <a href="">FLIR</a> and <a href="">Cognex</a>. Both are heavily focused on imaging, but for different markets. The figure shows their revenues since 2006. I didn't adjust for some some minor acquisitions that each of them made, but it doesn't seem to matter much.<br /><br /><div><a href=""><img id="BLOGGER_PHOTO_ID_5338776690846461794" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 470px; CURSOR: hand; HEIGHT: 267px" alt="" src="" border="0" /></a></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><br /><div></div><div>FLIR's sales are hardly off it's steady upward climb. Its internal sales are much more complicated. Its government sales and commercial vision sales were up, year over year, for military and security applications. Thermography was down due to falling demand and exchange rates. </div><br /><div></div><div>Compare that to Cognex, which specializes in machine vision and automation. One would hope that machine vision is one of those markets that may still defy the recession somewhat, particularly from customers looking to improve costs during hard times. But alas, machine vision equipment is capital equipment too, and customers are trying hard to keep capital spending low for now. </div><br /><div></div><div>If the rest of the year were flat for each company, FLIR's year would end up 1% over 2008 and Cognex's year will be 30% under 2008. That's right in line with our view of their respective markets. The military sector is still going strong, but is at or near a long-term peak. We expect the manufacturing sector to be down about 30% in 2009, but sales will be better in 2010.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, bad Q1 for lasers, but not worse than expectednoemail@noemail.orgTom Hausken<a href=""></a><div><div>Half full or half empty? My read of Q1 photonics company earnings reports is that the last quarter is not worse than expected, we are at the bottom. With Q1 out of the way, now it's time to look forward.<br /><br /><div>The figure below charts some selected laser companies up through Q1, all adjusted for acquistions and so forth. If the rest of the year holds at the Q1 level, 2009 will be 30% below 2008. That's not nice, but it's about what we expected before we heard all those quarterly reports (see for example our <a href="">press release for our industrial laser report</a>), so at least it's not worse. </div><br /><img id="BLOGGER_PHOTO_ID_5341315542821999778" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 232px; TEXT-ALIGN: center" alt="" src="" border="0" /><br /><div></div><div></div><div>The next big milestone will be to see if Q2 holds at or above the Q1 level for key companies. There is already a lot of talk that we are at bottom in the recession, including sectors important to lasers, such as semiconductor equipment order data out of both <a href="">North America </a>and <a href="">Japan</a>. But we're likely to bounce along the bottom for most of 2009, to be sure. </div><br /><div>Note that I'm referring here to revenues. Net profit, cash flow, stock prices, and various ratios are important to running the company and keeping everyone happy. In fact, revenues can turn around even as profits and head counts continue to decline. That can happen for a variety of reasons, but gaining back just some of the lost revenues would bring a lot of relief. </div></div></div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, for GaN devices: growing in more ways than onenoemail@noemail.orgTom HauskenOur new market on substrates for GaN-based devices is now available. Our take on that market? That's one market segment that's growing, and we don't mean growing just crystals. We forecast merchant substrate sales growing from $280 million in 2008 to $470 million in 2013. But, native GaN has a ways to go, and 6-inch substrates are a long way off. <br /><br />The <a href="">new report from our SU analysts Bob Steele and Hank Rodeen </a>updates our earlier reports, addressing both the devices and the substrates used for shorter-wavelength LEDs, blue lasers, and widebandgap electronics. The substrates are mainly sapphire or SiC, with the GaN grown on top, although there are a number of variations and alternatives to get the GaN layer. The substrates have been mainly 2-in in diameter, but are quickly moving to 3- and 4-inch diameters. <br /><br />The rapid migration stops there, however, in part because of the difficulty to work with GaN but also the manufacturing costs involved in the specific devices fabricated in GaN. In widebandgap electronics, for example, Cree points out that the substrate technology will be ready before the volumes will be. And the electronic devices are relatively large, but not large and pricey enough to merit the jump to larger substrates. <br /><br />And as for bulk GaN substrates--well--they are simply too difficult to grow and expensive to use for the time being. Inexpensive bulk GaN would be ideal for devices based on GaN, but nature provides alternatives today that are good enough at a lot less cost, and still getting cheaper. Without that volume, bulk GaN remains perpetually behind, or at least far enough behind to be unimportant to our 5-year forecast.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, tipping point: Lightfair becomes LED Fairnoemail@noemail.orgTom HauskenMy colleagues got back from <a href="">Lightfair</a> in New York last week raving about the big shift to LED products at this year's show. This is important because a first, critical step for LED lighting is to generate interest among lighting designers. And this was the year that exhibitors at Lightfair decided that they need to show off their LED products to get noticed.<br /><br />Vrinda Bhandarkar, our LED lighting market expert, notes that it takes events like this to create the interest, and then the lighting designers can start specifying products they want. These designers write the specs for big projects, like commercial buildings and such. Those projects help to drive LED volumes up and prices down enough to reach even wider markets.<br /><br />And for once, the standards won't be holding the market back. Finalized last year were the standards on solid-state lighting definitions (IES RP-16 (a)), photometric testing (IES LM-79), lumen depreciation testing (IES LM-80), and chromaticity (ANSI C78.377).<br /><br />If you want more detail on Lightfair, see the great coverage in the <a href="">daily articles in LEDs Magazine</a>.<br /><br />Oh, and I'll make a shameless plug here for Vrinda's most recent market reports: LED replacement lamps (2009), <a href="">LED Lighting Fixtures </a>(2009), and <a href="">HB-LEDs for Lighting </a>(2008). The replacement lamp report is just coming out--we'll comment on that soon.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, thawed spots in small company financingnoemail@noemail.orgTom HauskenThe venture finance folks have been saying that money for start-ups is tight, and especially hard for brand new ventures. So it's heartening to hear about companies getting any kind of funding in a time like this. Maybe the financing hasn't thawed, but it's not completely frozen either.<br /><br />If you dig around, the stories are there. In April, <a href="">Powerlase got a chunk of money </a>for its business in lasers. In March, <a href="">One-Chip Photonics received nearly $20 million </a>that was promised to them for meeting a milestone in photonic integrated circuits. In January, <a href="">nLight got about $11 million </a>for its business in lasers and laser components. In December, <a href="">Pixim received $13 million in funding </a>for its business in image sensors for security cameras. In November, <a href="">Raydiance got $20 million</a> for its work in ultrafast lasers. The biomedical sector continues to do particularly well. Recently three bio-optics startups received a total of $38 million in financing: <a href=",-AOptix,-and-BiOptix-raise-">AOptix Technologies, BiOptix Diagnostics, and LensX Lasers </a>(putting an x in your company name is evidently the new fashion). And there are more.<br /><br />The companies are quick to boast that they are still a good investment, but there is always more to the story, to be sure. For one thing, companies don't disclose the terms of the deals. And some have asked me, if they are doing so well, why do they need the money?<br /><br />But the investors are putting what money they have into the companies they believe in the most. That's worth noticing.<br /><br />By the way, if you want to read some interesting comments from a VC's perspective, see Larry Marshall's <a href="">VC View blog</a> at the Laser Focus World web site. For example, here's "<a href="">What VC's actually do in a down market.</a>"<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, new photonics application long overduenoemail@noemail.orgTom Hausken<div><a href=""></a>I've been hearing for years that there's a big future for breathalysers and saliva testers. It's a huge medical opportunity that the field has only begun to explore. So the new TB Breathalyser from <a href="">Rapid Biosensor Systems </a>(RBS) is just the thing I've been waiting for.</div><div><br /></div><div>The medical diagnostics field is one in great need for improvement. Tests are slow, expensive, and often inaccurate. A classic example is the 100 year old <a href="">Mantoux test for tuberculosis</a>. After a few days, if the test produces swelling greater than so many millimeters, it's a positive. Less, and it's a negative. It was satisfactory a century ago when TB was rampant. Today though, the false positives can exceed the true positives. And, the results vary with all sorts of factors.<br /></div><div>I know all this because I was a false positive about 15 years ago. I did some research and found out that the test is almost worthless, and one of my doctors later admitted so much to me. But they still preferred to rely on it, maybe just because it was the "standard" test.</div><div><br /></div><div>RBS has a breakthrough that could bring TB testing to the 21st century with its breathalyser. It basically uses a diode laser and fluorescence to make a determination within minutes. And, it's selective against other factors.</div><div><br /></div><div><br /></div><p align="left"><img id="BLOGGER_PHOTO_ID_5332506179858877682" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 178px; CURSOR: hand; HEIGHT: 159px; TEXT-ALIGN: center" alt="" src="" border="0" /></p><div align="center"><span style="font-size:78%;">Source: RBS</span><br /></div><div><br /></div><br /><div>It's not often that I get energized about a new product. After all, there are lots of trade press articles and conference presentations for that. And I tend to think that there are not really many new things under the sun. But I'll make an exception for the RBS breathalyser.</div><br /><div>Oh, and by the way: I am not connected, financially or otherwise, to RBS.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,, Part 2--Is Oclaro consolidation or redistribution?noemail@noemail.orgTom HauskenSo Bookham and Avanex finally merged, <a href="">forming Oclaro</a>. This is a sign that the industry is consolidating, right? Reducing the number of suppliers by one, yes. But it may just amount to moving market share around, and not necessarily to fewer players.<br /><br />Bookham and Avanex don't have greatly overlapping product lines. And the new management claims it will continue manufacturing parts the way it has been. That is, it will keep the Bookham fabs and its Shenzhen facility but will also keep using Fabrinet as Avanex did.<br /><br />The company points out that now they have a wider range of products to compete against bigger competitors, like JDS Uniphase and Finisar. I've never fully believed the one-stop-shop argument though. Of course, Cisco and any other customer would like to reduce its list of suppliers. But the customers also want suppliers to be competitive, and they want the best products they can find, provided that the supplier is qualified. Grouping products into one company doesn't necessarily make Oclaro more competitive in those products.<br /><br /><br />There will certainly be some synergies gained from consolidating various functions, such as procurement and corporate overhead. The figure shows Oclaro's vision of the gains it can make in gross margin from the merger. One of the bigger synergies would be the use of the Bookham fabs to supply chips for Avanex products. This is a change in market share, shifting sales from the former suppliers (such as JDS Uniphase) to Oclaro, possibly improving Oclaro's factory utilization. It might also steal some margin from contract manufacturers.<br /><br /><img id="BLOGGER_PHOTO_ID_5330545430298187138" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 250px; TEXT-ALIGN: center" alt="" src="" border="0" /><br /><span style="font-size:85%;">Source: Oclaro</span><br /><br /><br />That may turn out real good for Oclaro, although it doesn't necessarily constitute consolidation if it just spreads market share more evenly among some of the bigger players. Without knowing how it plays out product by product, it could actually increase competition and reduce consolidation in some segments.<br /><br /><a href="">Oclaro's CEO Alain Couder notes </a>that the company also gets to spread Bookham's credit line over a new balance sheet that is low in debt and with a nice chunk of cash. That's never a bad thing, for Oclaro. And despite claims to the contrary, the management may make more moves once the excitement has died down. Anything that tips the scales dramatically in Oclaro's favor would essentially increase consolidation, even if the number of suppliers is nominally the same.<br /><br />This may turn out real good for Oclaro. But I wouldn't call it industry-scale consolidation. Not yet.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, thawing in the opto end markets?noemail@noemail.orgTom HauskenThere are signs that some markets for optoelectronic products are thawing a little bit. Foundries in Taiwan have hired back workers. Large-area flat panel display production in Taiwan was up in March over the previous month. <a href="">Sales of flat panel TVs and video recorders were up in Japan</a>. Memory chip prices are up and <a href="">Samsung, for one, expects improving demand </a>for memory chips this quarter. <a href=";id=39366">Hon Hai, a major contract manufacturer, is hiring</a> in Taiwan, China, and the Czech Republic, with expansion plans in Mexico, Turkey, Russia, and elsewhere. Even equipment supplier <a href="">EV Group announced that it will add a shift </a>to accommodate demand for through-silicon via (TSV) and nanolithography tools. Compound semiconductor supplier <a href="">Triquint has also announced a bounce </a>as inventory burns off.<br /><br />At the least, this is an indication that inventories are now worked out of the supply chain. But, it's interesting that a lot of the news comes from one place: Taiwan.<br /><br />Dominique Numakura of DKN Research Group notes several reasons for Taiwan's thaw in his recent <a href=";id=39261">newsletter</a>. First, it's based on two successful products that are emerging now, just as the recession hurts sales for just about everything else. Those products are the netbook computer and the smart phone. Another reason is that spillover of demand from mainland China's stimulus package has driven up demand for large screen TVs supplied from Taiwan. Numakura also suggests that Taiwan has a more urgent and proactive approach to the downturn, more aggressively seeking out opportunities than Japanese and American counterparts that take a more reactionary approach.<br /><br />It helps to note too that the semiconductor downturn dates all the way to 2007 already, so improvement is well overdue.<br /><br />Any thawing will be good news for anyone making optoelectronic chips for common appliances: things like image sensors, displays, LEDs, etc.<br /><br />There is still plenty of bad news coming out every day. For example, <a href=";id=39379">iSuppli doesn't buy the hype</a> about a memory chip recovery, arguing that the supply will still exceed the growth in demand. And for the most part, the demand for fab tools and other manufacturing equipment remains frozen solid. But the chip demand has to improve before anything else can.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, disruptive application for widebandgap electronicsnoemail@noemail.orgTom HauskenIt's not often that I call a new development "disruptive," but there is one application of widebandgap semiconductors that has that potential. Here, I'm referring to the definition of disruptive as a technology that offers lower performance initially, but fills a market niche that the conventional technology is not filling. The market for the disruptive technology eventually exceeds the conventional one, sometimes completely displacing it.<br /><br />The application I have in mind is for SiC or GaN devices for power management devices in hybrid and electric vehicles. Their use in these vehicles is not news, but it's easy to overlook the transformation that this technology can help bring to the auto industry.<br /><br />Widebandgap devices can run hotter, switch faster, and are more efficient that equivalent devices based on silicon. They are more expensive too, but efficiency is very important in the power circuits in hybrid vehicles, and anyway, the price is coming down as volume increases. SiC devices are currently the market favorite, but GaN may be able to play here too.<br /><br />What is really exciting is how the electric vehicle can truly transform our definition of a car. Once you eliminate the engine, transmission, and drive train, you can do many things very differently. (See, for example, this <a href="">interview in Tech-On! with Yukitsugu Hirota, from the R&amp;D Center of Calsonic Kansei</a>.<br /><br />It reminds me of the history of the electric motor, in the 1800s. The first thing that innovators did was to replace water wheels with large motors, driving everything off of a single, long shaft. This is what they knew how to do, since they were used to water wheels, not motors. Then they began to break up the workload into smaller pieces, each driven by its own motor. This process took time--about 30 years, in fact.<br /><br />It's not difficult to see the same thing happening to the auto industry. Internal combustion engines won't go away, and electric golf carts are nothing new. But the auto industry will transform over the next few decades to a different type of vehicle, and it will need devices based on SiC and GaN.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, the new US military spending proposal means for the laser industrynoemail@noemail.orgTom HauskenU.S. Secretary of Defense Robert Gates announced a proposal for sweeping changes to U.S. military spending, including cancelation of the second airborne laser, and moving the existing program to an R&amp;D effort. What does this mean for the laser industry?<br /><br />The short answer is that it is way too soon to tell. The high-profile airborne laser program has been a dream for decades, but it has been too ambitious for its own good. In December 2007, a <a href="">U.S. Defense Science Advisory Board task force recommended that military agencies look for smaller, more practical applications for laser weapon projects</a>, rather than for giant, megawatt-class applications that take a longer time to prove in. This favors solid-state and fiber lasers for tactical operations over chemical lasers and other exotic technologies.<br /><br />There are dozens of military programs that involve lasers, even high-power lasers. Some are futuristic, like the airborne laser, and some have been in use for years, such as rangefinders.<br /><br />Moreover, Gate's dramatic changes to the budget have to be approved by Congress, and that won't be easy. Members will fight hard to save jobs in their home districts.<br /><br />By the way, it's interesting to see the trend in U.S. military spending. The figure shows spending by fiscal year, including supplemental funding. Military spending by the U.S. and other countries is likely near a peak, with tighter spending as early as this year.<br /><br /><a href=""><img id="BLOGGER_PHOTO_ID_5321992550794797586" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 251px" alt="" src="" border="0" /></a><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><span style="font-size:78%;"><span style="font-size:85%;">Figure source: U.S. Congressional Research Service and <em>Defense News</em> research, as reported in <em>Defense News,</em> October 13, 2008.</span> </span><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, fear factor in a capital equipment marketnoemail@noemail.orgTom HauskenI hear a lot of talk about fear these days. "It's just fear that's driving the market." "If people could get over their fear..." I don't find such talk very helpful, and here's why.<br /><br />We work in an industry that is mostly driven by capital equipment purchases. Big purchases have to be financed. You can think of it this way: the customers borrow money to buy the equipment, and pay it off with the revenues they will get in the future. Even if they use cash to buy the equipment, they could have used the cash for something else (like generating interest itself), so they have to cover that opportunity cost.<br /><br />In times like these, the customers are no dummies--their confidence in the future has dropped enough that they delay buying new capital equipment. Think about it: are you looking for a new car right now? Or are you thinking of a used car, or maybe keeping the one you have a little longer? Is that fear?<br /><br />No, fear is too strong a word. It connotes panic. From my discussions with customers, at the financial level, they aren't in a panic. They aren't reacting out of emotion. They have a reasoned, albeit cautious, approach. But all these microdecisions add up, and that hurts suppliers.<br /><br />What will bring back the confidence to buy new capital equipment? Inexpensive and available credit helps. Rising demand in the end-user markets helps, such as that stimulated by government spending. New product innovation helps, by motivating industrial customers to replace inefficient equipment with new equipment. Finally, understanding how the customer thinks--and the customers' customers--helps.<br /><br />Fear does indeed drive speculative markets like the stock market. Fear and greed. But not capital equipment purchases.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, we forecast 2009 even with low visibilitynoemail@noemail.orgTom HauskenNow that our laser market report is out, it's helpful to explain how we can do forecasts for 2009 when the visibility is only about 3 months. I won't go into all the detail about forecasting. I want to focus on how we used quarterly data to narrow the range of forecasts.<br /><div></div><br /><div>We have a lot of information about suppliers and customers for quarters up to December, 2008. What's striking is how 2008 was generally ahead of 2007, even though the last quarter was bad for most everyone. This varies from sector to sector, but for the most part it's true.</div><br /><div></div><a href=""><img id="BLOGGER_PHOTO_ID_5318017218747342370" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 232px" alt="" src="" border="0" /></a><br /><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div>The figure shows actual laser revenues for several selected companies through Q4 2008. It then shows what happens if all the quarters in 2009 are reset to a level near or below Q4 2008. As good as 2008 was overall, 2009 comes out well below that. Continuing the decline into Q1 2009, but no further, yields a decline of 32% for 2009 over 2008. It turns out that this supplier-side approach also matches our projections for 2009 in general from the demand side, aggregating all the different segments together.</div><div></div><br /><div>What's useful about this approach is not that it predicts each quarter (it doesn't), but that it narrows the range of plausible projections. Of course, anything is possible in 2009, but running simple scenarios like this helps to test a hypothesis. </div><br /><div></div><div>It also allows us to update the range of possible outcomes as the year proceeds. By Q4 2009, the error bars for 2009 will be much narrower, while the focus shifts to 2010.</div><div></div><br /><div>It also illustrates the range of outcomes from, say, a recovery, or of a price war. Either one could move the overall 2009 revenues up or down, especially if it happens early in the year. A recovery late in the year won't affect the overall 2009 revenues as much.</div><br /><div></div><div>This is an example how we use an analytical tool, and this one is especially useful when the market is in a period of rapid change, as it is today.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, in the laser market, Part 1--How much is there?noemail@noemail.orgTom HauskenIt seems like I hear about consolidation at every meeting I go to, whether in good times or bad. And I've come to the conclusion that everybody means something different when they talk about it. I thought that maybe it's time to present some facts, so here goes.<br /><div></div><br /><div>Over the last year I've been filling in a vast spreadsheet for the <a href="">Laser Focus market survey</a> and for our <a href="">industrial laser forecast</a>. It's a lot of work, but I'm able to refine it a little at a time. One of the things that I was able to find out was the amount of consolidation in the industrial laser market. (By industrial lasers we mostly include everything but diode lasers for communications and DVDs.) </div><div></div><br /><div>What I found is that the top 10 industrial laser suppliers get about 86% of the revenues. These are companies like Coherent, TRUMPF, Rofin-Sinar, Cymer, and so on The next 10 get about 10% of the revenues. And all those dozens of little companies you see at Photonics West and Laser Munich? They make less than 4%. </div><div></div><div></div><a href=""><img id="BLOGGER_PHOTO_ID_5316926151630440114" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 256px" alt="" src="" border="0" /></a><br /><div></div><br /><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div>(By the way, I tried as much as possible to strip out everythng but the laser revenues. And, the exact share varies a little depending on different definitions that I need to apply. But the basic ratio doesn't seem to change much.) </div><div></div><br /><div>Many of the little companies do quite nicely, though, or at least they do in normal times. They may supply into close partners, like military contractors, or they sell other products or get some system revenues. Some operate very lean.</div><br /><div></div><div>I make that point because I don't assume that just because they are small that they are necessarily more vulnerable. Certainly the recession will upset things. But consolidation is a lot more complicated than that. The laser market is probably too fragmented to lump together like this. </div><div></div><br /><div>But that's for a future installment. </div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, new laser forecast--get used to cyclesnoemail@noemail.orgTom HauskenOur new <a href="">forecast for the fiber laser and industrial laser market</a> is now out. It should be no surprise that 2009 isn't going to be pretty. We now expect the industrial laser market to end up 32% below 2008, if sales continue to follow their current levels. This puts that market at $1.7 billion, about the level of 2004. Fiber laser suppliers will see a shallower decline of 24% to $230 million, and will experience a faster recovery than other types of lasers. But if the recession deepens or if suppliers engage in a desperate price war, 2009 sales will fall further.<br /><br />In other words, the days of a nearly unbroken string of growth for both fiber lasers and industrial lasers is over. For the next several years the business will be much more cyclic, like the capital equipment market that it is. We still expect the envelope of the laser market to expand over time, but the swings of the cycles will be much more apparent.<br /><br />By the way, this forecast only reports on industrial lasers that could be available to fiber lasers. It excludes most diode lasers, and also big excimer lasers for lithography. So, it's best to compare the numbers only to our previous reports.<br /><br />In fact, if you have questions, send me an email (<a href=""></a>) and I'll try to explain how we came up with the numbers.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, plea to maintain opto pricesnoemail@noemail.orgTom HauskenHow much will price erosion destroy opto revenues this year? That's one of the great unknowns in forecasting the market for 2009. Will suppliers behave themselves and hold prices above their costs? Or will they sell products at any price just to get cash flow for another quarter?<br /><br />It's bad enough that the demand for components is sharply down as a result of the recession. Cutting prices only makes it worse. It's not like a company can brag about having market share if they lose money on every product going out the door. And in most of the opto market, high prices aren't holding back--the worldwide recession is to blame for that.<br /><br />This is what has happened for years to several companies in telecom components. Some were selling below their cost. Consistently. And it spoiled the market for everybody.<br /><br />I have to admit that I would be the first to argue that, in the end, the market forces ultimately prevail. That is, if there are enough competitors and the situation is desperate enough, suppliers will cut and run to get any business at all. Asking suppliers to remain calm and rational is not likely to make a difference.<br /><br />And if fact, since last fall I've heard of discounts of as deep as 30% and 50% on standard prices. And then there's the used equipment market. What's a supplier to do when it is competing against its own products on the gray (used equipment) market?<br /><br />Just the same, I hope that suppliers can look longer term and stick to a sustainable business strategy. It's going to be a long, cold recession and companies will be better off if they huddle together for warmth than if they wander off alone.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, forecasting matters in a hurricanenoemail@noemail.orgTom HauskenSomeone asked the other day, what good is market analysis now, especially if you couldn't foresee the global recession before it hit?<br /><br />It's a bit like asking, "What's the point of weather forecasting when the hurricane is already here?"<br /><br />For those who won't last the hurricane intact, it may not matter. But for those who think they will survive, they want to know how bad things are, how to prioritize, where the bargains may be, and where the new opportunities will be afterward.<br /><br />Companies are making hard decisions, and they come to us to get another opinion , as an extension to their market development, for financial due diligence, or for the "satellite view" of the landscape.<br /><br />Even in better times, conditions can change rapidly. There are new demands from customers, new technology solutions, and new competitors. Running a business is a perpetual challenge.<br /><br />That never changes.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, LEDs are doing better than industrial lasersnoemail@noemail.orgTom HauskenThe difference between the high-brightness LED and the industrial laser markets couldn't be wider right now. My colleague, Bob Steele, forecasts that LED revenues will decline 5% in 2009. I'm forecasting that industrial laser sales will drop by over 30%. And that's if 2009 follows the current trend. Some sectors will be worse.<br /><br />Why so different?<br /><br />It turns out that a lot of LEDs are sold into consumer products like mobile phones, displays, that sort of thing. Sales are down, but these products aren't out of reach for people who still have jobs.<br />Industrial lasers, on the other hand, are expensive capital items that are usually used to make something else. When factories are idle, or closing, you aren't likely to need much new capital equipment. It is a good time to upgrade, but the recession leaves most companies short of spare cash, so capital spending gets cut. And we don't count consumer applications like lasers for laser pointers and DVDs in this category.<br /><br />Think about it: you are still buying groceries, and maybe even replacing some of your electronic appliances. But a lot fewer people are buying new cars these days.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, systems good, fab tools not so goodnoemail@noemail.orgTom HauskenIn my search for anything resembling a good market out there, look what I found. The figure shows the revenues for three biomedical equipment vendors over the last three years. I picked them because they are fairly representative for that business. Most opto customers show declines at lesat in the last quarter, and many declined over most of the year. But not these. Combined, they had about 15% growth in 2008.<br /><br /><br /><a href=""><img id="BLOGGER_PHOTO_ID_5314638028783032914" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 211px" alt="" src="" border="0" /></a><br /><br /><br /><br /><br /><br /><br /><br /><a href=""></a><br /><a href=""></a><br /><a href=""></a><br /><br /><br />Contrast that with the revenues of, say, semiconductor tool vendors like KLA or ESI, or laser manufacturer Cymer. Cymer makes million dollar excimer lasers for litho tools. If you take out service revenues, their system sales have fallen 44% between 2006 and 2008.<br /><br /><br /><div><a href=""><img id="BLOGGER_PHOTO_ID_5314632807264520226" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 330px; CURSOR: hand; HEIGHT: 185px" alt="" src="" border="0" /></a><br /><br /></div><br /><br /><br /><br /><div><br /></div><br /><br /><br /><div></div><br /><br /><div>Cymer's lost some share to Gigaphoton, but the real problem is that the chip makers just aren't buying new litho tools these days.</div><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, a 5% decline in the market looks greatnoemail@noemail.orgTom HauskenYou know the times are tough when a market is forecast to decline 5% and people are in a good mood. That's how it seemed at our SIL event this year. SIL is our <a href="">Strategies in Light </a>conference and expo for high-brightnesss LEDs. Even in the midst of the biggest recession in decades we broke our previous record and had over 2,000 total attendees.<br /><br />My colleague Bob Steele forecast that the HB-LED market will drop 5% in 2009, mainly due to falling sales in end-use applications in mobile phones (a first for that business), automobiles, and LED video screen. Actually, it will drop more like 10% if you take out the emerging application of back lights for LCD TVs. That's a promising application, but restricted to some vertically-integrated players, so it's very hard to break into.<br /><br />Of course, as with any forecast right now, this one is looking ahead based on what we know now. Actual results may vary. We'll keep you posted.<br /><br />It's our 10th year doing SIL, and this year it had 6 workshops and 2 conference tracks: one on HB-LEDs and one on solid-state lighting. Another fellow analyst Vrinda Bhandarkar ran the new lighting track, bringing in the people who do lighting fixture designs, kind of taking things to a new level for our event.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, usnoemail@noemail.orgTom HauskenWhat do you think? Drop me a note, at <a href=""></a>. We are located in Mountain View, California. <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 500

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