Photonics Overview

Tom Hausken, PhDSenior Industry Advisor

4 December 2014

December 20142/28

Outline

• Photonics market trends

• Initiatives & roadmaps

December 20143/28

Global economy:  weak & uneven recovery

Source: World Bank (2013)

GDP AnnualGrowth

at Market Prices(%)

A weak and uneven global recovery continues. Threat of deflation.2015 will look approximately the same as 2014.

Source: IMF World Economic Outlook (October 2014).

December 20144/284

U.S. growth is modest but steady

2% annual growth continues to be normal.

Debt/credit slowly resolving.

Long‐term unemployment still high.

Oil prices are low. 

Source: U.S. Bureau of Economic Analysis (November 2013).U.S. real q‐over‐q (chained, annualized, seasonally‐adjusted) percent GDP growth. 

GDP Growth(%)

1.6%             2.3%            2.2%

Price of US$ in Foreign Currency

U.S. Unemployment Rate (%)

Average daily interbank rates.Source: OANDA.

December 20145/285

U.S. venture investment slowing?

Total U.S.Venture CapitalInvestment

($B)

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTreeReport, Data: Thompson Reuters (October 2014)

Total U.S.Venture CapitalInvestment

($B)

December 20146/28

Industrial tools

Source: (Top left) Company reports.  (Bottom right) Gardner Research, World Machine‐Tool Output & Consumption Survey (Feb 2014).

Revenues

December 20147/28

Imaging has mixed outlook

Sources:  (Upper left) OIDA, from company filings.  (Bottom right) U.S. government budget documents.  All values are outlays for fiscal years.  2014 represents estimated.  2015‐2019 represent as requested.

Revenues(US$M)

U.S. Dept. of DefenseProcurement Budget

($B)

December 20148/28

PV revenues & prices

Revenues and 

Net Income($B)

Source: (Top left)  OIDA (2014) from company filings.  Includes all segment revenues.  (Bottom right) ITRPV 2014 Roadmap, SEMI website.

December 20149/28

U.S. DOE photovoltaic funding

Appropriations($M)

Source: U.S. government budget documents.  All values represent fiscal years.  2014E is enacted budget.  2015R is requested budget.

However, PV R&D funding is declining and reassigned to other priorities as 

module prices meet targets.

The PV R&D category was redefined in FY2009 and for FY2013, giving a misleading 

appearance of growth or decline.

December 201410/28

Selected U.S. suppliers

Source: OIDA (2014)

SupplierRevenues

($US Billions)

December 201411/28

Selected U.S. supplier forecast

Source: OIDA (2014).

Selected U.S.Supplier Revenues

($US Billions)

13%            8%             7% 6% 6%

December 201412/28

Supplier Consolidation:

2014 Changes in Ownership

Acquiring Company Acquiree Date

Oclaro  II‐VI (amplifiers and microoptics) November 2013

Ametek Creaform November

Excelitas Technologies Lumen Dynamics November

Gooch & Housego Excelitas Technologies Corp. December 

JDSU Network Instruments December

Oxford Instruments Andor Technology December

Carl Zeiss Meditec Aaren Scientific January 2014

Finisar u2t Photonics January

JDSU Time‐Bandwidth Products January

Horiba Photon Technology International February

Rofin‐Sinar FiLaser February

GSI Group Jadak Technologies  February

TSI  Enwave Optronics February

Amplitude Systemes Continuum (from GSI Group) March

GSI Group Jadak Technologies March

CyberOptics Laser Design Inc. (LDI) March

ON Semiconductor Truesense Imaging April

Ametek Zygo April

Vishay Intertechnology Capella Microsystems July 

Bruker Vutara July 

Hexatronic Scandanavia Proximion August

e2v technologies Anafocus August

CMOSIS AWAIBA August

Finisar LightSmyth September

Newport V‐Gen September 

Fibercore Fibertronix September

JML Optical Industries Harold Johnson Optical Labs (HJOL) October

Thorlabs Corning (QCL laser business) October 2014

December 201413/28

Supplier “Un‐consolidation”

Splitting Company Acquiree Date

JDSU Test equipment vs. components September

Philips Health technology vs. lighting September

IBM Lenovo (servers) September

IBM Global Foundries (microelectronics) October

HP Hardware vs. services October

Agilent Technologies Keysight (electronic test equipment) November

Alcatel‐Lucent Submarine division 1H 2015

Closures:Heliovolt (Feb)DigitalOptics (March)3S Photonics (July)GT Advanced Technologies—GTAT (Oct)

December 201414/28

Is optics consolidating or not?

Fewer Companies Same number of companies

Many companies do M&A to integrate vertically or horizontally, access wider markets, and then “manage the complexity.”

Optics is fundamentally fragmented and customized, favoring a “local touch.”  Consolidating manufacturing is difficult.

Mom & pop businesses want to cash in.

Start‐up companies are necessary to innovate, especially in new directions.

High capital costs raise barriers to entry

Cost of capital is less in some regions

Answer: In mature segments, yes.  Overall, no.

December 201415/28

NPI estimate of U.S. photonics suppliers

U.S. Optics & Photonics Metrics

Optical communications 

suppliers

Other core photonics suppliers

Total

No. of U.S. companies 320 823 901

Annual revenues (US) $9.5 B $35.9 B $45.4 B

Employees (US) 24,500 150,000 174,500

Average sales/employee n/a $240,000 n/a

How defined Located in U.S. Headquartered in U.S.

Source: Joint effort by OSA and SPIE for the National Photonics Initiative.  Core Photonics Suppliers” were defined as those that have exhibited at one or more of 32 events worldwide during the past 2‐3 years and that make and ship an optics/photonics component products.

December 201416/28

US core photonics suppliers by revenues

90% of all companies combined drive <15% of U.S. photonics revenues (<$50M/company)

Source: Joint effort by OSA and SPIE for the National Photonics Initiative.  Data is for non‐communications companies only.

December 201417/28

Outline

• Photonics market trends

• Initiatives & roadmaps

December 201418/28

U.S. govt funding for photonics

Source: U.S. government agency budget documents (FY2014) and correspondence with agency staff.

Program FY2012 Funding ($M)

Dept. of Defense

Air Force & MDA (mostly DEW) 343

DARPA 197

Army (night vision) 151

DOD subtotal 691 691

Dept. of Energy (excl. fusion energy)

PV 285

LEDs 26

DOE subtotal 311 311

NSF 100

NIST [TBD]

Total >1,102

December 201419/28

Govt spending on R&D

Distributionof  Public

R&D Funding

Source: High Level Expert Group on Key Enabling Technologies Final Report, European Commission (June 2011).  *Asterisk indicates values from the NSF report from the previous chart.

December 201420/28

A hierarchy of national needs

Source: OIDA response to Air Force Research Laboratory DPA Title III RFI‐12‐19‐PKM (2012).

National security needsfor specific

components & equipment

CompetitiveU.S. communications

vendors

A state‐of‐the‐art communications infrastructurethat enables a

competitive U.S. economy

December 201421/28

Integrated photonics as a critical technologyWhite House PCAST report (2011)

“…Individual firms cannot justify the level of investment needed to fully develop the technology....”“…Individual firms cannot justify the level of investment needed to fully develop the technology....”

National Research Council report (2013)

Accessible Fabrication Facilities for Researchers. Determine the need of academic researchers and small business innovators for access to affordable domestic fabrication capabilities to advance the research, development, manufacture, and assembly of complex integrated photonic-electronic devices.

Accessible Fabrication Facilities for Researchers. Determine the need of academic researchers and small business innovators for access to affordable domestic fabrication capabilities to advance the research, development, manufacture, and assembly of complex integrated photonic-electronic devices.

NSTC Fast‐Track Action Committee report (2014)

National Photonics Initiative white paper (2013)

December 201422/28

What kind of fab?

The ideal facility would leverage a large‐volume CMOS fab, ideally with capability already demonstrated in integrated photonics.

Source: OIDA Workshop Report: NSF Workshop on U.S.‐based Si Photonics Foundry (OIDA, February 2014)

December 201423/28

Assembly vs. fab costs

Source: OIDA Roadmap Report on Funding of Integrated Photonics (June 2014).  

December 201424/28

NNMI

Source:  Capturing a Domestic Competitive Advantage in Advanced Manufacturing (Executive Office of the President, PCAST) July 2012. 

The NNMI institutes are designed to fill a gap in government and private sector funding.

December 201425/28

NIST AMTech roadmapping grantsAdvanced Manufacturing Technology Consortia (AMTech)

iNEMI‐MIT collaboration:Jim McElroy—Exec. DirectorBob Pfahl—Principal InvestigatorLionel Kimerling—Principal Investigator

University of Rochester, CEIS: Paul Ballantine—CEIS Deputy DirectorNew York PhotonicsRochester Inst. Of Technology (RIT)

December 201426/28

National Photonics Initiative

The Optical SocietyProud supporter of theInternational Year of Light.

Announcing OSA Industry Development AssociatesA new name for a more comprehensive industry program