Photonics And The Defense Market: Reasons For Optimism

By Ron Grunsby, editor

Defense spending is a topic that has caused much anxiety during conversations I have had at trade shows in recent years. While the future of this area is still uncertain due to looming defense cuts, it does not appear to be as bleak as it is often made out to be, according to industry executives speaking at SPIE Photonics West sessions last week.

During his "Government Initiatives and Opportunities for Growth in Photonics" presentation Thursday morning, SPIE CEO and Executive Director Eugene Arthurs said optics and photonics may fare better than other areas in the defense picture because of the rising use of UAVs, improved reconnaissance, hyperspectral imaging, optical targeting, and anti-missile systems. “There are also panoramic night vision goggles and Lockheed Martin laser defense,” he added. “You have heard about the Iron Dome in Israel [a mobile air defense system designed to destroy short-range rockets and artillery shells]. The next step is the Light Dome.” The Light Dome is expected to track and shoot down incoming UAVs or missiles.

According to Arthurs, global defense spending in 2012 was around $1.7 trillion. U.S. defense spending is about 41% of the total and accounts for about 20% of the U.S. federal budget. While the U.S. is decreasing defense spending, other countries are increasing it.

“Israel is increasing its defense budget by 6% and Turkey by 7%,” David Marks, CEO, Qioptiq Photonics, said at Wednesday’s “Executive Perspectives on the World of Optics and Photonics” forum. “India’s increase is quite dramatic. The U.S. and U.K. are absolutely cutting back, but there are other parts of the world that are increasing.” Qioptiq is a $350 million company with 50% of its business in defense optics.

While Edmund Optics is not a military contractor, it does supply optics to many of them. “We fully expected that we could see a big decline in military, but it has not been nearly as much as we thought,” Robert Edmund, CEO and chairman of the board, said during the forum. “What we're hearing from our customers is that a lot of countries around the world have woken up to the idea that the U.S. is not necessarily covering their backs.”

Dennis Werth, senior VP, Newport Corporation, says that the trend has been down for photonics in the aerospace and defense market over the last seven or eight years. “We're hoping we’ve reached the bottom,” he told forum attendees. “There's activity at the front end of new programs, but everybody is waiting for some of them to get traction and move up.”

Despite the optimism, the pending March 1 U.S. defense budget cuts are leading to troubling projections. Arthurs said he spoke to one company that does about $40 million in military sales but indicated it may lose as much as $20 million of that to the cuts. Plus, the Pentagon is trying to consolidate the supply chain, which could freeze out some companies currently doing business in the defense market.

What are your thoughts on the state of the defense market in the photonics industry? What will the future hold? Feel free to comment below.