The Who, What, And Where Behind Photonics' Explosive Growth

By John Oncea, Editor

The photonics market is growing at a tremendous rate from China, Japan, and South Korea to The Netherlands To Orlando. In this two-part look at photonics’ explosive growth, let's figure out why.

According to SkyQuest Technology Consulting, the global photonics market is expected to reach a total revenue of $1.198 trillion by 2028 due to the efficiency, low power consumption, and small size of photonic devices. Another factor fueling photonics’ growth is the demand for optical component products from various industries including biosciences, manufacturing, electrical, communications technology, solar panels, cybersecurity, and defense.

The use of silicon photonics to increase transmission rate will have a direct impact on the semiconductor sector and the rising number of medical applications – as well as its application in diagnostic imaging – also will contribute to the expected expansion of the photonics market over the next several years.

Straits Research agrees (mostly) with the SkyQuest findings, estimating the global photonics market to reach an expected value of $1.100 billion* by 2030, growing at a CAGR of 7.3%. Straits forecasts silicon-based photonics applications are the key to the growth of the market as well so let’s drill down on it.

Silicon-Based Photonics: A Case Study

“In telecommunications and data center applications,” Straits writes, “hybrid silicon lasers (silicon and group III-V semiconductor) are employed, benefiting them from III-V semiconductor materials’ light-emitting capabilities.”

Silicon photonics is growing because it offers a clear advantage over electric conductors used in semiconductors and technology is expected to push transmission speeds up to 100 Gbps. Straits reports that IBM, Intel, Kothura, and other companies have already made breakthroughs using the technology.

Also responsible for creating this lucrative market is the increasing adoption of LiDAR scanners in medical and industrial applications. “For instance,” writes Straits, “in 2020, SiLC collaborated with Varroc Lighting Systems to offer its FMCW LiDAR into the latter's headlamp. Moreover, the silicon photonic LiDAR from Yokohama University integrated a chip's OPA scanning, lasers, modulator, and photodetectors.”

Top this all off with National Institute of Standards and Technology (NIST) researchers identifying a class of silicon photonic sensors that may be effective in high-radiation environments because of their ability to withstand high radiation doses and it’s easy to see why the market is expected to invest heavily in the mass adoption of this technology.

There will be growing pains, of course, primarily in the form of developing laser technology small enough for use in electronic devices. Another stumbling block is that the market itself is highly fragmented because of high equipment and R&D costs resulting in many small- and midsized end users in various sectors being unable to afford photonics-based equipment.

And, while many venture capitalists are highly optimistic about the adoption and expansion of the technology, they believe technology may take much more time than accepted to gain its full potential and haven’t invested as much as expected.

Another restraining factor to the growth of the photonics market is, according to Fortune Business Insights, stringent environmental regulations. “Though most of the products are ecologically safe, a few compounds used to improve performance are deemed toxic to the environment,” write Fortune Business Insight. “Toxic chemicals, such as arsenic oxide and boron oxide, are regulated by REACH and the RoHS.”

These two organizations – rightfully, in this author’s opinion, need to ensure the safety of those working with the chemicals essential to the success of silicon-based photonics. If that delays the development of the technology a bit we’re all better off.

* What’s $98 million between friends?

Names You Need To Know

Despite that fragmentation, SkyQuest analysis reports companies such as Qualcomm, Intel Corporation, and Samsung Electronics have been able to establish a strong presence in the photonics market through mergers and acquisitions, as well as through the development of their products and services. The presence of these behemoths doesn’t stand in the way of small and midsized businesses (that can afford the technology, as noted earlier) that can effectively identify and capitalize on existing opportunities.

Other prominent players expected to experience growth in the global photonics market include:

• TRUMPF
• Hamamatsu Photonics K.K.
• IPG Photonics Corporation
• Molex
• Innolume
• II-VI Incorporated
• NeoPhotonics Corporation
• One Silicon Chip Photonics Inc.
• NKT Photonics A/S
• AIO CORE
• SICOYA GMBH
• RANOVUS
• Intel Corporation
• Polatis Photonics Inc.
• Alcatel-Lucent SA
• Infinera Corporation
• NEC Corporation
• Finisar Corporation
• Osram Licht AG
• Photonics SAS (Keopsys)
• Schott AG
• Carl Zeiss AG (Scantinel Photonics GmbH)

Where The Growth Will Take Place

On a global scale, SkyQuest reports that China, Japan, and Korea are generating 43% of the photonics market revenue as a result of aggressive investments in technology. For example, digital photonics technologies have led to shrinking dimensions and faster response times in photonic devices while technological advances in Femtosecond laser technology have driven down manufacturing costs. This has led to an increased demand for photonic devices across various industries, including automotive, industrial, defense, and medical imaging applications.

The governments of these three countries are largely responsible for the investments with Japan in particular investing in the development of an optical fiber technology due to their membership in the Global Optical Network, a cooperative project aimed at facilitating global trade and communication by transporting information using optical signals. South Korea’s investment is driven primarily by increasing demand for optical devices by businesses such as telecom carriers and technology companies and their interest in developing laser weapons technologies in the global photonics market.

The fastest growth is expected to occur in North America, driven by the likes of Facebook and Microsoft which need to optimize data management and transfer for their numerous data centers. New software devices' crucial high-speed data analysis and transmission capabilities can both be significantly enhanced by photonics.

What Market Segments Will Grow the Most

Due to their low cost and renewability, LED lights are increasingly being used for lights and displaying purposes, which will boost their market throughout the projection time frame, according to SkyQuote. Demand increases are being driven by energy-saving technologies used in areas like backlit, basic illumination, and automobiles.

Laser-based micro-electronic manufacturing, semiconductor fabrication, and metrology are the main areas of interest for photonic applications in different fields. Major uses include photolithography, metrology, laser-based machinery for elastic and high-density interconnects (HDIs), printed circuit boards (PCBs), drills, IC wrapping, and the manufacturing and handling of displays.

Capitalize On The Expected Growth By Being In The Right Vertical

“By 2025, the market for photonics-enabled systems should grow to almost $2 trillion,” writes McKinsey & Company. “This growth is enabled by a foundation of raw materials, along with lasers, sensors, optics, and other photonics components. Though small today, the market for photonics components is poised for rapid expansion thanks to several megatrends, including increased automation and the explosion in digitalization and cloud computing. With the market headed for a sustained period of double-digit growth, the next few years will be pivotal for large component players.”

McKinsey goes on to offer some pretty straightforward advice for those companies looking for their cut of the gig: be in the right vertical segments and keep an eye on M&A.

So, what are the right vertical segments? McKinsey research says the five stand out as particularly promising: silicon photonics for data center transceivers, ultrafast lasers, vertical-cavity surface-emitting lasers (VCSELs), sapphire glass and windows, and nonlinear optical (NLO) crystals.

These five verticals were singled out by McKinsey because they are the most likely to be helped by these six megatrends: the surging demand for data transfer speed, growth in remote vision and sensing applications, the rise of digital and additive manufacturing, rapid expansion in the noninvasive life sciences, a transition to sustainable energy sources, and an increase in geopolitical uncertainty.

Be sure to click the link for more details on the five verticals and six megatrends.

Mergers And Acquisitions, Anyone

The second bit of advice offered up by McKinsey – M&As – begins by noting the photonics industry is in its infancy, more or less. This is because, “Globally, there are about 30 photonics component companies with revenue greater than $1 billion. The global photonics market also includes hundreds of other component companies with revenue of less than $10 million and fewer than 50 employees. Such a long tail of small companies is a sign of an industry that is still in a relatively early stage.”

This also means that consolidation is coming. In fact, Teledyne’s purchase of FLIR for $8.2 billion and II-VI’s $6.9 billion acquisition of Coherent in 2021 are a sign it’s already begun. “The next biggest piece of M&A spending is essentially a mirror of the top-down strategy,” writes McKinsey. “The acquirers in this second group—bottom-up vertical-integration acquirers—view M&A as helping them get into higher-value areas of the photonics component space and as expanding their available markets.”

So That’s Everything, Right?

So, there you have it – the who, what, and where behind the expected growth of photonics over the next five to seven years. Well, mostly. We’re going to dig a little deeper into the “where” by focusing on one country and one city (hint: The Netherlands and Orlando) that are doing photonics right in the second of this two-part series.