Member News - January 2022

Industry Member News

04 January, 2022

Read about What to Expect in 2022, Hot Topics, Special Events, New Reports, and Other Noteworthy News, Opinions & Opportunities

 

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IN THIS ISSUE:


 

What to Expect in 2022

As we approach two years into the COVID-19 pandemic, what can we expect in 2022 for the optics and photonics industry?

As we've written several times, our industry fared relatively well despite the scale of the tragedy that has devasted millions of families and ruined businesses. Many businesses were considered essential and stayed open. Millions of workers were able to quickly pivot and work effectively from home. Asian factories reopened quickly. Government stimulus policies kept national economies running. And stock market indexes continued to climb, led by tech stocks.

Many conditions remain the same as we enter 2022. Factories remain consistently open and demand remains steady despite new virus variants and surges in cases. However, shortages in the supply chain and qualified workers restrain growth and threaten to trigger long-term inflation. Government stimulus spending is unlikely to continue. And the stock market may be overvalued, giving stakeholders a false sense of security. A correction could ripple through the financial sector, restricting capital flows to optics and photonics companies seeking investment.

The figure below shows the run rate of the U.S. economy (in blue), annualized and adjusted for inflation and seasonal variations. Shutdowns in early 2020 sent the economy into a dip of about 9%, but it recovered quickly. By late 2021 the U.S. economy has passed the pre-pandemic level and is growing steadily. It falls short of where it would have been if not for the pandemic (shown by the dotted line) and there are many challenges facing the U.S. and other national economies, but the worst is likely behind us by this measure.

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Source: Optica (formerly OIDA), from U.S. Bureau of Economic Analysis and
National Bureau of Statistics of China.

The chart also shows the annualized run rate of China's economy in its native currency, also annualized and adjusted for inflation and seasonal variations. It’s economy also dropped about 10%, but it happened one quarter sooner than the U.S. economy, and China recovered already by Q2 2020. China’s economy also runs hotter; its growth rate is typically about 2-3X that of the U.S. economy.

The next figure shows U.S. daily air passenger traffic passing through security checkpoints compared to the same day in pre-pandemic 2019. Traffic dropped in early 2020 to about 4% of the pre-pandemic level but has steadily recovered as travel restrictions relaxed and vaccines became available. By the end of 2021, traffic is 80-90% of the pre-pandemic level, with lucrative business and international travel still recovering. Meanwhile, the airline industry has its own supply chain issues—of deliveries of new aircraft in time to meet recovering demand. American Airlines announced in December that it will cancel some international flights in 2022, claiming that it won’t have the widebody aircraft it ordered from Boeing ready in time.

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Source: Optica (formerly OIDA), from U.S. Transportation Security Administration (13 Dec 2021).

The optics and photonics sector also lost ground in early 2020 with lockdowns and supply chain disruptions, but companies remained resilient and quickly reopened. Some market segments performed better than expected, such as displays, optical communications and COVID-related biomedical devices and equipment. The figure below shows our current estimate and forecast of the industry's revenues and compared to our forecast in early 2020. The jagged shape results from the normal seasonal variation that appears in our industry. (The global metric shown in the figure combines results across the eight segments we track. For more on performance by sector, see previous issues of this newsletter, here.)

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Source: Optica (9 December 2021).

Our industry did much better than we expected in March 2020, as the world struggled to understand the crisis. In March 2020, we felt brave to claim that our industry would return to the pre-pandemic level by 2022. In fact, our industry gained a modest 1.3% already in 2020. As the early disruptions in our industry faded, a burst of pent-up demand surpassed expectations in early 2021. By late 2021, supply chain issues may be restraining growth, but the arithmetic puts our current estimate for 2021 at 15.4% over the previous year. We expect the trend to continue, with our forecast pointing to 2.7% growth for 2022.

The next figure compares the current forecast (again in blue) with the pre-pandemic forecast (in green). If things go as expected, our industry would end 2022 slightly ahead of where it would have been if the pandemic had never happened and growth had proceeded at a respectable 4.7% per year. In other words, the gains in 2021 made up for the losses in 2020.

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Source: Optica (09 December 2021).

While there are plenty of challenges facing the industry, many fall in the general category of "supply chain issues." Earlier in the pandemic, this evoked images of shortages of specific products (such as toilet paper or automotive electronics) and images of ships idling in harbors waiting to be unloaded. However, the problem has expanded to encompass delays up and down the supply chain across a wide array of products.

The issue spans shortages of workers too (such as truck drivers and skilled factory workers). Optics and photonics companies complained about a shortage of qualified workers even before the pandemic, from manufacturing line operators to quantum PhDs. The pandemic intensified the shortage as workers faced lockdowns and quarantines, caring for themselves or family members, or making location or career moves. The topic has elevated from a consistent complaint to constraining industry output and profits.

Our industry has fared surprisingly well considering the threats up to now. Travel is recovering despite waves of variants. Production falls short of demand, which leads to longer lead times and higher prices, but this shortfall of production to demand won’t continue indefinitely. At this time, the signs point to a good 2022.

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Hot Topics in 2022

It's the time to review some hot topics for the coming year. There are so many exciting opportunities in our industry that it seems random and unfair to call attention to just a few, but here are some that we would like to feature as we start the new year (not in particular order):

  • COVID-19-related biophotonics. The role of optics and photonics in addressing the pandemic—from identifying the virus to speeding vaccines—is one of the great triumphs of the crisis. The speed and scale of the response has been unprecedented, and would have been impossible just a few years ago. This has flowed to optics and photonics companies: Illumina passed USD 4 billion in sales. Its growth is largely from sales of consumables, however; its equipment and service sales are relatively flat. Commercial innovations related to gene sequencing, antibody detection or remedies for COVID-19 will be hot for a long while. Look for more developments like those from Abionc and AIM Photonics.

Market Update

  • Augmented and virtual reality. Facebook is so committed to this area that it changed its name to Meta Platforms Inc. (doing business as Meta) and is rolling out a major marketing campaign promoting its virtual reality headsets. Meanwhile, Microsoft won a 10-year contract worth up to USD 22 billion with the U.S. Army for wireless augmented reality headsets for soldiers, due for testing in the coming year. The industry expects rollout of other major new products, including rumors of a long-anticipated product from Apple.

Market Update

  • Co-packaged integrated photonics. The technology continues to advance beyond R&D demonstrations to commercial products. Its biggest role is currently in optical communications, and co-packaging with data center switch chips would bring the optics into the same module with switch electronics, marking another major advance in the history of optical communications. Companies are commercializing exciting new applications for photonic integration in quantum computing and communications, neural networks and biomedicine.

Market Update

  • LIDAR for driver assistance. Several LIDAR companies made news in 2020-2021 as they began trading their stock on the public markets following mergers with SPAC companies. These LIDAR companies and those that were scooped up by auto suppliers are the winners from nearly a hundred companies just a few years ago. The stock prices have faded somewhat with softening interest in the SPAC market and as suppliers wait for automakers to move the technology gradually to market. Meanwhile, the auto industry is moving aggressively to electric car production, bringing novel demands on laser-based manufacturing.

Market Update

  • Quantum photonics. The many well-funded national programs in quantum technology and privately funded R&D pull researchers and startups into this topic. The main driver is FOMO (Fear Of Missing Out); Wall Street calls it "downside risk mitigation." But as a largely early-stage enabling technology, there are many open questions about the actual market opportunities. The technical developments are very exciting, setting new records even as the definitions of the milestones change. Deals are emerging: Honeywell spun off its quantum operation to merge with Cambridge Quantum in a new entity called Quantinuum. There are now a few publicly-traded pure-play quantum companies like QuantumCTek (in China) and IonQ (in the U.S.)—see the figure below showing recent stock price performance. Expect more companies to go public or be acquired by larger companies seeking to lock up the technology.

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Source: Optica, from company statements. QuantumCTek prices have been converted to USD.

That's not all! There is also 5G, miniLEDs and microLEDs, metamaterials, perovskites and much more. That is what is great about optics and photonics: there are always hot opportunities in the pipeline.

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Registration is Open for Optica's Executive Forum at OFC

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Optica's 2022 Executive Forum registration is open! Held in conjunction with OFC, join us in person on 07 March to hear senior executives address the challenges and opportunities which drive their company's—and the industry's—transformational activities. We have an exciting program planned and look forward to our Keynote Address from Keri Gilder, CEO of Colt Technology Services.

Attend the premier event for leaders in optical networking and communications. This is a vital opportunity for meaningful in-person networking and important programming about topics that matter.

Register now to take advantage of our early-bird discounted pricing! Exclusive for Optica Corporate Members: If your company selected our Networking & Events benefits category you can buy 1 discounted registration and bring a customer or colleague for free!

Learn more and register now.

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Welcome New Optica Corporate Member

AIP

AIP

 

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Spotlight—Women in Industry

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Eve Griliches, Product Marketing Manager, Cisco Systems

Spotlight—Women in Industry highlights female Optica Corporate Members who share their thoughts on both personal and professional issues. This month features Eve Griliches, Product Marketing Manager, Cisco Systems. If you would like to be featured in this section, please email industry@optica.org for more information.

  • What currently excites you most about working in the optics and photonics industry?
    I love the tradeoffs we work with; the growing demand and how we manage the new bit rates and new platforms. I also love the fact that subsea is so different and yet similar. There are so many applications for optical transmission, it makes the entire market always interesting and a way to keep growing and learning. And the people, the people are absolutely wonderful.

Market Update

  • What career advice would you give to your younger self?
    Stay focused and work hard. Sometimes politics or outside influences can be disruptive, if you just work hard, it will always be recognized. And, stand up for yourself, no one else will really manage your career, it’s up to you to communicate it’s time to grow and time to get the right compensation.

Market Update

  • What is a hobby or passion of yours?
    I love riding horses in the great outdoors like Wyoming and Montana. I'm now taking lessons in riding English (instead of Western) to get to another level of riding. And, I’ve started playing pickleball! What an addicting sport! And so good for your aerobically as well as just plain fun. I also have been giving back in many ways, first through the Fresh Air Fund, but plan to work more with inner city kids to assist with computer skills.

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Member Benefit: New Industry Reports Available to Corporate Members

Industry leaders worldwide are planning their strategy for 2022 and beyond. A winning strategy is driven by intelligence. Optica Corporate Members have exclusive—and complimentary—access to Optica Market Update reports. Have you downloaded our newest industry report?

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Read the latest Market Update for exclusive information on:

  • Macroeconomic update
    • 3D printing and additive manufacturing revenue data and insights
    • Industrial instruments sector revenue data and insights

Stay on top of the latest optics and photonics market insights, news, roadmaps and research. Read our reports today and get the information you need to make better business decisions faster.

Other reports include:

Optica Market Update reports are available to all employees of Optica Corporate Member companies who selected the Market Intelligence benefit category. We encourage you to browse the Industry Reports page on the Optica Publishing Group site to see everything available to you.

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Invitation to Join the Optica Industry Network LinkedIn Group

Join 4,800+ of your colleagues in our Optica Industry Network LinkedIn Group. This one-of-a-kind Forum for Industry lets you participate in discussions about cutting-edge issues. Extend your professional network. Exchange information about problems, ideas and solutions. Collaborate with experts in your field. Now is the perfect time to build a relationship with fellow optics and photonics professionals!

Linkedin

Link Now...

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Questions or Suggestions about Optica Corporate Member Benefits?

We are committed to ensuring the value of your Optica corporate membership, so please email Optica corporate membership if you have any suggestions for new programs or comments on your membership.

Forward this message to your colleagues.

Not yet a member? Learn more about the benefits of membership.

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Optica Corporate Engagement Council

Thank you to the volunteers who oversee the programs and services available to the Industry Community.

 

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Amy Eskilson

Inrad Optics, Chair

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Simin Cai

Go!Foton, Past Chair

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Aleksandra Boskovic

Corning Inc.

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Cedric F. Lam

Google

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Anjul Loiacono

ColdQuanta

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Rick Plympton

Optimax Systems, Inc.

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Thomas Rettich

TRUMPF

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Natarajan ‘Subu” Subrahmanyan

AO Asset Management

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Debbie Wilson

Lumentum

 

 

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