Summer read: Euro report on photonics

Looking for some good summer reading last week at the beach in Santa Barbara, I read through the final report on the economic impact of photonics in Europe. 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.

First, the motivation and impact of the report. 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 Photonics21. 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.

The impact: 10% of the economy, or is it 100%? 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.

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.

There is a lot in the report about leverage and improving competitiveness. 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.

My view is that the real value of photonics to Europe is in high-value systems, not so much the components. 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.

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).

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.