SIL 2010: HB-LED market to grow 53% this year

Our 11th annual Strategies in Light event ended last week and it was symbolic of the LED and LED lighting market. Booming. In fact, the big takeaway is exactly that. The HB-LED market will surge 53% in 2010 to $8.2 billion, going to $20.2 billion by 2014. Did you get that? That’s $20 billion. That's a respectable number compared to other components sectors, like semiconductors and displays. And, it grew 5% in 2009, despite the recession.

This is so big, saying much else takes away from the message. And anyway, my colleagues at LEDs Magazine were all over the event, so you can go there to find out the details. You might especially like this chart of our LED market forecast, at the magazine’s site.




The event was a indication of the expectations in the LED market. We had nearly 3,000 total attendees and 88 exhibitors, each up about 50% from 2009.


The LED lighting part of the event is really gaining mindshare, with its separate conference track, LED lighting tutorials, a new Solid-State Lighting Investors Forum, and a new LED Lighting pavilion in the exhibit area. There was also a lot of discussion about broader systems issues like LED-specific thermal management, suitable optics, efficient drivers, LED-friendly controllers, and all that. In short, it’s not just about the LED anymore.

The next big imaging technology: OMI

If you haven’t heard of optical molecular imaging (OMI), get ready to hear more about it. OMI is about to move into clinical use as one of the key tools in personalized medicine. Growth of equipment sales is on track to reach $400 million in 2014 and nearly $1 billion by 2020. Yes, you heard that right.

Don’t confuse this new imaging technology with OCT (on which we also have a new market report). Think of optical molecular imaging more like CT or MRI, but using visible light emission from molecular agents. OMI can be used in living tissue as a tool for examining diseases or drug effectiveness. It’s highly portable, fast, and less expensive than conventional imaging, and it has the potential to be used in the doctor’s office.

There are a lot of factors in this market rollout, though. The growth hinges on partnerships with key medical equipment vendors, the outcomes of clinical trials assessing imaging agents, regulatory approvals, patent litigation, and decisions about insurance reimbursement.

The market will likely expand in two directions: research systems and clinical systems. Recent advances in imaging agents will power the transition of optical techniques from the lab to clinical settings. Large imaging firms, such as GE Healthcare, Siemens, and Philips, are beginning to pursue optical molecular imaging, while over 12 companies are already marketing OMI systems. A large part of the revenues will be from the imaging agents, animal models (that is, genetically-engineered mice), accessories, software, services, and licensing.

As always, ours is a high quality market report, and the only comprehensive one out there. Kudos to our good friend and lead author, Susan Reiss.

Photonics West--what theatrics and so not 2009

I don't know if it's the new Moscone Center venue, the laser show at the conference reception, or the fact that this is 2010, not 2009, but Photonics West was really booming this year. And the statistics say it all: over 18,000 visitors, a new record. That is now more than Semicon West, in both visitors and booths. (Don't believe me? Check here.)

First, there was the venue. San Francisco is more expensive, and a lot of us locals have easier access getting in and out of San Jose. But there was a classier feel to the show this year. It's like Photonics West moved to a major league ballpark. And the vendors that were formerly in the tents in San Jose must have felt a lot better getting equal traffic at Moscone. At least the roof wasn't leaking on the rainy days like before.

Then there were the theatrics. SPIE put on a great reception, with Cirque performers, old clips of lasers from James Bond, and a laser magic show. There was a great exhibit of old lasers in the North Hall. And it helped that Apple unveiled its iPad on Wednesday on the same block. If you go out to a restaurant, you are more likely to recognize someone in San Jose and less likely to encounter panhandlers, but San Francisco has more stuff happening.

And finally, there was the economy. The feeling was that if you showed up, that's already an achievement. 2009 was a terrible year, but companies responded to the recession quickly, and the market seems to have bottomed out in mid- to late-2009. This time last year the market was still in decline. We were still looking at the abyss. Now, while visibility is still poor, the most likely scenario is modest growth from the new low, plus or minus in either direction a little.

Photonics West is about product development, which still must go on even during recessions. Conference highlights were: OCT imaging, molecular imaging, or for that matter, anything combining bio and imaging. In fact, BiOS was booming. Also mid-infrared, quantum cascade lasers, and terahertz.

On the show side, I have to say that there wasn't anything that struck me as especially new this year. But then again, the Photonics West show is all about nuts and bolts, so it's hard to stand out in the middle of all that.

I also got to tour the National Ignition Facility on Thursday, which is something any laser engineer should see. But, I'll get to that another day.

New report: OCT has a good 2009

How good is the OCT equipment market these days? It grew in 2009, despite the recession, and that's in units, not just exchange rate adjustments. That’s how good it is. What’s more, we’re expecting 20% compound growth through 2014. This is from our latest OCT market report, now officially released.

If you don’t know what it is, OCT is a great imaging technology. OCT systems use advanced optics to construct micron-scale cross-sectional and 3D images in real time. The technique is non-invasive and can be used in vivo, such as to examine the inside of the human eye. The business is now entering a new phase, beyond ophthalmology to new specialties, such as looking inside arteries for cardiology. Each of these applications has the potential to be as big or bigger than the sales today in ophthalmology.

OCT may sound arcane, especially if you have to pronounce its full name. But this is big stuff, with equipment sales now in the hundreds of millions of dollars per year. Much of the activity has been driven by a shift in the technology from time-domain systems to faster Fourier-domain systems, which are also not as limited by patent protection.

Carl Zeiss Meditec no longer holds the majority of market share, even as its own revenue has grown. At least 21 other companies are developing and/or marketing OCT systems in 8 medical specialties, as well as in R&D and industrial applications. Many more companies supply the sources, detectors, and related components that enable OCT systems and applications.

Oh, and did I mention? Our market report is the only comprehensive report on the topic, a follow-on to an earlier report, also sponsored by PennWell. Kudos to our good friend, Greg Smolka.

The 2009 laser numbers are in

The numbers are in, and the laser market dropped to $5.3 billion in 2009, a 24% decline from the record high of $7.0 billion achieved in 2008. While sales will remain sluggish in many sectors, overall revenues are already on the rise on a quarterly basis, with 11% growth expected in 2010.


Companies doing better than average were few, but the military and biomedical sectors stand out. For example, the OCT equipment market grew in 2009, as reported in our new market study.

Other than those sectors, as a rule, the larger the capital equipment, the worse that sector did in 2009. So sales of diode lasers for CD and DVD players didn’t do well, but sales of welding equipment for making cars and trucks was particularly difficult. And, companies with fiscal years that ended last September saw even sharper declines in annual sales than, say, those on a July to June schedule.

There were surprisingly few changes among the list of suppliers in 2009, including announcements from Oclaro and from Sumitomo. Most consolidation was internal to suppliers in the form of layoffs or securing market share within niches. Much more significant are the mergers and changes at the customer level, whether it is Ciena buying Nortel’s optical operation or GM’s spin-offs and plant closures.

There’s much more to the numbers. They are based on the annual Laser Focus World market survey, to be presented at the Lasers & Photonics Marketplace Seminar in San Francisco on January 25.

The capex derivative & solar--Part 2

In a previous post, I discussed how steep upward growth for a market doesn’t necessarily mean steep upward growth all along the supply chain. In fact, solar cell manufacturing is an example where sales can go wildly negative even as the power generators see upward growth. In the original post, I considered three different scenarios that made my point very nicely. But what happens when we plug in some numbers that may be more or less what we expect the solar market to be?

I’ve done that in this figure. The first thing to notice is that the cumulative generating capacity—the top curve and what the power companies think about—goes up all through the forecast.

The next thing you notice is that the new module shipments—that’s the middle curve—takes a dip in 2009. This isn’t too surprising, given the recession, tight credit, and low oil prices. The dip isn’t too big and it’s in record territory again by 2011.

But what is really interesting is the bottom curve. That’s the new factory capacity that’s needed to make the modules each year. This correlates directly to lasers sold for making cells. That curve actually goes to zero, even negative, for a couple of years. And even in the recovery it only hangs around the 2008 level through 2013. In other words, the laser sales will not rocket upwards like the module sales through 2013.

Of course, there are some problems with this simple chart. The new factory capacity (laser sales) probably don’t go negative. That would mean companies were taking equipment out of commission. While I have heard of this happening in 2009, it’s not widespread. Companies want to be ready for the recovery. And, there are always new suppliers, and old suppliers expanding and upgrading equipment. That raises sales above zero.

On the other hand, there is also inventory in the supply chain and used equipment for sale. That pushes the recovery further into the future.

To a first approximation, the chart is a good model, and a good example of what I call the "second derivative paradox." At least it’s better than looking at the other two curves and assuming something similar.

January 13, 2010

On using the downturn and dumb luck

It's become a cliche that companies can use downturns to their advantage. Now there's an analyst from Bain & Co. who actually has the data. As he says in a piece on NPR this morning, it's like companies use the curve in a car race to gain advantage against stronger competitors, while using the straightaway to hold it.

The Bain analyst, Darrell Rigby, has data to show that market share changes the most in the chaos of the downturn. It's not surprising: at best, the downturn changes the game. At worst, it brings out all the weaknesses in a company.

Since they start out with the most market share, the biggest companies have the most to lose. They have deeper pockets, but they also have inherent inefficiencies that come with any large organization. These are the inefficiencies of running a global sales network, of running operations across many end-user sectors, across multiple technologies, and so on. There's a cost to doing all that.

Companies with the next generation products may not be doing well now, but they will seize market share coming out of the recovery. This favors fiber lasers, LED lighting, and new imaging tools like OCT and optical molecular imaging.

But let's admit it: luck also plays a huge part. We deal in macro trends at Strategies Unlimited. But it's my view that, at the micro scale, a lot of business is just dumb luck. Companies are simply in the right place at the right time.

That may feel insulting to the many hard-working engineers and sales staff who nurture relationships, often over years, to bring a product to market. When things go well, it's natural to give credit to all that hard work. But looking at it from a statistical point of view, some will get the new business and some won't. Many of those who lost the business also worked hard, and even did the right things, but the business simply went elsewhere.