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Why the Data Center Business Matters So Much to Photonics
It's hard to appreciate just how significant the data center business has been for optical communications. Yes, there are a lot of companies providing services that use large data "warehouse-scale" centers, such as Google, Facebook, Amazon and Microsoft. But these companies are not only expanding their capacity, but also upgrading their infrastructures as their businesses evolve. Facebook once said at an OIDA workshop that it swaps out its equipment "down to the concrete floor" every three years or so. Even if the companies can migrate to keeping some of the same equipment—such as empty racks and fiber cabling—over multiple cycles, it amounts to a lot of business for component vendors as long as this cycle keeps repeating itself.
Our most recent OIDA Market Update features charts from Ovum that illustrate the growth in this business and its impact on optical transceiver sales. The figure below shows the growth in capital spending from the top ten Internet Content Providers (ICPs—including cloud service providers), compared to the top ten traditional communication service providers (CSPs—the telecom operators). The ICPs have increased their spending with a compound annual growth rate (CAGR) over 22% since 2009, while the traditional CSPs increased spending at only about 2% CAGR over the same period. The new cloud providers now amount to about 1/3 of the total capital spending among these 20 select companies, and nearly all of the growth.
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 Source: Ovum (2018).
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The capital spending mirrors the overall revenue growth for each group. Ovum's data shows the growth of the top eight ICPs also about 22% CAGR since 2009, to about US$ 700 billion in 2017. The overall revenues for the traditional providers is much greater, at US$ 1.75 trillion in 2017, but the growth rate is only about 1% for the period.
What happens if the growth in ICP revenue slows? Since capital expenditures have been tracking revenue, it might mean slowing growth of capital spending, and therefore slowing growth of spending on optical components. Note, however, that this is about slowing growth, not an actual market contraction, which is something much more dramatic.
To see Ovum's charts on optical transceivers for this and the emerging 5G wireless market, see the latest OIDA Market Update.
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Views on Asian Photonics and Tariffs
For 23 years OIDA has met with its counterpart optoelectronics trade associations from around the world to share information on new initiatives, technology trends, and market data. This year, Dr. Christoph Harder represented both OIDA and Switzerland at the group's meeting in South Korea in June. For several years, Japan, Taiwan, and South Korea have reported that their photonics manufacturing is moving to China, just as U.S. manufacturing started moving to Asia decades ago. Dr. Harder writes that this theme was repeated again this year.
Taiwanese photonics companies' revenues (including revenues earned from offshore operations) amount to about 10% of Taiwan's economy, according to industry estimates by the Photonics Industry Development Association, PIDA, OIDA's counterpart there. However, manufacturing operations, and jobs, are moving increasingly to China, even as ownership remains in Taiwan. Meanwhile, Taiwan's position in displays has declined as South Korea's position has risen, and Taiwanese companies are now supplying display components to South Korea.
The South Korean Association for Photonics Industry Development, KAPID, estimates that its photonics companies bring revenue equivalent to about 5% of South Korea's GNP. Samsung and LG, in particular, have scored wins in displays, most recently with QLED and OLED technology, and South Korea is also strong in LEDs and other products. The country's strong economic growth since the 1950s is striking, but now contrasts sharply with lower labor costs in China, not to mention North Korea. Most troubling for the South Korean companies is that the value of its exports of optics and photonics products has declined every year since 2012, in both Korean won and in U.S. dollars. The figure below shows this decline, in dollars.
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 Source: KAPID (2018)
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Japan's OITDA estimates that its photonics companies bring revenue equivalent to about 2.5% of Japan's GNP. The country was once strong in cameras, displays, and many other photonics technologies that have declined due to competition elsewhere, or for other reasons. And a recent revival of solar energy after the Fukushima accident has slowed. The figure shows Japan's domestic production of optoelectronics and electronics products (in trillions of yen), with the nominal GDP shown for comparison (scaled by 1/20). The Japanese economy was flat for about two decades and is now on the rise, while its domestic optoelectronics production peaked in 2007 and has cycled since. Japan's domestic electronics production has fared much worse, with its best years in the 1980s and 1990s.
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 Source: OITDA (2018)
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Another topic at the meeting of trade associations was the trade war, not surprisingly. It is not disputed that the U.S. has low import tariffs and that China and other countries have higher tariffs. Moreover, World Trade Organization (WTO) policy recognizes the right of developing countries to protect their industries more than developed countries. What's not well understood abroad is the justification for the U.S. to have the same import tariffs as other countries, whatever the level of the tariff itself. In other words, government policy on what determines "fair" trade right now depends on where you live and which products you're referring to.
OIDA will be publishing presentations from the IOA meeting in an upcoming OIDA Market Update.
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Welcome New OIDA Member
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New! RSVP to Complimentary OIDA Networking Reception for OIDA Members at FiO
You are invited to a complimentary networking reception for OIDA members that will be held at the conclusion of Automotive Themed Sessions at FiO.
As a benefit of being a valued OIDA member, come meet the Automotive session speakers and industry leaders. This is a networking reception that you can't afford to miss.
Networking Reception for the Automotive Session Attendees and OIDA Members
Monday, 17 September 2018, 16:00-18:00
Washington, DC, USA
Please RSVP by Friday, 14 September 2018 by email to oida@osa.org or call +1 202.416.1930 to receive the reception location. A detailed confirmation will be sent after RSVP. We look forward to seeing you on Monday evening 17 September!
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See Technologies of Tomorrow at the OSA Frontiers in Optics Conference
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Image: Dmitri Garbuzov, Ouster, Inc., installs an OS1 sensor.
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The FIO + LS conference and exhibition, held 16-20 September in Washington, DC, features the latest in optics and photonics science and applications. Of special interest are four thematic tracks focusing on automotive optics, nanophotonics and plasmonics, quantum technologies, and virtual reality and augmented vision.
The exhibition, called the Science & Industry Showcase, features almost 40 exhibiting companies coupled with technology demonstrations, networking events and industry programs.
Highlights include:
VR, AR and MR Headsets
Experience technology of tomorrow with virtual reality headsets provided by Oculus and HTC and augmented reality headsets from Microsoft HoloLens, Lenovo and Mira.
The OS-1-64 Sensor from Ouster
Ouster, a leading developer of LIDAR and perception technology for the autonomous vehicle and robotics sectors, will host live demonstrations of an OS-1-64 sensor. Learn more about its panoramic imaging capabilities, high spatial acuity and small form factor.
Register for the technical conference for full access, or choose the free Exhibit Pass Plus registration, which provides access to all Science & Industry Showcase programs and the Plenary Session.
Learn more.
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RSVP to OIDA Industry Market Update Dinner on 25 September in Rome, Italy
OIDA members are invited to a complimentary OSA Industry Development Associates (OIDA) Market Update Dinner for senior-level executives on 25 September, 19:30 to 21:30 in Rome, Italy.
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Come hear the founder and lead analyst at Cignal, AI, Andrew Schmitt, provide an overview of the opportunity for third generation coherent technology. The transition to the latest coherent WDM technology is underway and its effects are rippling through the optical market. It's time to take a step back and sort out where things are, what worked, who benefitted, and what happens next.
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This event is free for you to attend. Seating is limited. RSVP before 11 September by email to oida@osa.org or call +1 202.416.1474 to receive the restaurant information. RSVPs will be taken on a first-come first-served basis. A detailed confirmation will be sent after RSVP.
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Join Industry Leaders at OIDA Executive Forum on 8 November in Boston
Come to learn, collaborate and build lasting relationships. OIDA Executive Forum will be held in conjunction with the OSA Laser Congress. Register now to secure your place and learn about trends, opportunities, and challenges facing the laser market. This is a highly-interactive and intensive program focused on peer learning and information exchange that will help leaders in the industry plan for disruptors, capitalize on opportunities, and remain relevant to their customers. View the program.
Hear from Top Industry Speakers Including:
OIDA Members receive special pricing for this event, which includes a networking lunch. Registration is available as an add-on to your Congress registration, or as an add-on to your Free Exhibits Pass Plus registration.
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Program Announced for the OSA Laser Applications Conference, 5-7 November in Boston
The Laser Applications Conference (LAC) is an all invited speaker format for industry at the OSA Laser Congress. This 3-day meeting focuses on two main topic areas — Materials Processing and Applications for High Power Lasers. One of the themes of this meeting will be to initiate discussions on what engineering and production advances are needed to translate promising technological advances into marketable products.
View the program and build an itinerary that matches your interests. This is a unique opportunity to network and learn from leaders in Applied Industrial R&D.
Meet top luminaries in the field including:
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Norman Hodgson,
Plenary Speaker Coherent, Inc., USA
Industrial Femtosecond Lasers for Material Processing
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View all the speakers and secure your place at this must-attend event. Save when you register
by 9 October.
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OIDA Market and Technology Reports
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Make better business decisions faster. Tap into the OIDA Publications and Reports website, which brings you the latest market insights, roadmaps, and research you need to stay ahead of your competition.
Visit today and get leading-edge ideas, strategic thinking and practical solutions to the challenges facing your business.
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Topics include:
- Optical networking
- Biophotonics/Life sciences
- Machine tools and automation
- Sensors
- Lasers and optics
- LIDAR
- And more!
OIDA helps businesses large and small surpass their goals. Visit the OIDA Publications and Reports website today.
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Submit Your OSA Award Nominations by 1 October
OSA awards and medals span all areas of optics and photonics, as well as contributions made to industry, education, and the scientific community. Nominations for 2019 are due 1 October 2018.
The following awards and medals specifically recognize the achievements of engineers, business leaders, inventors, innovators and entrepreneurs:
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Opportunities for Your Company at CLEO 2019: New Brochure Now Available Online
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Optics enabled markets support nearly the entire global economy of $78 trillion annually. Exhibit at CLEO to capture a piece of that business. New industry offerings make this event a magnet for executives throughout the buying channel. Exhibitors will have extensive, targeted opportunities for exposure and in-depth interaction with key prospects and customers. These high-level buyers are looking to you—the leading product experts, manufacturers and service providers—for the most innovative, cost-effective solutions to support their missions. Learn more about how your company can capitalize on this market.
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Invitation to Join the Optics and Photonics Industry LinkedIn Group
Join 3,000+ of your colleagues in our Optics & Photonics 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!
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Take advantage of your OIDA (OSA Industry Development Associates) Member Benefits
We are committed to ensuring the value of your OSA Industry Development Associates Membership, so please email OIDA 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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OIDA (OSA Industry Development Associates) Council
Thank you to the volunteers who oversee the programs and services available to the Industry Community.
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• Claudio Mazzali,
Corning, Inc., Chair
• Alex Fong,
TruTag Technologies, Inc.,
Past Chair
• John Dexheimer,
Lightwave Advisors
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• Amy Eskilson,
Inrad Optics
• Christoph Harder,
Harder and Partner
• Fred Leonberger,
EOvation
Technologies, LLC
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• Inge Kabert,
Thorlabs
• Martin Seifert
• Debbie Wilson,
Lumentum
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