Read about OIDAs Optics & Photonics Market Forecast, How to Read Q1 Reports in a Crisis, How to Navigate the Crisis from Your Laptop Special Events, New Reports and Other Noteworthy News, Opinions & Opportunities In this Issue:
The Optical Society (OSA) is committed to ensuring our staff, members and customers are supported during the COVID-19 (Coronavirus) pandemic and will continue to implement measures to protect the health of our global community while maintaining business operations and programs to the extent possible. Learn more. "Yes, There Will be Growth in the Spring" — Chauncey Gardiner This was the wisdom of Chance the Gardiner, also known as Chauncey Gardiner, the clueless advisor to the President in the satirical novel "Being There" (see the trailer here). He says, "As long as the roots are not severed, all is well. And all will be well in the garden." Chance, or Chauncey, is a simple gardener, but the observation was welcome. It's welcome now, too. While the economy was already fragile when the pandemic arrived, and there may not be growth this spring, there will be growth this summer, and fall and next spring. How so? Read on. Source: Everett Collection. There was early hope that the pandemic would pass quickly and the hit to the broader economic recovery would be V-shaped. Now it's clear that the recovery won't be swift, given that U.S. unemployment just went from a 50-year low to the greatest jump in weekly initial jobless claims in U.S. history, along with many other disturbing metrics. Source: IMF World Economic Outlook (April 2020). The crisis leaves no region safe, as even China's many decades of remarkable growth has been interrupted. The chart below shows China's overall GDP annualized growth rate by quarter, on the x-axis, showing a year-on-year decline for the first time since it began releasing GDP figures in 1992. China's IT sector—which includes information technology, transmission and software—continued to show good year-on-year growth, and approximately flat quarter-over-quarter, even with the extended Chinese New Year holiday and pandemic shutdown. The IT sector is relatively small compared to the overall Chinese economy but has showed exceptional double-digit growth in recent years. The IT sector result suggests that the Chinese technology sector may fare better than the Chinese economy overall. Source: National Bureau of Statistics of China (April 2020). What does this mean for optics and photonics? It helps to sort all products into (1) consumables and (2) durable goods. Consumables are things like food and toilet paper that can continue selling even in recessions. In our sector, this could include disposable endoscopes and laser debris windows. (Service contracts, while not actually products, bring steady revenues the same way.)
Using estimates in each of the segments above, OIDA created a more refined forecast for the optics and photonics market, which suggests a decline of 11-15% for 2020 overall. This would be a record decline for the industry, and more dramatic than the overall economy, because of the role of optics and photonics in durable goods, and particularly as capital equipment. While it's difficult to find something good to say about this, at least it isn't because of declining interest in photonics; it's entirely from the pandemic. Source: OIDA (2020). A decline of 11-15% is devastating for a US$ 460 billion components and systems industry, that could be US$ 70 billion of lost revenue. Some observers may be nonetheless skeptical. With factories shut down, flights cancelled and millions suddenly out of work, could a 11-15% decline in revenues be optimistic? How to Read Q1 Reports in a Crisis Last month in the OIDA newsletter we showed the seasonal nature of two Asian companies involved in the manufacturing of consumer products, Foxconn and Largan Precision. With factories in Taiwan and China, they offer a look at what is to come elsewhere as social restrictions lift. Foxconn's revenues so far this year are about 12% below the same period last year, while Largan's are up a remarkable 35% over the same period, but those results say more about the past 12 months than the current period. The updated charts show that the two companies seem to have weathered the initial crisis, despite any interruptions in production or the supply chain. Less clear is whether demand will hold up for the rest of 2020. Source: OIDA, from Foxconn and Largan financial statements. A lesson from Foxconn and Largan is that the usual financial figures are not very helpful in the chaos of this pandemic and recession. This is also the case with the Chinese economic data noted earlier in this OIDA newsletter. The quarter-over-quarter results likely exhibit seasonal variation; it's not clear if a decline or upturn by itself is normal or wildly atypical. Year-over-year results accumulate the performance of three other quarters, and may say little about the performance of the most recent quarter. Only by looking at this year's performance compared to the historical seasonal variation can we know if the current performance is on track, or not. How to Navigate the Crisis from Your Laptop Do you feel that you're flying by the seat of your pants? If so, you’re not alone. We keep hearing that this is "the new normal." Whatever you call it, how long will this last? And how can we navigate through it? We know that you are already spending more time on videoconferences, that's why we want to direct you to some important resources. Source: Douglas Knight, CartoonStock. OIDA launched its weekly series of webinars specifically addressing company management during the crisis, spanning topics from supply chains to employment and financial assistance. The webinars draw from collective wisdom from the community as well as experts from outside the community. See here and check for updates as we add more to the schedule. See also some helpful resources from experts we’ve posted here, and commentary from Laser Focus World’s Conard Holton on OIDA’s efforts here. OIDA Council Chair Dr. Simin Cai for the 16 April 2020 webinar. Grey Williams pointed out in the 23 April webinar that recovery of the supply chain has to be V-shaped, even if the overall sector is not. He explained a crisis management approach to re-secure the supply chain. The chain doesn't just include suppliers, you may need to consider logistics too, such as delivery and storage services. Cut your less essential projects; trying to be a hero by keeping all your projects going won't succeed. Forecast what you can based on updates on your supply, with best and worst case scenarios. The demand will be more difficult to update; focus on what you can control. OSA's Optics & Photonics News will host a webinar around ways that optics and photonics are used to fight against COVID-19 (here). The webinar will feature Thomas Baer and Christina Baer, authors of a recent OPN article (here), on 8 May at 13:00 ET. OSA's We Are On webpage here lists all of the webinars from OSA's many activities. Webinars are offered nearly every day of the work week on topics ranging from optics and photonics technology to professional development and even activities for kids (see Optics4Kids here). SubOptic, a partner with the OSA Foundation's Subsea School, offers webinar content on pandemic-related issues around the undersea fiber network business. See here for more information. See also OSA's webpage for OSA's statement and updates on its response to the pandemic (here).
RSVP for Virtual OIDA Member Benefit Orientation RSVP for OIDA's member benefit overview orientation. This is an opportunity to learn more about key membership benefits you and your company should be taking advantage of and explore how to maximize performance and grow your business. LAC Chairs Encourage You To Submit a Paper This meeting will be held as scheduled. LAC Chairs
Showcase Your Company's Useful Techniques: Submit to Applied Optics' Engineering and Laboratory Notes Applied Optics (AO) publishes Engineering and Laboratory Notes (E&L Notes)—brief, concise articles that share useful laboratory techniques and practical engineering approaches in the applied optics field. Topics range from design and analysis, to fabrication and integration, alignment, testing, and calibration of optical systems. E&L Notes offers a unique way to publish useful techniques from your engineering notebook in Applied Optics. Read more about E&L Notes and suitable topics for submission and learn about how to submit your contribution. Recognize the outstanding contributions of your colleagues through an OSA Award or Medal nomination. The awards below specifically recognize the achievements of engineers, business leaders, inventors, innovators and entrepreneurs. View a full list of OSA awards. Nominations are due 1 October 2020 unless noted. Celebrate the International Day of Light: 16 May 2020 We encourage all of our industry partners to join the conversation around the International Day of Light on social media with #seethelight and #idl2020. This year, you can experience a special message at lightday.org/seethelight. Cleaner energy, sustainable farming, high-speed connectivity and better diagnostics and treatment are all enabled by the science of light, and it's up to us to help communicate that message to our friends, families and the public. Articles on each of those topics are in the works and will also be published on lightday.org/seethelight. 16 May 2020 is an opportunity to #SEETHELIGHT and celebrate what it does for all of us. Invitation to Join the OIDA Optics and Photonics Industry LinkedIn Group Join 3,500+ of your colleagues in our OIDA 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! Questions or Suggestions about OIDA 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.
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