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Chinese merger creates ambitious optical firm

05 Mar 2004

Jacqueline Hewett visits Photop Technologies, the new rising star of Chinese optics, and learns that chief executive John Ling has big ideas for the company.

From Opto & Laser Europe March 2004

Photonics West was the first opportunity for many people to see the new face of one of China's up-and-coming optics firms, Photop Technologies. Formed in August 2003 as a result of a four-company merger, Photop employs more than 1100 people, anticipates revenues of $20 m (€15.77 m) this year and offers everything from high-precision optics to semiconductor substrates and laser diodes.

What's more, the company came to Photonics West with an eyebrow-raising claim - that it was producing the world's smallest green laser. Crammed into a standard 9 mm TO package, the device uses an 808 nm diode laser to pump a Nd:YVO4+ KTP crystal and emits 5 mW of green light. The laser is said to have a lifetime in excess of 3000 h. And given its low cost, Photop says that the device is an ideal replacement for traditional red laser diodes. All things considered, it's not hard to see why so many people were swarming around the firm's booth.

"We can reduce the cost of the laser to $50," John Ling, Photop's chief executive officer, told Opto & Laser Europe. "Our target is $5 in three to five years' time." This is a prime example of Photop's philosophy for the future: low-end, low-cost and high-quantity production.

"When we talk about the direction of Photop, we ask, can we be number one or two in China in this direction? If we can, we do it. If not, we kill it," said Ling. The firm's development of green microchip lasers is a result of this philosophy. "I hope in the future we will be number one or two in the world," said Ling.

Partnerships and progress Photop clearly has global ambitions. The newly merged company is now consolidating into four vertically-integrated divisions and is in the process of building a photonic manufacturing base for international customers. Ling says he is keen to establish partnerships with western companies.

"We think Photop can help lower the cost of our customers' manufacturing," Ling explained. "We can sample some devices for them or work together, make joint production lines or contract manufacture devices. We want to be a manufacturing base for companies worldwide."

Such drive and ambition were no doubt kick-started by the merger that brought Photop into existence. The business is a consolidation of four Chinese companies: Koncent, SUWtech, Sandgy and Microlattice.

Ling explains that one reason behind the merger was the need for vertical integration and the cost savings that this brings. "Now Koncent, Sandgy and Microlattice engineers can get together in one team, for example," explained Ling. "It's quick and efficient and a much better way of serving our customers than before." He also anticipates that forming a single larger firm from four well-known names will increase Photop's stature when dealing with larger companies.

Six months after the merger, Photop is completing the process of shuffling itself into four divisions: telecoms, lasers, optics and projection optics. Each division draws on the expertise of the four component firms. For instance, the telecoms division will produce a raft of passive and active components, which was the core activity of Koncent.

The laser division will take on the expertise of SUWtech in producing green, blue and infrared lasers. This division has already produced the record-breaking 532 nm diode-pumped microchip laser.

The optics division of the firm is developing high-precision optical components and crystals for telecoms applications. Once again, Photop's low-cost, high-quantity philosophy is in evidence. "We have developed a C-lens to replace the GRIN lens which is used to couple light into optical fibres," said Ling. "The C-lens is a low-cost and high-performance component. The typical insertion loss associated with a GRIN lens is 0.15 dB, while a C-lens comes in 50% lower at 0.1 dB."

The final division, projection optics, is an area that Photop has pinpointed as a large potential market. It is currently working with an undisclosed US firm to develop optics for digital projectors and projection televisions. Ling says that both parties have invested in a production line, which they are hoping to get off the ground in mid-2004.

"This division gives us new models of how to work with our customers," said Ling. "Usually we supply the products to our customers. But this time, both Photop and the customer have invested and formed a joint production line. Everything is open to each side - materials, technology and management."

Establishing a presence While the merger appears to have been a success so far, Ling admits that brand awareness is one stumbling block that Photop has yet to overcome. "Photop is not well known in society. But Koncent is well known and so is SUWtech," he said. "We need a transition to let the customer know that Koncent and SUWtech are Photop."

Photop has already taken steps to address this issue. In November 2003, the company opened a US office in the heart of California's Silicon Valley. The office serves several purposes, although Ling says it is primarily for marketing, sales and technical support.

The office gives Photop a valuable window for observing emerging technologies in the US and passing this information back to China. Photop also plans to use its US base as a training centre for its Chinese sales and marketing staff. "Employees can come to Photop US for six months and learn how to improve our relationship with the customer," explained Ling. "They can then go back to Photop in China and teach other guys how to improve customer satisfaction and service."

Currently exporting around 50-60% of its products to North America, it seems that Photop has the infrastructure to grow its business once the consolidation is complete. But there are larger challenges ahead. "We are planning to go public outside China - maybe in Hong Kong or on the NASDAQ - within the next 3-5 years. This is a set goal," Ling said.

Photop plans to achieve this by attracting investment from western companies. "We want to make Photop a more western-style company - everything from management to quality systems and finance," Ling said. "Our customers must feel comfortable about transferring the manufacture of their product."

Under the Photop umbrella * Koncent Communication is a three-year-old manufacturer of fibre-optic components, micro-optical devices and photonic materials. Based in Fuzhou, Fujian Province, the firm provides a range of product outsourcing and contract manufacturing services from its 27,900 m2 production facility (which includes class 100-10 000 clean rooms). Its workforce of more than 500 includes around 150 dedicated photonics engineers. Koncent is ISO9001-certified.

* Shanghai Uniwave Technologies (SUWtech) of Shanghai designs and produces diode-pumped solid-state (DPSS) lasers. Its products include green microchip lasers, power-stabilized and low-noise green/infrared/blue lasers, and single-frequency lasers. Established in 1997, the company claims to be "one of the main suppliers worldwide for low-power and low-cost DPSS lasers", able to "respond flexibly to non-standard requests". The company received ISO9001:2000 certification in October 2002.

* Fujian Sandgy Optronics of Fuzhou, Fujian Province, is a five-year-old company with around 300 staff and 7000 m2 of facilities. Its core competency is the design and manufacture of precision optical components, including prisms, lenses, C-lenses, beamsplitters, polarizing optics, micro-optics and waveplates. Sandgy also supplies optical accessories including fused silica mounts, glass tubes and glass capillaries, and various antireflective, highly reflective and partially reflective coatings. The firm is ISO9001-certified.

* Fuzhou Microlattice Semiconductor specializes in the R&D and manufacture of a range of advanced optical materials. Based in Fuzhou, Fujian Province, the firm's product lines cover semiconductor crystals (GaAs ingots/wafer, InP ingots/wafer) for LED, laser-diode and wireless component applications; and optoelectronics crystals (Nd:YVO4, Nd:GdVO4, KTP, BBO, green laser core) for solid-state infrared/green lasers and laser frequency conversion.

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