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15 Jan 2009
There is no doubt that 2009 will be a challenging year for the optics industry. The economic downturn, industry-wide skills shortage, environmental concerns and the new US president will shape the market. OLE asks five industry leaders for their opinions on these big issues.
COHERENT: John Ambroseo
How will the result of the US presidential election influence your business?
While many people in America and around the world had a preference for President-elect Obama, global macroeconomic factors have a much greater influence on business prospects for our industry and the economy at large. Restoring balance in the credit markets and restoring consumer confidence is of paramount importance. Either candidate would have faced the same challenge although the President-elect has the advantage of having the Democratic Party in control of both houses of Congress. That should make it easier for him to pass economic stimulus packages.
How these packages will be paid for is another question. It is likely that taxes will increase for businesses and individuals. For businesses, this could result in lower capital investment that is bad for our industry. If consumer discretionary spending decreases due to higher taxes, we could well see a prolonged slump in consumer electronics. It has also been suggested that alternative energy incentives may need to be reduced to help pay for the stimulus packages. Needless to say, this would drive an undesirable outcome for solar investments by virtue of making the economics of deploying solar far less favourable.
Are you experiencing problems recruiting skilled staff and how are you addressing the issue?
With a global footprint, Coherent is exposed to multiple employment markets around the world. We have been very fortunate in recruiting and retaining some of the best talent available. The current economic market actually favours a company like Coherent since candidates consider multiple factors including the sustainability of their future employer.
Coherent runs a financially responsible business and believes that cash generation is a key operating metric. With more than $200 m (€139 m) in cash and cash equivalents, and no debt, we are well positioned to weather an unsettled macroeconomic period.
In the longer term, we are concerned by the drop-off of science and mathematics graduates in the western markets. We are addressing this by supporting a variety of public–private educational initiatives, such as the Laboratory for Learning in Silicon Valley, designed to increase interest and competency in science and mathematics among students of ages 10–14. In this way, we are attacking the root cause and hope to drive a generational change. Between now and then, we will compete for talent by offering a stimulating work environment, attractive compensation and advancement opportunities for the best qualified candidates.
How is your company responding to environmental concerns?
Over the years, the photonics industry has developed highly enabling, yet electrically inefficient, solutions. Lamp-pumped and ion lasers at 4 and 0.001% wall-plug efficiency respectively are two examples. We are seeking to break this paradigm by engineering electrically efficient solutions like our optically pumped semiconductor laser (OPSL) and direct-diode systems (DDS).
OPSLs rely on semiconductor technology to create a variety of CW IR, visible and UV wavelengths with wall-plug efficiencies many times greater than traditional lasers, while eliminating the need for water cooling. Not only is this environmentally friendly, it allows customers to save hundreds to tens of thousands of dollars per year in utility costs compared with legacy technologies.
We also believe that DDS will ultimately dominate the materials processing space due to their inherent simplicity as well as unrivaled electrical-to-optical efficiency in high-power applications. Today, DDS are limited to low mode quality applications such as heat treating and cladding, but improvements in mode quality, stacking and fibre delivery will provide access to cutting and welding applications.
How is the current economic climate affecting your business?
The collapse of the credit markets is putting unprecedented pressure on customers and suppliers that rely on credit to operate and/or expand their businesses. Two examples are China and the solar industry. The photonics industry has enjoyed tremendous growth in China over the past few years. However, much of the growth has come from small, emerging companies that need access to capital to operate. The current credit crunch has deprived these customers of that access and many – estimates are as high as 50% – will cease operations within six months.
The solar industry represents a similar story. While there are several self-sustaining businesses in this space, the majority of solar companies are venture-backed start-ups. With the decline in credit access, venture investment has slowed to a trickle. In a now famous presentation (www.techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/), Sequoia Capital warned its portfolio CEOs to preserve cash as new cash injections would be difficult, if not impossible, to secure. A directional change is urgently needed. The efforts of governments globally to free up the credit markets are laudable. They just may not be fast enough to save many of the affected companies.
How will the result of the US presidential election influence your business?
We certainly live in exciting political times. We anticipate changes in investment due to a potential change in focus of the US government and the public toward alternative energy, domestic technical innovation and healthcare – all markets we currently serve. The biggest effect right now is that some customers are uncertain so they are either making purchases before the change, or waiting until the change beds in.
Are you experiencing problems recruiting skilled staff and how are you addressing the issue?
We're fortunate that we are a growing company with an excellent market reputation along with a work environment that allows people to challenge themselves. There are plenty of skilled individuals available, but it is always a struggle to find individuals who are technically superior and who understand our culture, and believe in our vision. As a result we hire much more for attitude and aptitude than resume.
Throughout the industry, however, we have observed that schools are not focusing enough on developing practical technical skills. Individuals that have combinations of skills and practical, customer-focused, acumen are rare. We'd rather hire a solid technical person who loves solving problems and has a thirst for learning versus someone who believes that they are a world expert in a particular area.
How is your company responding to environmental concerns?
Our focus is two-fold: internal and external. On the internal side we are looking at ways to minimize our environmental impact. This is everything from paper recycling and energy conservation through to efficiencies in our supply chain and product delivery as well as suitable production materials that have less environmental impact.
The external focus is quite different. We're building products for scientists to measure our world – whether it is atmospherics and space exploration, marine science or on land. This also includes helping companies involved in the "green revolution" such as solar panel or LED lighting manufacturing. We believe that better knowledge of how our planet reacts to change will lead to better strategies to minimize impacts.
We have educational outreach to help train the next generation of scientists and teachers with curricula filled with examples of environmental studies. Our belief is that this is probably one of the most important areas of integrative science. A better understanding of our environment and how it adapts to change is one of the big trends, we believe, for the next couple of decades.
How is the current economic climate affecting your business?
For us, these uncertain economic times have brought a few challenges, but much more in the way of opportunity. Fundamentally, our success comes from helping customers solve problems and being their trusted science and business partner. We find that generally the current economic uncertainty has only strengthened our relationships with customers and brought about new opportunities in many markets. Of course, some of our OEM partners are seeing business impacts and to a degree we "feel" what they "feel". We're confident, however, that focusing on what we do best – providing high-value solutions to customers and helping them solve their optical sensing challenges – will continue to provide growth and opportunity for us.
How will the result of the US presidential election influence your business?
It has already become apparent that Barack Obama will pay more attention to environmental issues. Jenoptik may profit from this trend. To give an example, the American automotive industry is facing a difficult situation. Manufacturers have to meet new challenges such as producing cars that need less fuel by improving the quality of engines. Jenoptik provides the measuring systems to monitor the quality of rotationally symmetrical parts used in engines. With our measurement systems, we enable the car manufacturers to ensure high quality in production. This is increasing the demand for these Jenoptik products.
Nevertheless, the new president will be confronted with the difficult task of boosting the US economy. But the focus on high tech and infrastructure is positive. Jenoptik has business activities in the US and subsidiaries there. Therefore, the development of the US economy may also affect our business.
Are you experiencing problems recruiting skilled staff and how are you addressing the issue?
Jenoptik has its headquarters in Jena. Fortunately, Jena is one of the top regions in Germany. This was the result of an analysis carried out by the German newspaper Handelsblatt that was published recently. The city has succeeded in creating a good combination of research, teaching and economy, and that is something that we profit from.
We have also established intensive contacts with universities and thus with the students themselves. But, of course, recruiting skilled people that meet specific job descriptions at specific locations can be a challenging task. Therefore, we have implemented well-targeted human resource marketing. Having a family friendly company culture often makes Jenoptik more attractive to job candidates. Thanks to all of these factors, we do not experience problems recruiting skilled staff.
How is your company responding to environmental concerns?
Jenoptik places great emphasis on environmental issues. Environmental protection has a double effect.
On the one hand, Jenoptik preserves the environment by consuming less material and energy. On the other hand, it enables the Group to present itself as a responsible partner for its customers and to provide sustainable products.
Jenoptik has made a successful entry into a new and fast-growing business area: the photovoltaic industry. We knew that we could leverage existing technology within the business and focus it on laser-based machines for the solar industry.
In this area, our Lasers & Material Processing division has become a supplier for series systems for specific applications used in the manufacturing process of thin-film solar cell (structuring, edge deletion, edge insulation and cutting of glass modules).
In the production of thin-film solar cells, photo-active semiconductors are applied as thin films onto a backing material. In this context, the films are significantly thinner compared with conventional solar cells. The reduction in material and energy consumption during the production process offers significant potential savings in comparison with crystalline silicon technology and contributes to environmental protection. Our systems also contribute to increasing the efficiency of solar cells.
How is the current economic climate affecting your business?
Jenoptik is actively engaged in different long-term growth markets, including the stable defence market. Although these markets will not be able to fully escape the current slowdown in economic activity, this makes Jenoptik less susceptible to downturns in individual markets.
Despite these uncertain economic framework conditions, the Jenoptik Group is keeping to its forecasts for the full year 2008. Group sales will come in at just under €550 m. As a result of the heightening crisis in the semiconductor industry and a marked slowdown in the automotive industry, we expect a Group EBIT of around €37 m, at the lower end of the forecast range of €37–40 m.
The improvement of the interest result by €11 m to €14 m compared with the previous year has also been reaffirmed. In addition, the Jenoptik Group succeeded in increasing its order intake in the first nine business months of 2008 by 8% and recorded an order backlog at the same level as in the previous year.
With our strategic realignment, accompanied by a more streamlined management structure and a cultural change throughout the Group, we have created the conditions needed for value-retaining and sustainable growth.
How will the result of the US presidential election influence your business?
We are all hopeful that the new administration will stimulate a turnaround of the economic recession that everyone is experiencing on both a domestic and international level. During the election, the incoming administration pointed to the importance of increasing the amount of manufacturing done in the US for both domestic use and export. Certainly that emphasis would include and positively impact our company. To the extent that the new administration supports research and places a high priority on US innovation, CVI Melles Griot is ideally positioned to thrive and grow.
The new administration's interest in furthering education also bodes well for our and, indeed, the photonics industry's need for qualified personnel.
Are you experiencing problems recruiting skilled staff and how are you addressing the issue?
CVI Melles Griot has been expanding globally and quickly moving into an industry leadership position in the past several years. As such, we expect to become the employer of choice for the photonics industry. Again, with education and training at the top of the list of the new administration's priorities, we expect that the talent pool for our industry will grow and that CVI Melles Griot will attract the best and the brightest wherever they are around the globe.
How is your company responding to environmental concerns?
First and foremost, the majority of the products that we sell are compliant with the Regulations on Hazardous Substances (RoHS). We likewise seek to work with vendors who adhere to RoHS, as well as share our best practices in recycling, reduced energy and natural resource use. We continue to minimize the creation of scrap in manufacturing and pursue new methodologies for making a positive impact on the global environment.
How is the current economic climate affecting your business?
CVI Melles Griot is conservatively run and is working harder daily to engender our customers' loyalty. These are difficult economic times and we have assembled a team with the experience to weather the storm and, indeed, to come through such times even stronger. While we know that monies for growth are harder to access, we are committed to our growth and well positioned to self-finance its continuation. Given the nature of our business and its ever-expanding applications, the long-term demand for our products should not be impacted by the current economic climate. However, the short-term impact is extremely dynamic and we are actively managing the business.
How will the result of the US presidential election influence your business?
The US presidential election has just taken place. The coming months will show the influence on our business. The US market plays an important role for our business and with Osram Sylvania, our North American subsidiary, we continuously expand our presence in this country and are dedicated to bringing innovative technologies to our customers.
Are you experiencing problems recruiting skilled staff and how are you addressing the issue?
As a global player in a highly innovative business we attract qualified employees who are ready to prove their abilities worldwide. Therefore we do not experience recruiting problems.
How is your company responding to environmental concerns?
We commit ourselves to social and environmental responsibility worldwide. As a leader in innovative lighting solutions, Osram is dedicated to products and processes that contribute to solving global sustainability challenges, address s economic needs and protect the environment. Around 60% of sales come from energy-efficient products.
How is the current economic climate affecting your business?
Our fourth quarter of fiscal year 07/08 has shown a combination of industry challenges and market weakness causing a decline in our business figures. In the coming quarters, I expect challenging market conditions to continue particularly in the consumer and automotive markets.
• This article originally appeared in the January 2009 issue of Optics & Laser Europe magazine.
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