A fitful recovery looms

21 Sep 2009

The barrage of bad news may be easing in the US photonics sector, but good news remains in short supply

Although an uptick in pricing pressure hints that the gloom could be starting to lift for some companies, the recession continues to weigh heavily on suppliers and integrators in the US optics and laser sector.

Some major vendors have seen their industrial laser markets shrink by 30–50% over the last 12 months and it appears that electronics, R&D and defence applications are propping up many optics suppliers for now.

"The outlook remains mixed for both lasers and optics," Mark Douglass of technology forecaster Longbow Research (Independence, OH) told optics.org. "Companies that rely on automotive and industrial end markets remain the most pessimistic, citing low capacity utilization and the unwillingness of customers to build inventories as major obstacles in the coming year. But those [vendors] with exposure to government, semiconductor/electronics, research and military markets are more positive."

Assessing the numbers in Longbow's survey of US lasers and optics suppliers for August 2009, Douglass believes that when the recovery begins it will inevitably be hesitant: "Some suppliers might be able to see a turnaround in Q4 2009, but it will be patchy over the next couple of quarters. At present, typical industrial contacts in our survey are still seeing just trickles of orders."

One company with improved prospects is Newport, which recently transferred its Spectra Physics high-power diode business to Oclaro – a move that will allow its own laser division to significantly improve profitability, according to Douglass.

"Newport was losing money in that business, so the deal will make a material difference, but it also indicates a change in the nature of the merchant diode business," he said. "It's now much more mature and closer to a commodity market. Companies like Newport no longer need to be vertically integrated, because they can obtain good quality and inexpensive pump diodes from third parties. This is a very different scenario than 10–15 years ago."

Some general cheer for the optics sector might lie in Longbow's finding that the US manufacturing sector continues to rebound from its low-water mark of December 2008, and crept out of economic contraction into a very tentative expansion during August 2009. European economies continued to shrink, although Germany's manufacturing sector, a crucial bellwether for the optics industry, showed only minor contraction during the period.

"This is a particularly positive sign for Rofin-Sinar," explained Douglass. "Approximately 51% of its sales are in Europe and about 33% of its overall laser sales are to the machine-tool market, which is particularly strong in Germany."

China's economy shows a rather different picture: Douglass noted that its manufacturing industry stopped contracting at the start of 2009 and has been in positive territory since April.