COVID-19 Year 2: A photonics story of growth, shortages, and innovation
Few markets have sustained the steady and healthy growth numbers the photonics market has enjoyed since the 1970s. However, when the COVID-19 pandemic hit, it threatened to put an end to the market’s 50-year boom. Fortunately, the photonics market saw far less instability than many anticipated throughout the pandemic. Although the market may not have seen the same growth rates it has enjoyed in previous years, it remained pleasantly stable.
According to recent numbers by Mordor Intelligence, the anticipated growth for the photonics market remains impressive. Specifically, Mordor valued the global photonics market at US$589.82 billion in 2020, and it is expected to reach US$1019.77 billion by 2026. This accounts for an estimated compound annual growth rate (CAGR) of approximately 7.14% during the period of 2021-2026.
Additionally, in June 2021, McKinsey & Co. released its “The Next Wave of Innovation in Photonics” report, which also demonstrated how the track record of dedication to innovation across the photonics markets has enabled the laser-device market to achieve a value of $17 billion by 2020. This same report anticipates a continued growth rate of 10%, yielding market valuation of $28 billion by 2025. Additionally, McKinsey expects to see 8% growth across precision optics sector, as well as 9% growth for photonics sensors. The automotive use of photonic sensors in particular is an area where the firm predicts especially strong growth numbers (21% per annum), attributable to the trend towards autonomy.
The key takeaway from the available numbers? The pandemic remarkably doesn’t seem to have had much effect on the industry, explains Tom Hausken, senior industry advisor with Optica (formerly OSA). “Whereas you hear about downtown office buildings remaining empty and devastating the nearby businesses that serve them, and other lasting impacts from the pandemic, our industry seems surprisingly unscathed,” he says.
“The year 2020 underperformed from what it would have been without the pandemic, and 2021 outperformed as disruptions faded, and pent-up demand drove revenues. Now supply chain issues are restricting growth, but the industry appears to be on track to approximately where it would have been if the pandemic hadn’t happened,” says Hausken. “Looking ahead to 2022, we can expect more of the same. It should be a ‘normal’ year, apart of course from whatever new external disruptions may come our way. But our industry has been strong through two of the most challenging years of our generation.”
One key note: Unlike previous market review articles appearing in Laser Focus World’s January issues, this year’s focus is much broader, looking at the photonics market as a whole rather than narrowing in on the laser subset. The rationale for this shift is significant. Although lasers will continue to serve as a meaningful component of the larger photonics industry, the market has hit a maturity level where it is now important to look at the market in its entirety.
The chip conundrum
It may feel like everyone is “blaming” the chip shortage for current frustrations. After all, it has become a common sticking point across just about every industry today—but for good reason, the number of semiconductor chips in today’s manufactured goods is mind-boggling. Adding fuel to the fire, the need for more chips is intensifying as smart technology becomes the norm (see Fig. 1). Specifically, the persistent drive to leverage artificial intelligence (AI), machine learning, autonomy, and electronification of mobility solutions will only add to the demand expectations.
Simply considering how many chips one product can contain adds context to the issue. For instance, automakers consume roughly 10% of the current chip production with cars containing a range of 100 (internal combustion engine) to as high as 3000 (autonomous battery electric). Smartphones, appliances, Industrial Internet of Things (IIoT) devices, and even toys are all chip hogs rapidly using up the global supply.
According to a December 2021 report by Kearney, “the demand for leading edge semiconductors will increase with an annual growth rate of 15%.” Kearney sites AI, high-performance computing, edge computing, and wireless communications as the key drivers (see Fig. 2), while also estimating these products will account for “more than 80% of leading-edge semiconductor consumption by 2030.”
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