Growth seen for global optoelectronics market
The economic slowdown has negatively impacted the global optoelectronics (OE) market, resulting in reduced demand from end-user industries such as computers and telecommunications. The industry is left with over-capacity that has also led to price erosion and industry consolidation. Industry participants must remain competitive despite less capital to invest in newer projects that promise higher profit margins. Global OE revenues reached $4.23 billion in 2002, compared to $4.63 billion in 1999.
The news is not all bad, however. It is projected that the global OE market will grow with the expansion of the total semiconductor market over the next four years. Total revenues for the global OE market will reach $7.23 billion in 2009, as newer applications are introduced that use optoelectronic devices, especially in the telecom industry. Shrinking package sizes and a need for lower power consumption will continue to drive sales of optoelectronic components in the telecom and datacom industries.
LEDs accounted for 25.3% of $4.23 billion in global OE revenues in 2002. Optocouplers represented 21.7% of total revenues. The convergence of faster bandwidth and telecom is expected to drive growth in optocoupler-device revenues through 2009.
Photodetectors accounted for 20.3% of global OE revenues in 2002. The growth rates in the LED and optocoupler segments are projected to be comparatively higher than the photodetector market. Photodetectors will lose market share of the total OE market worldwide by the end of the forecast period, although it is believed that the effect on the revenue growth of the photodetector market will be minimal.
Laser diodes represented 32.7% of global OE revenues in 2002. It is projected that laser diodes will find some extended application in fiber-optic communications that will help increase the segment's share of the global OE market. High-bandwidth Internet proliferation coupled with greater use of medical electronics in network environments will drive revenue growth of the OE market worldwide.
There are over 100 competitors in the OE market. There are three tiers of competition: The first tier includes diversified electronics manufacturers offering a full range of optoelectronic products, the second tier consists of diversified electronics manufacturers offering only specific optoelectronic products, and the third tier includes OE manufacturers offering low-end products.
Product distribution in North America is primarily through direct sales and distributors. In Europe, Asia-Pacific, and the rest of the world, sales are primarily through distributors and manufacturing representatives. The competitive factors for this market include price, efficiency, operating voltages, and delivery time.
Even though the industry has seen diluted volumes due to the slowdown in the economy, all the market participants have continued to improve the quality of their products to promote their sales in the market. The industry is moving more toward high-volume, low-cost applications. As such, it is important to remain price competitive to capture sales. The Figure displays the degree of competition in the OE industry worldwide.
Customers are demanding improved materials and higher technology without increased prices. Therefore, vendors are finding new methods to cut costs that include higher automation and migration to cheaper locations for manufacturing. OE manufacturers are moving their mass production facilities to Asian countries such as China, South Korea, and Taiwan. Though there is an upsurge in the Asian markets, that is not due to the any expansion of world market, with the exception of China. North American revenues are also being diverted to Asia. It is projected that this trend will continue as the market in China continues to expand.
The global OE market is growing. Because the OE market is very competitive, it is important to keep pace with technology development and keep track of the dynamics in the growing end-user markets such as telecommunications. Due to increased outsourcing by OEMs to electronic manufacturing services (EMS) (EMS), the EMS industry is enjoying an increasing share of the global OE market as more telecom OEMs outsource to subcontractors. Optoelectronics manufacturers that can identify market opportunities, provide their customers with quality product support, keep pace with technological developments, and compete on price, will be successful in the global OE market.
Mandeep Singh Oberoi is a research analyst at Frost & Sullivan (San Antonio, TX).