SAN JOSE, Calif. The photonics component business needs to adopt a foundry model to deal with an over capacity in laser diode manufacturing. That said, the sector's growing diversity of markets will help it weather the recession which is currently hammering the telecom industry.
That was the conclusion of a panel of senior executives from laser component makers at Photonics West here.
"I think we need a foundry model for the diode part of the business because we have gross overcapacity," said Kenneth Ibbs, executive vice president of Bookham Inc. (San Jose) which announced Tuesday (Jan 27) plans to buy Avanex Corp. for $35 million to expand its telecom business.
"Further consolidation will be necessary for us to survive," said Stuart Schoenmann, chief executive of CVI Melles Griot (Albuquerque). "There's clearly too much capacity out there today and more is coming online," he added.
The laser industry's diverse customer based in growing clean tech and medical fields will help it survive the current recession, said other panelists. "Photovoltaics is a hot topic even at this show, and we hope new administration fosters that," said Timothy Morris, general manager of Trumpf Inc. (Farmington, Conn.).
"After 50 years, the number of applications driving by laser business is still phenomenal and I don't see it ending anytime soon," said Ibbs. "That gives people niches to move into where people tend to compete on value rather than price," he added.
Telecom is the one slice of the laser component market under intense pressure, he said, characterizing the downturn in chips as "one of the deepest recessions they have seen."
"Unquestionably in telecom consolidation is critical," Ibbs said. Companies have done an amazing job bringing costs down, but it's still not leading to better financial results."
"The [telecom] customers drive you to Multi-Source Agreement standards, taking away your ability to differentiate, but that helps companies like Cisco buy from several vendors," said Mark Sobey, a senior vice president with Coherent (Santa Clara, Calif.).