This February, I was honored to present at SPIE Photonics West with other photonics industry experts. With business development (BD) and marketing tied up on the exhibition floor, sessions like our AR/VR Market Outlook, Photonics Outlook, and LFW’s Laser Marketplace, tended to attract C-level thinkers. Their strategies, experiences, and questions revealed some trends:
Allen Nogee, President, Laser Market Research, confirmed some surprisingly lackluster 2019 results. While demand and the general market appeared promising, laser companies missed the mark, with a 1.7% growth in GDP in the US, behind inflation at 2.3%.
Why did we miss? To list a few, we had delays of the Boeing 737, a 12% drop in materials processing, and slowing growth in China (a country that consumes more lasers than any other). Perhaps the most impactful is that many companies over-stocked at the end of 2018 in anticipation of tariffs. While the larger laser companies were able to move manufacturing lines, smaller companies had fewer options and were hit much harder.
Of course, controlled growth and a catch-up year in 2019 isn’t a bad thing. However, after 2 years of slowing growth from the all-time 2017 high, companies will need to position for high-value capabilities, emerging markets, and fight for market share to maintain growth rates and margins.
What's Ahead for 2020?
There is growing uncertainty with political shifts, worldwide health issues, changing demand, and more industry movers ahead. Regardless of the industry’s and your company’s 2019 results, these market changes are worth a discussion:
We are projecting a $17.3B 2020 revenue and 11.5% growth in the laser market. What is fueling this growth? Three major sectors:
Communications 11.3% CAGR
Sensing 29.2% CAG
Military 29.7% (Space communications; sighting systems; energy systems)
Allen’s predictions include:
- A rough year again for additive manufacturing, with very little growth in macro materials through 2025.
- LIDAR and camera fusion will be the technology of choice in automotive, but it will push out a few more years than hoped, mostly due to highly publicized fatalities. The roll-out of the Audi A8, the first commercial car with LIDAR for accident avoidance, demonstrates high-volume viability.
- Coronavirus (Covid-19) is the elephant in the room—the question remains: how long will China's lock down last? This could trigger a bigger recession in China.
- Aesthetic market for lasers remains the highest growth in medical, though still modest. Cosmetic laser growth in the emerging Chinese middle class continues to present a growth opportunity. (6.7% in 2019; down from 10.1% 2018).
- Laser as a light source will open new markets, as laser-based flashlights are introduced, and illumination for security remains high growth.
In a leadership panel that included II-VI, Trumpf, Excelitas, and others, they agreed that the biggest challenges the industry will face in 2020 include:
- Talent: Workforce development and the unavailability of engineers and technicians
- Nationalism: Tariffs and supply chain changes
- Privacy: GDPR, CCPA, and the move to AI will increase need for and requirements around data privacy
Through our work in optics, photonics, lasers, and upstream into medical device and aerospace/defense, I have come across some trends and drivers worth noting:
- The opioid crisis is impacting every sector we work in, and should drive the adoption of lasers for pain management, both class 3 and 4 lasers, along with the move toward robotic and minimally invasive surgery, driving demand for micro optics and endoscopy.
- Cannabis legalization, expected to grow this market at 30% CAGR for the next three years, could drive demand for industrial automation and optics/photonics used in inspection. This may offset the continued 1-2 year downturn, likely caused by the ‘valley of adoption’.
- Defense, which continues to rely on outsourced R&D, is increasingly reliant on its supply chain for optical engineering and system design. Lockheed Martin’s venture fund for long term strategic investments in innovation in autonomous systems and robotics, cybersecurity, artificial intelligence, advanced electronics and sensor technology is an excellent harbinger of priorities.
A forward-looking eye toward your customers’ emerging requirements and a willingness to reposition your company to capitalize on opportunities like these can help you to beat market downturns and commoditization in traditional markets.
About Launch Team, Inc.
We are a multi-dimensional, highly focused marketing firm that has helped companies in technical and engineering-driven industries succeed. We've been doing this for over 30 years, increasing and improving our offerings along the way. Our team's backgrounds include optics, chemistry, biology paired with a core business and marketing focus. This allows our team a unique understanding of your business, the decision makers you work with, and the engineers who will evaluate your solution.