<$1M $1M–
$10M
Number of companies of total revenues
Company size
$10M–
$50M
$50M–
$500M
$500M–
$1B
>$1B
1600
1400
1200
1000
800
600
400
200
0
60
50
40
30
20
10
0
2,132 companies with
photonics revenues <$10M
produce ~4% of total sales
69 companies with
photonics revenues >$500M
produce >72% of total sales
Market Insights
Growing our core photonics
businesses: Transcending the
$10-million plateau
JAN MELLES and LINDA SMITH
According to research from
SPIE, there are about 2750 companies
worldwide supplying photonics components and materials, and they em-
ploy 700,000 people. These companies sell $156 billion of light sources,
optics, and sensors. Of these companies, more than 2000 realize revenues
of less than $10 million, accounting
for less than 4% of worldwide sales
(see figure).
With photonics components at the
core of most modern technologies,
this is an exciting time for the indus-
try. So, have the stars aligned for more
photonics companies to transcend the
$10-million plateau? If so, what can a
small business do to become a larger
market participant?
To explore the question, Linda Smith
of CERES Technology Advisors, an M&A advisory firm working with pho-
tonics companies, talks with Jan Melles, president of Photonics Investments
and founder of 12 photonics companies.
Linda Smith: Were you surprised by any of the research presented by SPIE
on the make-up of the core optics and photonics components market?
Jan Melles: Not really—it’s more a confirmation of many years observing the
photonics components market. As the SPIE data clearly illustrate, little has
changed in the way the components market has developed over many years.
LS: How has the competitive landscape evolved in that time? In industries such as semiconductor manufacturing, as technology matured, the industry consolidated. With photonics components, however, the technologies matured, but much of the industry remains highly fragmented. What
do you see?
JM: There are two main reasons why the industry has developed this way. First,
there is an absence of a high-volume market such as is the case with semiconductors. Second, the component market does not add enough value to enable
component companies to grow into more substantial organizations. To make
the jump from being a component supplier to an organization that manufactures and supplies products that add more value has been a
difficult one.
LS: Looking at the photonics component companies
you invest in, are the biggest challenges they face very
different?
JM: In principle, no. If I could wave my magic wand and let
those companies blossom where others do not, it would be
wonderful but remains a fairy tale. What has improved, however, is the way we deal with this issue more professionally based on long experience. Along the way, plenty of errors
were made, but as long as you learn from them, the potential to grow these companies improves.
LS: A small business looking to grow has many options–
expand the product line for the current customers, extend
into new markets, move up the food chain to compete
Core photonics suppliers worldwide. Less than 10% of companies
employ ~77% of the workforce. (Courtesy SPIE)