Competition, excess manufacturing capacity impact optoelectronics profitability

Circuits Assembly, March, 2004

The recent economic slowdown has reduced demand from end-user industries, heightening competition and flattening the growth rate in the world optoelectronics market. New analysis from Frost & Sullivan (Palo Alto, CA, www.electronics.frost.com) reveals that this industry generated revenues totaling $4.23 billion in 2002. Total market revenues are expected to reach $7.22 billion in 2009.

"Lack of capacity utilization, price constraints and reduced volumes are greatly impacting the profitability of optoelectronic component manufacturers," said Frost & Sullivan research analyst Mandeep Singh Oberoi.

As rapidly expanding communication technologies drive higher bandwidths and increased speed of communication products, manufacturers of optoelectronic components are under pressure to enhance the speed of the devices as well as the bandwidth they can support.

Another trend in the industry is toward lower package dimensions to help reduce the size of products. Higher budgets are required to design and test newer packages without affecting the speed of the optoelectronic device. However, customers are not willing to pay a higher price for improved technology, and vendors are being compelled to cut costs without compromising on quality.

According to the report, the increasing brightness and range of colors in light-emitting diodes (LEDs) offers new market opportunities for manufacturers that keep pace with the technology. In other segments, the convergence of computers, communications and consumer electronics is driving demand for optocoupler devices, while photodetectors are likely to do well in the medical device market. High-end telecommunications products, office automation and peripheral devices are expected to push laser diode sales.