Industry Overview
Photonics is one of the fastest-growing high-tech industries in the world today. It is the science and technology of generating, controlling, and detecting photons, which are particles of light. Today, photonics is made up of a variety of many different technologies (semiconductor devices, optical lenses, optical fibers, glasses, thin-film coatings, optoelectronics, etc.), and relies on a variety of disciplines. According to Mordor Intelligence, the photonics market was valued at USD 686.86 billion in 2019 and is expected to reach a value of USD 1,080.3 billion by 2025, at a CAGR of 7.89% over the forecast period (2020-2025). The trends in photonics, such as lidar or additive manufacturing are rising. Lidar technology has been used for decades to analyze the distribution of gases and pollutants in the atmosphere. It has become a crucial technology for autonomous driving in recent years. In the Southeast Asian market, the key industry players are Malaysia, Singapore, and The Philippines.
The photonics market is expected to surge during the forecast period owing to the extensive application of photonics in the various end-use industries. This includes life sciences, manufacturing, electronics, information and communications technology, photovoltaics, and security and defense. The market is expected to fuel in the forecast period with the growing demand for quality healthcare and its immense use in medical imaging. Furthermore, the growing awareness regarding early disease detection will further propel the demand for effective imaging, fueling the market growth with the growing demand for accuracy and sensitivity providing real-time information. The growing miniaturization of devices has given rise to the designing of photonic sensors in addition to other sensors, propelling the growth of global photonics in the forecast period. Also, with the growing adoption of IoT and its advancements, the emergence of the internet of photonic things is boosting the market demand in the forecast period and in the upcoming years.
For Malaysia, photonic companies enjoy various advantages as efficient and sophisticated supporting industries are already in place, having grown in tandem with the country’s semiconductor industry. Malaysia’s relatively young photonics sector has also benefited from the participation of several multinationals and state-owned companies. Furthermore, in recognition of the sector’s potential, the Malaysian government has identified photonics as one of the country’s priority sectors for development. In line with the policy, the government is actively fostering photonics-related research & development activities at universities and research institutions as well as upgrading the skills of the Malaysian workforce.
One of the country’s major companies, Photronix Malaysia, started the operations in 2002. To date, the company manufactures Fibre Optic Sensors for various applications, Fibre Bragg Grating (FBG), Erbium-Doped Fibre Amplifier (EDFA), and Fibre Optic Couplers for local and overseas markets. Photronix Technologies Fibre Optic Sensors are being used in monitoring hill slopes, and structures such as buildings and bridges. The company is also venturing into the pipeline as well as power cable monitoring. Photronix Technologies is also in collaboration with several local universities in the area of Fibre Optic Sensors. The company’s research and development team is actively pursuing areas where optical sensors are applicable.
For Singapore, based on advance estimates for the third quarter of 2020 by the Ministry of Trade and Industry, the Singapore economy expanded by 7.9 percent on a quarter-on-quarter seasonally-adjusted basis, rebounding from the 13.2 percent contraction in the preceding quarter. Singapore has a high degree of industrialization and more than $300 billion of foreign investment, and the country has focused on finance, trade, high-volume manufacturing, and manufacturing services in several sectors including the biomedical sciences, chemicals, electronics, and precision engineering. Moreover, the nation has been consistent in its efforts to deploy disruptive technologies to improve the lives of citizens, including the country’s initiative to become a Smart Nation. As Singapore pushes on with its ambitious plans, the capacity needed on networks along with the Green Data Center initiative will continue to grow, and photonics, in this matter, becoming more relevant to support the ambition.
However, for The Philippines, photonics research is one area where Philippine-based scientists have been able to display creativity and technical expertise that are comparable with the best in the world, particularly in laser microscopy, and image & information processing.
Industrial Performance Per Segment
Production Technology (Laser materials processing systems, laser for production technology)
Photonics based production technology comprises equipment used in industrial manufacturing. This includes on the one hand lasers and laser systems for materials processing. On the other hand, it comprises systems for lithography, a major manufacturing process for semiconductors, printed circuit boards, and flat panel displays.
According to the Crystal Market Report, the Southeast Asia laser marking machine market is valued at 112.47 million US$ in 2018 and will reach 190.53 million US$ by the end of 2025, growing at a CAGR of 7.87% during 2019-2025.
Measurement & Image Processing
The major products in terms of market volume are photonic sensors (binary sensors), spectrometers, semiconductor measurement systems, and geometrical measuring systems. The photonic sensors market was valued at USD 13.25 billion in 2019 and is expected to reach USD 28.99 billion by 2025, at a CAGR of 14% over the forecast period 2020-2025. The Asia-Pacific region is expected to witness the highest growth rate over the forecast period. Growth in the region is fueled by increasing defense/military spending in China and India, and the industrial automation trend in these nations.
Medical Technology & Life Sciences
Medical technology comprises therapeutic medical systems as well as systems for in-vivo and in-vitro diagnostics. Life science includes analytical systems used in R&D, in the pharmaceutical and biotechnology industry. Major products include endoscope systems and accessories, spectacle lenses and contact lenses, therapeutic lasers and laser systems (including for cosmetic purposes), medical imaging systems, and many more.
The Asia medical technology market is expected to grow at a CAGR of 8% and is projected to overtake the EU as the second-largest market globally by 2020. In Southeast Asia, Singapore is strategically placed to enable MedTech companies to tap into these regional opportunities. To date, Singapore is home to more than 60 multinational MedTech companies, undertaking a range of activities.
One of the country’s companies, Becton Dickinson, is a Fortune 500 global MedTech company that provides innovative solutions to improve medical discovery, and its history in Singapore stretches over 30 years and remains one of the top three investors in Singapore’s MedTech.
Communication
An optical network is a communication system that uses light signals, instead of electronic ones, to send information between two or more points. In a way, optical networking employs light for the transmission of data in the long-range (wide area networks) and the short-range (local area networks). Valued at $16.9 billion in 2019, the global optical networking and communication market size is set to reach $32.8 billion by 2030, witnessing a CAGR of 6.2% during the forecast period (2020–2030).
The Asia Pacific region held the largest revenue share in the global optical networking and communication market in 2019. The evolution of broadband services depends on the deployment of optical networks, and a considerable rise is being witnessed in broadband penetration in Asia Pacific countries. In the region, China, India, Malaysia, and the Philippines are displaying a high adoption rate of wireless communication and advancements in the IoT field, which are resulting in the rising demand for fiber optic cables in the region.
Information Technology
Information technology products, including consumer electronics and the office automation segment in Southeast Asia, is projected to reach US$ 11.401 million in 2020. The revenue is expected to show an annual growth rate (CAGR 2020-2025) of 11.0% resulting in a projected market volume of US$ 19.171 million by 2025.
Major products include digital cameras, optical printers and copiers, scanners, barcode readers, and optical disk drives.
Displays
Displays, or more precisely flat panel displays, comprise a wide range of products; LCD, LED-backlit, LED, OLED, and e-Ink. The flat panel display market is reshaping the whole electronic market in terms of technology. The major factor which is driving the flat panel display market is the high adoption of advanced technology such as OLED over LCD. OLED (organic light-emitting diode) displays as compared to LCD are thinner and lighter in weight and offer high resolution. Various other factors are driving the market, such as an increase in the demand for smartphones, high-quality resolutions of television, and laptops. The demand for flat screens in the automotive sector is growing rapidly which is further driving the market for flat panel displays.
Geographically, the flat panel display market is segmented into North America, Europe, Asia Pacific, Middle East and Africa, and South America. Asia Pacific region is expected to experience high growth in the flat display market, the region is led by China as a large number of market players for consumer electronics. Japan also shows potential growth in the flat panel display market as the adoption ratio of consumer electronics is high. The Asia Pacific Flat Panel Display Market would witness market growth of 10.8% CAGR during the forecast period (2020-2026).
Lighting
According to Mordor Intelligence, the global LED lighting market is valued at USD 58.91 billion in 2018 and is expected to reach USD 127.97 billion by 2024, with a CAGR of 13.75% during the forecast period (2020 – 2025). By transitioning to energy-efficient LEDs, an estimated savings of USD 18 billion in electricity costs can be achieved.
The Southeast Asian LED lighting market has been growing steadily over the last few years, mainly due to government initiatives, rising demand, and infrastructure projects. The government offers strong support through incentives and regulations; financial support is provided to boost local manufacturers. Declining prices have resulted in rising consumer demand for and adoption of LED products.
Besides, environment-friendly products are seeing increased uptake across the region, fueled by the efforts of the key market participants. The outdoor lighting segment will record significant growth over the next 2-3 years as a result of infrastructure-related investments. Malaysia is projected to reach US$ 6 million in 2020, with revenue is expected to show an annual growth rate (CAGR 2020-2025) of 26.1%, resulting in a projected market volume of US$ 21 million by 2025.
Photovoltaics
The photovoltaic market in the Asia Pacific was valued at the US $94.81 billion in 2019 and is projected to reach US$ 407.93 billion by 2027; it is expected to grow at a CAGR of 20.0% during the forecast period. Several initiatives have been taken by governments in APAC to minimize the cost of the overall set-up to maximize the far-reaching benefits of an on-grid option in rural electrification, along with uplifting the focus toward sustainable environmental conditions.
For Southeast Asia, Vietnam is now the leader in the solar photovoltaic (PV) market with the largest installed capacity in the region. According to research by Wood Mackenzie, Vietnam’s cumulative solar PV installation will hit 5.5 gigawatts (GW) this year, making up 44% of Southeast Asia’s total capacity, compared to just 134 megawatts (0.134 GW) in 2018.
Market Challenges
As reported by Laser Focus World, the data generated by the exponential growth rate of Internet traffic is enormous and data centers are crucial to support the resulting data communications, storage, and processing needs through cloud computing. Photonic devices play vital roles in these data centers, and this has posed significant challenges to photonics high-volume manufacturing (HVM).
A recent Cisco study indicates that both global IP and global data center traffic are growing at a compound annual growth rate of around 25%. The proliferation of emerging applications, such as the Internet of Things (IoT), video streaming, 3D sensing, smart cars, and virtual reality (VR) and augmented reality (AR), has created more appetite for bandwidth and thus for new data centers. By 2020, projections show that 50% of data centers will be at the hyperscale level, meaning their architecture will have the ability to scale appropriately as increased demand is added to the system.
The challenges, however, lie within the datacom. As data center demand becomes the new growth engine, the photonics industry feels the challenges from servicing new data center business models that are far different from the traditional telecom models. The most critical factors that impact photonics manufacturing are high volume, low forecast visibility, the fast pace of innovation, quick response, and low cost.
Market Opportunities
Asia-Pacific region occupies the most significant market because of the presence of emerging economies such as China and India. The availability of a cheap workforce coupled with favorable government initiatives is driving the market growth. For instance, China aims to become a global leader in manufacturing by 2025 through its initiative “Made in China 2025”. Currently, China is a leader in manufacturing smartphones and other consumer electronics, such as flat panel displays and lighting products. Thus, through this initiative, China aims to become the world’s “factory,” and in return would have a positive impact on the market.
Moreover, with the rising young workforce in countries such as India, there is an increase in disposable income which is another primary reason which is expected to drive the market. This is because the major vendors are expanding their footprint in the country through partnerships or mergers and acquisitions to gain a competitive advantage.
Conclusion and Recommendation
Photonics is a key enabling technology that can be found everywhere. Photonics is not part of our everyday language, but it serves as the foundation for many technologies we depend on daily, including those that use light, create a light, detect light, or modify light. From its beginnings with the invention of the laser in the 1960s, photonics technologies have advanced significantly to impact a wide range of sectors, especially the following: telecoms and data communications, healthcare, advanced manufacturing, and more. Moreover, as one of the fastest-growing high-tech industries in the world today, the photonics market was valued at USD 686.86 billion in 2019 and is expected to reach a value of USD 1,080.3 billion by 2025, at a CAGR of 7.89% over the forecast period (2020-2025).
BRIGHT Indonesia as a Partner to Help Your Company Join Photonic Industry
However, one of the most critical outcomes of photonics’ emergence is acknowledging in which sectors where the dependency on photonics for their competitiveness is at present maximal. As previously discussed, Singapore is a home for medical technology (MedTech), thus showing that healthcare is a large sector where photonics can be enhanced. Moreover, we recommend establishing specific policies to regulate photonics and its growth in the market, knowing that the Southeast Asia region has not handled such things yet.
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