The global market for photonic integrated circuit subsystems and components is expected to rise at an average annual rate (AAGR) of 18.2% to $5.6 billion by 2009. The market for discrete devices or integrated optical circuits will grow at an AAGR of 17.1% to $4.9 billion. The established transmission market (laser diodes, transmitters, photodiodes) comprises 77% of this market. Subsystems, or photonic integrated circuits, will grow at an AAGR of 27.7% to $744 million. In sum, these systems, or optical systems-on-a-chip (SoC), will grow from 8% to 13% of the overall market. PIC sales experienced a generational lag due to the slowdown in telecom equipment spending in 2001. The resulting focus on the bottom line has raised the value of higher performing, low-cost optical components in the network.

Growth of the Worldwide Market for Photonic Integrated Circuit Subsystem and Components, 2002-2009 ($ Millions) Source: BCC, Inc.

INTRODUCTION

The photonic integrated circuit (PIC) is the optical equivalent of the electronic planar integrated circuit. Since the introduction of PICs in 1997, the optical component industry slowly has been migrating from manual assembly of discrete optical devices to to automated, semiconductor wafer-processing techniques and single-chip solutions. Ultimately, each major optical networking function (e.g., amplification, mux/demux, switching, transmitting/receiving) will be performed by a single chip.

Yet, in the last three years, the market for photonic integrated circuits has undergone a major realignment. About 75% of photonic chip makers either have merged or closed since 2001. The carrier market has undergone a number of bankruptcies and consolidations. The slowdown in equipment spending in the long-haul market is not expected to rebound before 2006.

Amidst this repositioning, the market has emerged with product pipelines of market-ready advanced photonic chips and growing endmarket demand. Emerging network segments such as the metro ring and fiber to the home are creating early markets for these low-cost, compact components. At the same time, shift of manufacturing to fabs in China and Singapore is further driving down costs.

This BCC analysis responds to the need for an in-depth analysis of the technical and market developments underpinning market growth. It addresses the advances in materials and fabrication processes that are enabling passive-active photonic integration. Specifically, it provides a detailed analysis of the current and future markets for photonic integrated circuits, an important enabling technology for nextgeneration networks.

SCOPE OF STUDY

The report contains:

• A comparative overview of PICs and their historical development
• Forecasts for growth of PICs deployed in fiber- optic telecommunications systems
• Product market forecasts, broken down by subsystems, PICs and components, integrated optical circuits (IOCs), the buliding blocks of PICs
• Segmentation by passive (arrayed waveguide gratings, variable optical attenuators, switches) and active (lasers, detectors, transmitters, transceivers, amplifiers) PIC subsystems and components
• Forecasts of PIC penetration rates by network segment and geography
• Forecasts and comparative analyses for both the materials and technologies used in the fabrication of photonic integrated circuits.

METHODOLOGY AND INFORMATION SOURCES

Forecasts are based on current industry statistics, opinions from industry experts, and standard technology forecasting methodologies. Information sources include extensive interviews with optical component suppliers, industry analysts, market and scientific researchers, academicians, and purchasers of photonic integrated circuits. In addition, trade magazines and industry reports were consulted.

BCC has been a leader in market research and consulting to the optical networking; optical component; and optoelectronics equipment, systems, and materials industries since 1971. Over the past several years, BCC has produced in-depth analyses of technologies and business opportunities in materials and components for advanced optical networks. Some reports of interest are outlined below.