Technical Insight
Data storage boom prompts fresh growth for laser diodes
Buoyant sales of DVD players and recorders in 2003 more than offset the third consecutive annual drop in sales to telecom applications as the laser diode market grew for the first time since 2000. Figures show that optical data storage is now dominating the laser diode market more than ever.
The laser diode market grew 18% in 2003 to reach $3.1 billion, the first annual growth seen since the heady days of 2000. That s according to the 2004 annual review and forecast from the US analyst firm Strategies Unlimited, which is expecting the market as a whole to grow 11% to $3.4 billion this year - close to the historical average of 10% over the 1996-2003 period.
However, with revenue from the optical telecom sector falling for the third successive year, the market growth was almost entirely due to the impact of a boom in sales of consumer goods, particularly DVD players and, increasingly, DVD recorders. With sales worth $1.87 billion, optical data storage applications accounted for 60% of laser diode revenue in 2003.
The substantial change in the relative value of the US dollar against the Japanese yen over the past year has also added some gloss to the apparent market growth. Strategies Unlimited says that the strengthened yen and weakened dollar contributed approximately 5% to the apparent rise in sales.
According to the report, 2004 will be the turning point for laser diode applications in the telecom sector, with the Strategies Unlimited team expecting to see this market grow 20% this year. This would represent the first increase since 1999-2000, in a sector that saw lower sales in 2003 than in 1996. However, the same forecaster expected this market to bounce back last year, so the prediction should be viewed with some caution. This time last year, 30% growth was predicted for the beleaguered sector, whereas the latest figures show that this market actually contracted by around 10% in 2003 to $780 million.
DVD lasers show strongest growthLooking at the data storage figures, it is clear that the DVD phenomenon shows no sign of abating. Overall, unit sales in the data storage market grew 11%, but this translated to a revenue growth of 34% from $1.4 billion to $1.87 billion, thanks to the higher growth rates of the more expensive 650 nm lasers used in DVD drives. However, 780 nm lasers used in CD drives continue to take the lion s share of the market ($1.05 billion).
Last year saw both a big fall in the cost of DVD players and a sharp jump in the number of recordable DVD drives shipped, particularly those used in PCs. As a result, sales of visible lasers used in DVD applications leapt 78% to reach $811 million last year. The variety of different recordable DVD formats has apparently held the market back from even faster growth, but with consumer prices continuing to drop, sales of recordable DVD players for both PC and audiovisual applications are expected to rocket this year.
Indeed, several major laser manufacturers have already announced substantial hikes in production over the coming months, for example Matsushita Electric (see Matsushita prioritizes GaN with Blu-ray set for July launch).
Not yet making an impact in data storage, however, are GaN-based blue-violet lasers for high-density DVD players and recorders. Although Sony already has a Blu-ray recorder on the market in Japan, its high cost ($3360 in Tokyo shops, according to the latest reports) means that the medium is still far from becoming a significant contributor to the laser diode market. Strategies Unlimited says it is unlikely that 405 nm lasers will make an impression on the overall figures until at least 2005. If the trend seen with DVD is followed, it will take several years for the HD-DVD market to develop and for prices to drop to a level affordable in the mass market.
Telecom decline slowsThe bright spot in the telecom market for laser diodes is that the 10% market contraction seen in 2003 was at least the slowest decline since the bubble burst. Although unit sales for transmitter lasers are matching increased demand for telecom traffic, price erosion is holding down revenue growth, says the report. This is put down to the increased proportion of sales into Asia at heavily discounted prices. "Sales of 980 nm and 1480 nm pumps for optical amplifiers continued to be weak [in 2003] but have turned the corner," said the report. "Unit sales were up but prices continued to fall...revenues will jump, but they have a long way to go before the business is healthy again."
Strategies Unlimited believes that there will be stabilization in prices this year, but this remains to be seen. For example, with Intel relaunching a tunable laser transceiver at the same price as its competitors single-wavelength products at the recent OFC conference (tunable transceivers have traditionally been much higher in cost), discounting could be set to continue. Well over 40 components companies continue to serve the fiber-optic market, and Strategies Unlimited expects to see a lot more consolidation this year.
With data storage and telecom applications making up 87% of the total market, even substantial developments in the remaining application areas for laser diodes are relatively inconsequential. However, the solid-state laser-pumping segment is still a market worth more than $100 million, and several companies that were originally set up to focus on the telecom market have now switched their attention to this area.
This change was much in evidence at the recent Photonics West event in San Jose, CA, where companies such as Alfalight and Novalux were touting their high-power diodes to laser-system OEMs for materials processing applications.
Pump lasers for high-power diode-pumped solid-state lasers (DPSSLs), which make up the third-biggest sector in the overall laser diode market, continued on a historical growth trajectory in 2003, less prone to the economic cycles that have characterized data storage and telecom. The pump-diode market grew by 7% in 2003, although this figure hides a disparity between the two major application areas for DPSSLs. While disappointing trials for materials processing applications have apparently had a significant negative impact on the market, sales are still expected to increase by 14% to reach $135 million this year.
Strategies Unlimited told Compound Semiconductor that reliability issues appeared to have set back the adoption of high-power DPSSLs. As a result, some suppliers of high-power diode stacks were expecting a downturn in 2004, although this was not a view shared by all.
Fiber lasers, which incorporate high-power diode sources that are amplified by a doped fiber, have attracted a lot of attention in the materials processing area. Automobile manufacturers including Volkswagen are reputedly looking into the technology for high-power welding applications, while low-power applications are also proving to be a growth area. With manufacturers claiming lower running costs and technical advantages over comparable DPSSL systems, fiber lasers look certain to snatch some market share, but it is still early days for the technology and it will likely be several years before any major impact is seen.
Printing registers strong growthOf the "other" sectors covered by the report, printing and medical applications showed the fastest growth in 2003. The medical market was largely driven by a steep rise in sales of hand-held hair-removal systems, while the market for blue-violet laser diodes also grew dramatically. The key development was Fuji s photopolymer plate, which is sensitive to violet wavelengths, and the release of 30 mW diodes required to expose it. More recent development of 40 mW diodes will enable faster plate exposure and should see the market grow further, and possibly penetrate large-format printing, which has until now been dominated by thermal exposure based on 830 nm laser diode arrays.
Sales of laser diodes into the printing market is expected to grow 7% this year, with most of the growth coming from increased sales of violet laser diodes, according to Strategies Unlimited.
However, with revenue from the optical telecom sector falling for the third successive year, the market growth was almost entirely due to the impact of a boom in sales of consumer goods, particularly DVD players and, increasingly, DVD recorders. With sales worth $1.87 billion, optical data storage applications accounted for 60% of laser diode revenue in 2003.
The substantial change in the relative value of the US dollar against the Japanese yen over the past year has also added some gloss to the apparent market growth. Strategies Unlimited says that the strengthened yen and weakened dollar contributed approximately 5% to the apparent rise in sales.
According to the report, 2004 will be the turning point for laser diode applications in the telecom sector, with the Strategies Unlimited team expecting to see this market grow 20% this year. This would represent the first increase since 1999-2000, in a sector that saw lower sales in 2003 than in 1996. However, the same forecaster expected this market to bounce back last year, so the prediction should be viewed with some caution. This time last year, 30% growth was predicted for the beleaguered sector, whereas the latest figures show that this market actually contracted by around 10% in 2003 to $780 million.
DVD lasers show strongest growthLooking at the data storage figures, it is clear that the DVD phenomenon shows no sign of abating. Overall, unit sales in the data storage market grew 11%, but this translated to a revenue growth of 34% from $1.4 billion to $1.87 billion, thanks to the higher growth rates of the more expensive 650 nm lasers used in DVD drives. However, 780 nm lasers used in CD drives continue to take the lion s share of the market ($1.05 billion).
Last year saw both a big fall in the cost of DVD players and a sharp jump in the number of recordable DVD drives shipped, particularly those used in PCs. As a result, sales of visible lasers used in DVD applications leapt 78% to reach $811 million last year. The variety of different recordable DVD formats has apparently held the market back from even faster growth, but with consumer prices continuing to drop, sales of recordable DVD players for both PC and audiovisual applications are expected to rocket this year.
Indeed, several major laser manufacturers have already announced substantial hikes in production over the coming months, for example Matsushita Electric (see Matsushita prioritizes GaN with Blu-ray set for July launch).
Not yet making an impact in data storage, however, are GaN-based blue-violet lasers for high-density DVD players and recorders. Although Sony already has a Blu-ray recorder on the market in Japan, its high cost ($3360 in Tokyo shops, according to the latest reports) means that the medium is still far from becoming a significant contributor to the laser diode market. Strategies Unlimited says it is unlikely that 405 nm lasers will make an impression on the overall figures until at least 2005. If the trend seen with DVD is followed, it will take several years for the HD-DVD market to develop and for prices to drop to a level affordable in the mass market.
Telecom decline slowsThe bright spot in the telecom market for laser diodes is that the 10% market contraction seen in 2003 was at least the slowest decline since the bubble burst. Although unit sales for transmitter lasers are matching increased demand for telecom traffic, price erosion is holding down revenue growth, says the report. This is put down to the increased proportion of sales into Asia at heavily discounted prices. "Sales of 980 nm and 1480 nm pumps for optical amplifiers continued to be weak [in 2003] but have turned the corner," said the report. "Unit sales were up but prices continued to fall...revenues will jump, but they have a long way to go before the business is healthy again."
Strategies Unlimited believes that there will be stabilization in prices this year, but this remains to be seen. For example, with Intel relaunching a tunable laser transceiver at the same price as its competitors single-wavelength products at the recent OFC conference (tunable transceivers have traditionally been much higher in cost), discounting could be set to continue. Well over 40 components companies continue to serve the fiber-optic market, and Strategies Unlimited expects to see a lot more consolidation this year.
With data storage and telecom applications making up 87% of the total market, even substantial developments in the remaining application areas for laser diodes are relatively inconsequential. However, the solid-state laser-pumping segment is still a market worth more than $100 million, and several companies that were originally set up to focus on the telecom market have now switched their attention to this area.
This change was much in evidence at the recent Photonics West event in San Jose, CA, where companies such as Alfalight and Novalux were touting their high-power diodes to laser-system OEMs for materials processing applications.
Pump lasers for high-power diode-pumped solid-state lasers (DPSSLs), which make up the third-biggest sector in the overall laser diode market, continued on a historical growth trajectory in 2003, less prone to the economic cycles that have characterized data storage and telecom. The pump-diode market grew by 7% in 2003, although this figure hides a disparity between the two major application areas for DPSSLs. While disappointing trials for materials processing applications have apparently had a significant negative impact on the market, sales are still expected to increase by 14% to reach $135 million this year.
Strategies Unlimited told Compound Semiconductor that reliability issues appeared to have set back the adoption of high-power DPSSLs. As a result, some suppliers of high-power diode stacks were expecting a downturn in 2004, although this was not a view shared by all.
Fiber lasers, which incorporate high-power diode sources that are amplified by a doped fiber, have attracted a lot of attention in the materials processing area. Automobile manufacturers including Volkswagen are reputedly looking into the technology for high-power welding applications, while low-power applications are also proving to be a growth area. With manufacturers claiming lower running costs and technical advantages over comparable DPSSL systems, fiber lasers look certain to snatch some market share, but it is still early days for the technology and it will likely be several years before any major impact is seen.
Printing registers strong growthOf the "other" sectors covered by the report, printing and medical applications showed the fastest growth in 2003. The medical market was largely driven by a steep rise in sales of hand-held hair-removal systems, while the market for blue-violet laser diodes also grew dramatically. The key development was Fuji s photopolymer plate, which is sensitive to violet wavelengths, and the release of 30 mW diodes required to expose it. More recent development of 40 mW diodes will enable faster plate exposure and should see the market grow further, and possibly penetrate large-format printing, which has until now been dominated by thermal exposure based on 830 nm laser diode arrays.
Sales of laser diodes into the printing market is expected to grow 7% this year, with most of the growth coming from increased sales of violet laser diodes, according to Strategies Unlimited.
