The global photonics market size was valued at USD 630 billion in 2021. It is estimated to reach an expected value of USD 1,100 billion by 2030, growing at a CAGR of 7.3% during the forecast period (2022–2030). Photonics is widely touted to be a critical enabling technology for the emergence of smart systems that make judicious use of energy without compromising on the efficiency of overall systems. Many industries use technology to increase efficiency, fueling growth, including healthcare, automotive, communications, manufacturing, and retail. These sectors' investments have recently experienced significant growth as well.
The primary engine driving the photonics market is silicon-based photonics applications. In telecommunications and data center applications, hybrid silicon lasers (silicon and group III-V semiconductor) are employed, benefiting them from III-V semiconductor materials' light-emitting capabilities. Furthermore, technological advancements in light-based technologies have been driving the new wave of innovation by providing sustainable solutions to global challenges, which have been identified as a significant driving factor for the global market.
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Emergence of Silicon-based Photonics Applications
Silicon photonics is an evolving branch of photonics offering a clear advantage over electric conductors used in semiconductors, which are used in high-speed transmission systems. This technology is expected to push the transmission speeds up to 100 Gbps, with companies like IBM, Intel, and Kothura achieving breakthroughs using the technology. Besides, this technology revolutionizes the semiconductor industry, enabling high-speed data transfer and processing.
The increasing adoption of LiDAR scanners also creates a massive opportunity for silicon photonics LiDAR in medical and industrial applications. For instance, in 2020, SiLC collaborated with Varroc Lighting Systems to offer its FMCW LiDAR into the latter's headlamp. Moreover, the silicon photonic LiDAR from Yokohama University integrated a chip's OPA scanning, lasers, modulator, and photodetectors.
Furthermore, researchers at the National Institute of Standards and Technology (NIST) identified a class of silicon photonic sensors that may be effective in high-radiation environments because of their ability to withstand high radiation doses. Thus, the market is expected to invest heavily in the mass adoption of this technology and be a key aspect in developing high-performance computing to improve performance and efficiency. Therefore, the emergence of silicon-based photonics is driving the market.
Increased Focus on High Performance and Eco-friendly Solutions
In the present day, modern technological advancements seldom occur without the environment being considered. Preserving the planet plays an ever-greater role in forging the direction of innovations in photonics technology, and, conversely, photonics is having a considerable impact on the environment. Photonics-based devices offer higher energy efficiency than other technologies in many verticals, which has been identified as a significant market driver. In industrial applications, photonics-based processes have been identified to consume 30% less energy than conventional machines while providing faster operating time and material wastage savings of up to 94%.
The technology helped reduce the world's lighting energy consumption and revolutionized data transfer and its associated energy needs. Similarly, solar energy, one of the photonics technologies, is being observed to address a critical environmental issue. Likewise, scientists are harnessing photonics technologies in sensors to detect chemical and particulate emissions that are harmful to the environment. Hence, the increasing focus on high-performance and eco-friendly solutions is expected to drive the demand and positively impact market growth.
High Initial Cost of Photonics-enabled Devices
Technology adoption is being hampered by the higher initial cost of silicon-enabled goods and gadgets compared to traditional goods. Although the technology offers greater performance and efficiency, many small- and medium-sized end users in various sectors still cannot afford photonics-based equipment. Furthermore, in the photonic market, many venture capitalists (VC) are highly optimistic about the adoption and expansion of the technology. However, many believe technology may take much more time than accepted to gain its full potential. Due to this, the market does not have as much investment as expected.
Additionally, there is a high level of initial investment required in industries for integrating such photonics technology for automation purposes. Automated systems' high costs concern effective and robust hardware and efficient software. Automation equipment requires increased capital investment to invest in smart manufacturing (a computerized system can cost millions of dollars to install, design, and fabricate). Thus, industries rely on existing technologies at a lower price, ultimately challenging their adoption.
Increased Use of Photonics for Non-Invasive Healthcare
From physics to biological sciences, photonics technology has spread quickly. Many stages of medical and biological research employ light and laser technology. Studying biological components in-depth is made possible through spectroscopy. Medical lasers are essential for success in all fields, including medication research, delivery, medical imaging, genomics, and robotic surgery guidance. Perhaps the most critical part of medicine that photonics changes are diagnosis. OCT scanning is a recent innovation that can identify several conditions that were previously challenging. The field of ophthalmology is the first and most affected to gain from OCT. Glaucoma, retinopathy, and other forms of visual deterioration can all be seen during eye scans utilizing OCT. All contemporary optometry clinics use technology since it is crucial for diagnosing novel retinal illnesses. Hence, such applications in the healthcare sector propel market growth.
The global photonics market is segmented by application and region.
By application, the global photonics market is segmented into surveying and detection, production technology, data communication, image capture and display, medical technology, lighting, and other applications (traffic and research).
The Image Capture & Display segment accounts for the largest market share and is estimated to grow at a CAGR of 7.2% during the forecast period. Image capturing & displays deal with a broad palette of interrelated photonics technologies. The global demand for displays and TVs with the latest display technologies is increasing, further augmenting the demand. With the proliferation of smart TVs, consumers looking to update their devices to the latest technologies are expected to drive the market. Optical systems can capture and interpret hand movements contactless, with low installment and maintenance costs. These optical systems can be used in sterile workplaces such as hospital operating rooms, driving the need for photonics.
The Surveying & Detection segment is the second largest. Photonics plays a significant role in surveillance systems adopted in law & enforcement along with the defense sector as the demand for such solutions is increasing along with the proliferation of technology in the industry. Further, the high focus of the governments on developing drones is anticipated to aid the surveillance hardware market in the defense sector. Biometric devices are expected to replace traditional systems as the primary means of user authentication. Photonics-based sensors are widely employed in the design of biometrics systems, which could lead to an overall reduction in costs while improving the accuracy and reliability of these systems. Such factors drive segment growth.
The Data Communication segment is the third largest. The demand for technology in the market is anticipated to be driven by the expanding usage of optical solutions in communication technologies such as optical broadband, with the segment occupying a significant part of the market. With the growing use of optical networks as part of the infrastructure, the investment from telecommunication companies in enhancing legacy networks is expected to drive the demand. Moreover, with the proliferation of technologies and growing consumption of video content over the internet, the need for broadband is increasing worldwide. Photonics provides novel and disruptive techniques required to cope with the increasing requirements for bandwidth capacity, particularly in backbone networks.
Asia-Pacific Surpasses Other Regions
By region, the global photonics market is segmented into North America, Europe, Asia-Pacific, and the Rest of the world.
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Asia Pacific accounts for the largest market share and is estimated to grow at a CAGR of 7.1% during the forecast period. Japan is the third-largest economy in the world; it had a GDP worth USD 5,082 billion in 2019, representing 4.22% of the world economy. It still holds a significant share in the photonics market and is becoming more open to collaborations. Big corporations want to stay on top and seek investments to fuel growth. The market size, emerging openness, and dynamic photonics industry can surely benefit innovative companies in Japan, thereby driving the country's market growth. Moreover, with the significant increases in internet traffic due to data from social media, video streaming services, working from home, IoT, and the country's overall digitization, players are investing in photonic integrated circuits (PIC).
PICs are devices in which optical functions are integrated into wafer materials such as silicon, indium phosphide, and silicon nitride and have immediate applications in transceivers for optical communications. For instance, in November 2020, Hitachi High-Tech Corporation announced that VLC Photonics SL (VLC) has become Hitachi High-Tech's subsidiary company and will continue providing photonic integrated circuit (PIC) engineering services as part of the company's broader offering. According to the company, besides the optical communications market, PICs are also becoming a critical platform technology within many industrial sectors, such as automotive sensing, environmental testing, health sciences, and quantum technology. Such instances are likely to propel the market growth in the region.
North America is expected to account for USD 230 billion by 2030, registering a CAGR of 7.5% during the forecast period. The photonics market share is expected to witness significant growth in the North American region over the forecast period, with the United States dominating the regional market. The increase in the photonics market demand in this region strongly correlates with the development of adjacent markets such as lighting, safety & defense applications, healthcare, and production technology. Also, the United States leads the data center hardware market, which remains one of the significant applications for photonics. The presence of several market incumbents, such as IBM, Intel Corp., and HP, with greater access to R&D funds is expected to drive growth in this region.
The United States has the highest concentration of photonics-based applications companies relying excessively on consumer feedback. According to a paper presented at the Optical Society of America's (OSA) Conference on Lasers and Electro-Optics (CLEO) and published online in the OSA Technical Digest, a group of people created a single thin layer of integrated silicon photonics that emulated the lens and sensor of a digital camera, reducing the thickness and cost of digital cameras. This was designed at the California Institute of Technology. Such trends are expected to boost the adoption of photonic sensors in the regional consumer technology industry, thereby stimulating the market's growth.
Europe is the third largest region. Photonics offers solutions that address critical societal challenges, such as energy generation and energy efficiency, healthy aging of the population, climate change, and security. The European region forms a significant proportion of the world's analysis of fundamental photonics, providing Europe with a dominant position in the world. Due to industry development activities, Germany is expected to exhibit a considerable growth rate over the forecast period. For instance, the country is increasingly investing in upgrading and installing advanced telecom equipment and infrastructure. Besides this, photonics also sees an increase in usage across various industries in this country, like healthcare, due to growing consumer awareness boosting the adoption rate of photonics in this industry.
List of key photonics market suppliers profiler