Putting Light to Work

A Discussion Paper on the Canadian Photonics Sector

Canadian Photonics Consortium

September 2004

Contact: Ouafaa Douab
Telephone: (613) 990-4216
Email: Ouafaa Douab

Acknowledgements
Table of Contents
Executive Summary

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Acknowledgements

This paper has been prepared as a background document for the upcoming National Photonics Roundtable being organized by the Canadian Photonics Consortium in partnership with Industry Canada. Its purpose is to guide participants through relevant information to enable them to assess issues and consider future options for the Canadian photonics industry. The document does not aim to propose specific recommendations, but rather to provide an informative platform upon which constructive dialogue may be built. It has been prepared under the guidance of the National Photonics Roundtable Steering Committee.

National Photonics Roundtable – Steering Committee

Table of Contents

1. Executive Summary
2. Photonics: The Technology of Light
3. Photonics: Applications & Markets
• 3.1. Photonics: Market Data
• 3.2. Emerging Photonics Technologies
• 3.3. Socio-economic Impact
  
  
4. Photonics in Canada
• 4.1. Canadian Innovations
• 4.2. Key Photonics Stakeholders
• 4.2.1. Photonics Research Organizations
• 4.2.2. Canadian Companies
• 4.2.3. Photonics Clusters and Associations
• 4.2.4. The Role of the Federal Government
• 4.3. anada and the Optical Telecom Boom
  
  
5. The Global Context
• 5.1. The United States
• 5.2. Europe
• 5.3. Asia-Pacific
• 5.4. Global Themes
  
  
6. Canadian Strengths, Challenges and Opportunities
• 6.1. The Canadian Advantage
• 6.2. The Challenge of the Telecom Market Downsizing
• 6.3. Developing and Maintaining Skills
• 6.4. The Commercialization Challenge
• 6.3. Need for Increased Understanding and Support
• 6.4. Investment
  
  
7. Summary: Imperative for Action

• Appendix A: The Photonics Community in Canada
• Academic Research
• Canadian Research Centres
• Photonics Clusters in Canada

• List of figures
• Fig. 1: The Electromagnetic Spectrum
• Fig. 2: Web of Photonics-enabled Applications
• Fig. 3: Global Optoelectronics Market Estimates, 1999 – 2002
• Fig. 4: Global Supply of Optical Telecom Components, 2000
• Fig. 5: VC Investment in Photonics

1. Executive Summary

Photonics: The Technology of Light

Photonics is about harnessing light to perform useful tasks, from illumination and imaging to precision measurement and sensing, as well as data transmission. Light offers unique advantages for many applications due to its transmission speed, interaction with certain materials, and its precise delivery of energy.

Photonics: Applications and Markets

Photonics is widely recognized as a uniquely important technology because of its direct application in a number of markets and its strategic value as an enabling, technology linking it to many other established and emerging markets and business sectors. Photonics’ current applications range from telecommunication to medicine, industrial manufacturing, security and entertainment. The marriage of optical technologies with others, including electronics, material science, manufacturing and biotechnologies, enables a vast array of components, devices and processes that are key enablers of larger systems and future innovations. According to the Optoelectronics Industry Development Association, photonic components enable more than US$100B worth of products used in optical communications, computing, and consumer goods. This figure does not include the vast array of other products that are manufactured and/or tested, using laser or photonics-enabled processes. Consequently, the socio-economic impact of photonics is growing and is expected to provide accelerated growth through the next decade, as new applications and enabling linkages emerge.

Photonics in Canada

Canada boasts many groundbreaking achievements in the area of photonics, thanks to some outstanding people and organizations, as well as an early start in the field. World-class photonics research is being conducted in both public and private labs across the country. The National Research Council (NRC), the Communications Research Centre (CRC) and the Institut National d’Optique (INO) have all been recognized for their contributions, and have enabled the creation of numerous photonics start-up companies. Additional research and commercialization support is provided through the Canadian Institute for Photonic Innovations (CIPI). The Canadian Photonics Consortium (CPC) is the national industry-led association representing the Canadian photonics community. The Consortium works to solidify and advance Canada’s position as a globally recognized leader in the field of photonics.

The photonics community in Canada is a diverse blend of approximately 250 photonics-related companies and 70 government and academic institutions. Companies range from optical communication giants Nortel Networks and JDS Uniphase to a host of small and medium-sized enterprises, providing products such as imaging systems, test equipment and photo-dynamic therapy drugs. A specific success story was telecom: at the height of the “optical boom” Canada was a global leader, supplying 41% (US$3.3B) of the worldwide demand for telecom optical components in 2000.
Federal and provincial governments play a significant role in the development of the Canadian photonics sector. In addition to NSERC support for university research and training and other funding to federal labs and centres of excellence, Industry Canada and its provincial counterparts have been instrumental in the facilitation of partnerships and linkages to promote knowledge building and commercialization.

This Canadian photonics community has many inter-connections and cooperates on a number of levels, working to leverage the advanced research expertise to commercial advantage. The infrastructure is established and robust, and capable of supporting major investment initiatives.

The Global Context

Several countries have targeted photonics-related areas as national priorities for investment and development, and are producing positive economic results by capturing large market shares in highgrowth areas. Trends towards increased offshore manufacturing and development further strengthen foreign capabilities. In examining the approaches of several countries among the most prominent in photonics-related areas, the following main themes emerge:

• Concerted and coordinated effort among government, industry and academia;
• Strong interaction among companies in the industry, forming alliances, consortia, etc.;
• Efforts to identify future directions via technology roadmapping exercises;
• Some degree of “top down” directions or guidance, regarding technology priorities, coupled with large R&D investments by national governments;
• Special emphasis on improving access to R&D funding and partnerships for SMEs; and
• Increased investment in infrastructure, including training of skilled workers.

Canadian Strengths, Challenges and Opportunities

The Canadian photonics sector has achieved well beyond the level that the size of our population or economy might have suggested. Canada has vast breadth of intellectual property across many photonics-related areas. Favourable R&D tax credits continue to be a strong factor in attracting and maintaining high levels of R&D investment in Canada. However, our past successes will not continue to provide future benefits without renewed effort and investment, and past approaches are not guaranteed to work in the new global context.

The Canadian photonics sector was challenged by the collapse of telecom markets in 2002. In addition to laying off thousands of employees, Nortel Networks largely divested its in-house optical components operations. Entire labs worth of equipment, some unique in Canada, were disassembled and auctioned off. More important than capital assets is the talent pool. Many of the highly skilled professionals laid off were experienced in photonics. The net impact on the capabilities of the photonics sector is not yet known, but it is feared that recovery will be difficult if this talented resource is under-utilized.

It will be important to maintain and leverage the R&D investments of our large companies, and support even more strongly the efforts of Canada’s growing number of photonics SMEs. Carefully chosen research thrusts, sustained funding and the facilitation of effective collaborations can achieve synergy among the contributors to Canadian research and maximize the impact of investments.

Commercialization remains a major challenge with the greatest bottlenecks, appearing to be the movement from prototype to production, as well as effective sales and marketing.

The Canadian photonics sector stands at a crossroad. Its leadership and reputation in photonics markets requires continued investment to maintain. A photonics landscape composed mainly of young companies and SMEs requires a different approach than one dominated by large, vertically integrated firms. Canada’s challenge is finding and implementing a strategy to capitalize on our strengths to move the photonics sector forward in a way that is consistent with our socio-economic priorities and allow its entrepreneurs to aggressively grasp global market opportunities.