The world''s economic system is dependent upon its ability to communicate and transmit both voice and data information. Networks of optical fiber span continents and circle the globe, making this communication possible. The rapid expansion in the use of the Internet, too, drives the broader optical market. Optical coatings may be devices or can be a value-added feature of an optical element, such as a lens. Many elements are fabricated and coated in volume, and thus have low prices and margins. The market with the highest margins and fastest growth for coatings, however, is the optical network application. Such networks require complex filters to control the signal transmission along the fibers in the network.
According to a soon-to-be-released updated report from Business Communications Company, Inc, RGB-187R Future for Optical Coatings, the global market for optical thin film coatings is estimated at $5.95 billion in 2002. Expected to grow at an AAGR (average annual growth rate) of 4.3%, this market is likely to reach $7.33 billion by 2007.
Optical coatings are most often deposited using vacuum deposition methods, and processed in batches, although larger producers may have continuous processing capabilities. Optical coatings have higher quality specifications than other types of thin films, and precise scattering and reflectance are often required for applications.
The optical coatings industry, like other optical component industries, is faced with cost pressures as customers seek to bring component prices down by standardizing designs, bringing the technology in-house and automating processes.
In telecommunications, multi-layer thin film stacks have made increased bandwidth possible for fiber optic communications. The telecommunications segment represents the fastest growing segment of the coatings market and is an area with many new entrants.
Thin film filters consist of many layers and have extremely small tolerances and low yields. The low yield rate has kept the prices for the devices high, while prices on other coatings have fallen. The ability to process coatings at a higher than industry average yield is also a characteristic that defines the segment leaders. BCC expects that price pressures will bring down prices and margins in this segment as well.
In the transportation segment of the market, coatings are used on windows, panels and mirrors. Margins in all auto supplier markets are squeezed, and the vehicle makers try to keep part costs to a minimum.
The best coating margins are realized on electrochromic coatings, which are used on automatic dimming mirrors now available on high-end luxury cars. Other coatings are typically captive revenues as suppliers coat the mirrors and windows prior to delivery.
The electronics and instrumentation segment of the market includes many of the standard coatings applications, including camera lenses, computer and television screens, flat panel displays, and laser optics. Segment revenues represent the largest percentage of the total, however, the slow unit growth in several product categories and the declining prices result in declining revenue growth over the five-year period covered in this report.
The medical category represents coatings deposited on eyeglass lenses. Such coatings are a value-added feature of the lens suppliers and as such are captive revenues.
Architectural coatings are deposited on panes of window and display glass. These revenues are also captive, as the glass manufacturer applies the coating as part of the manufacturing process.