manufacturers for communications were founded in the United States.40 In March 2000, however, the telecommunications bubble burst, throwing the industry into turmoil. By 2002, optical fiber sales had fallen short of monthly projections by more than 80 percent,41 and competitive survival of producers of fiber and components required that they reduce production costs rather than develop novel technologies.42
The collapse of the U.S. telecommunications equipment market led to dramatic change in the location of optical components production. Between 2000 and 2006, the majority of optoelectronic component manufacturers moved manufacturing activities from the United States to developing countries, in particular to developing East Asia.43 By 2005, five U.S.-based companies (Agilent Technologies, JDSUniphase, Bookham, Finisar, and Infineon) and two Japanese-based companies (Mitsubishi and Sumitomo Electric/ExceLight) accounted for 65 percent of revenues in optoelectronic components.44 All five of the top U.S. manufacturers had moved assembly activities to East Asia, and all but JDSUniphase had also moved some or all of their fabrication activities to East Asia. The offshore production activities of these U.S. firms did not rely on contract manufacturers, instead producing components in wholly owned foreign subsidiaries. Only a few U.S. entities, mainly start-ups relying on funding from venture capitalists or Small Business Innovation Research (SBIR), chose to keep all manufacturing in the United States. Included among these start-ups were Infinera, Kotura, and Luxtera.
Despite these changes in the location of manufacturing, as can be seen in Figure 7.3, the United States has maintained a dominant role in total optoelectronics patent production as measured by USPTO data, with Japan a close second. In the 4-year period (2001-2004) after the bursting of the telecommunications and Internet bubble, U.S. patents filed annually by assignees in the United States fell while U.S. patenting during the same period by assignees in Japan continued to rise.
Although those data depict trends in issued patents, which have to pass a formal review for novelty and non-obviousness by USPTO examiners, they do not adjust for the fact that the economic or technological importance of individual patents varies widely. Nor do these patent data indicate the location of the inventive activity
40 Yang, C., Nugent, R., and Fuchs, E. 2011. Gains from Other’s Losses: Technology Trajectories and the Global Division of Firms. Carnegie Mellon University Working Paper. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2080595. Accessed November 12, 2012.
41 Fuchs, E.R.H., E.J. Bruce, R.J. Ram, and R.E. Kirchain. 2006. Process-based cost modeling of photonics manufacture: The cost competitiveness of monolithic integration of a 1550-nm DFB laser and an electroabsorptive modulator on an InP platform. Journal of Lightwave Technology 24(8):3175-3186.
42 Fuchs et al. 2006. Process-based cost modeling of photonics manufacture.
43 Yang et al. 2011. Gains from Other’s Losses.
44 Fuchs et al. 2006. Process-based cost modeling of photonics manufacture.