Optics and Photonics Essential Technologies for Our Nation (2013) / Chapter Skim
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2 Impact of Photonics on the National Economy
2 Impact of Photonics on the National Economy
Pages 20-63
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The absence of such information reduces the visibility of photonics within the industrial community and impedes the development of more coherent public policies to support the development of this constellation of technologies and applications. This chapter takes the following form: First, a case study of lasers is used to introduce the field of photonics, and the conceptual challenges of developing estimates of the economic impact of photonics innovations are discussed.
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economy. That section motivates the subsequent discussions of the role of venture-capital finance in photonics innovation, the role of university licensing, and the implications of offshore growth in the production of optics and photonics products for innovation in the field.
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Available at http://www.laserfest.org/lasers/ baer-schlachter.pdf. Accessed June 25, 2012.
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Funding of Early Laser Development The development of laser technology shares a number of characteristics with other postwar U.S. innovations, in fields ranging from information technology to biotechnology.
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In 1963, total DOD R&D investment, including intramural projects, approached $24 million, which increased to just over $30 million in the late 1970s.6 Another tabulation of military R&D investment es timates total military laser-related R&D spending through 1978 at more than $1.6 billion (all amounts in nominal dollars) .7 The Early Laser Market The military also was a major source of demand in the early laser industry, although its share of the market declined over time as civilian applications and markets grew rapidly.
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Assuming that this characterization of the laser industries of the United States and other nations is accurate, the differences reflected the prominent role of government demand for lasers in the United States, as well as the important role of U.S. venture capital in financing new-firm entrants into the laser industry.
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in semiconductor lasers than was true of Japanese start ups, whereas established Japanese firms have maintained a more prominent role as sources of scientific publications into the 21st century than have U.S. established firms in electronics, communications, or IT.
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Conclusions from the Laser Case Study This brief overview of the development of laser technology and the U.S. laser industry highlights several issues that are relevant to overall photonics technology.
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and Japanese scientific publications in laser technology. Moreover, the high levels of mobility of researchers, funding, and ideas among industry, government, and academia were important to the dynamism of the U.S.
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publicly traded companies. Data on revenues, employment, and R&D spending in 2009 and 2010 for 282 of the 285 publicly traded companies that are listed as members, employers, or exhibitors can be seen in Table 2.2.16 The total revenues associated with these 282 public companies in 2010 amounted to $3.085 trillion, they invested $166 billion on R&D (amounting to 5.4 percent of revenues)
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million individuals.17 Thus, the public firms listed as active in photonics accounted for approximately 10 percent of U.S.-based employer firms' revenues and 6 percent of U.S.-based employer firms' aggregate employment in 2010. Data were also used from Dun and Bradstreet to estimate revenue and R&D expenditures for the publicly traded and privately held firms listed as corporate 17 Public company listings contributed by SPIE and the Optical Society of America.
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expenditure data subsequently collected for public companies from Compustat and for private companies from Dunn and Bradstreet. Compiled by Carey Chen, Board on Science, Technology, and Economic Policy of the National Academies.
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. This study interprets these data as indicative of the pervasiveness of photonics innovation and technology within this economy.
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Report of the Loyola University Maryland's International Technology Research Institute, Baltimore, Md. 25 Photonics21.
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Report of the Loyola University Maryland's Inter national Technology Research Institute. Baltimore, Md.: International Technology Research Institute.
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As part of the committee's data- collection efforts, each agency was given a one-page description of this study, including a brief description of what the committee included in its definition of o ptics and photonics, along with examples of optics and photonics technologies and applications. The responding agencies were as follows: within the Department of Defense, the Air Force Office of Scientific Research (AFOSR)
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SOURCE: Data collected from the National Institutes of Health RePORTer Database on October 10, 2011, compiled by Carey Chen, Board on Science, Technology, and Economic Policy of the National Academies.
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CHANGES IN PHOTONICS-BASED INNOVATION IN THE UNITED STATES SINCE 1980 This section discusses several aspects of the changing structure of the public and private R&D institutions and investments that have underpinned innovation in photonics and other technologies in the United States since 1980. These structural changes have reduced the role of large industrial firms as performers of R&D and have increased the importance of smaller firms, many of which are funded through venture capital, and at least some of which rely on university-licensed intellectual 30 It is important to note that the search tool uses two different coding methods, one pre-2008 (each institute's judgment of how a grant should be coded)
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The role of venture capital in photonics innovation is discussed in the next section, and potential approaches to inter-firm and public-private collabora tion in technology development are examined in a subsequent section. Chapter 7, "Advanced Manufacturing," discusses another important structural change in U.S.
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SOURCE: Data provided by the Department of Energy on October 18, 2011, compiled by Carey Chen, Board on Science, Technology, and Economic Policy of the National Academies. FIGURE 2.7 Federal research, development and demonstration (RD&D)
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40 Optics and Photonics: Essential Technologies for O u r N at i o n FIGURE 2.8 Federally and non-federally funded research and development (R&D) between 1953 and 2002.
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It is plausible that the U.S. market for photonics technologies now is dominated (in terms of total revenues)
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World Investment Report 2005 noted that multi-national firms from the United States, Europe, and Japan all had increased the share of their offshore R&D activities located in the People's Republic of China, Singapore, Malaysia, and South Korea. According to the UNCTAD report, the developing-economy share of U.S.
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Venture capital has played a significant role in the development of the optics and photonics industry. While total venture-capital investment in the United States may be lower today than during the dot-com bubble, investments continue to be significantly higher than in the early 1990s.
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Between 1998 and 2000, the percent of dollars invested in optics and photonics companies in network and telecommunications services grew from 15 percent to 20 percent of total venture dollars invested in network and telecom munications services to a peak of 28 percent. In 2010, optical and photonics invest ments in communications, equipment and services, and telecommunications fell from a total of $8 billion to less than $2 billion.
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SOURCE: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters; courtesy of John Dexheimer, LightWave Advisors, Inc. Reprinted with permission.
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Capital Photonics Index relative to the S&P 500, revealing that the S&P 500 outperformed the photonics sector during the early part of 2011. If the traditional photonics industry fails to outperform the S&P 500, it is unlikely that the venture industry will shift its investment focus away from social networking and software companies, which currently account for a large share of venture-capital investments, back to photonics.
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Reprinted with permission. capital funding on photonics innovation in telecommunications applications is provided by Figure 2.16, which shows the results of a venture-capital survey conducted by Deloitte and the National Venture Capital Association (NVCA)
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. SOURCE: 2011 Global Venture Capital Survey, June, by Deloitte; National Venture Capital Association -- Next 5 Year Venture Capital Forecast of Allocations.
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If returns from optics investments can be better quantified, venture capitalists may be more likely to track and invest in optics and photonics as they did for the brief period in the mid-1990s. BOX 2.1 A Note on Government Funding of Small and Medium-Sized Businesses As suggested in this chapter in the earlier section entitled "Government and Industrial Sources of R&D Funding in Photonics and Federal Funding of Optics," in addition to venture capital and angel funding, government funding can contribute to the financing of small firms that are research and development performers.
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Many if not all U.S. research universities have established campus offices of technology licensing to oversee the patenting and licensing to industry of research advances.39 In the case of the photonics industry, universities have clearly over the last four decades been playing an expanding role in early-stage R&D.
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42 The "Open Collaboration Principles" cover "just one type of formal collaboration that can be used when appropriate and will co-exist with other models, such as sponsored research, consortia and other types of university/industry collaborations, where the results are intended to be proprietary or publicly disseminated." According to the principles, "The intellectual property created in the collaboration [between industry and academic researchers] must be made available for commercial and academic use by every member of the public free of charge for use in open source software, software related industry standards, software interoperability and other publicly available programs as may be agreed to by the collaborating parties." Ewing Marion Kauffman Foundation.
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The committee supports the conclusions of these expert groups. MODELS OF COLLABORATIVE R&D AND IMPLICATIONS FOR PHOTONICS INNOVATION As is noted above, the structure of the U.S R&D system has changed since 1980.
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The first model, SEMATECH, is a not-for-profit research consortium established in 1987 to provide a research facility in which member companies could improve their semiconductor manufacturing process technology. The second, the Optoelectronics Industry Development Association (OIDA)
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The model provided by the German Fraunhofer Institutes is discussed in Box 2.2. Semiconductor Manufacturing Technology (SEMATECH)
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industry's competitiveness may be difficult to prove, SEMATECH met most of its revised objectives in the development of process technology, the supply of manufacturing equipment, and collaboration between manufacturers, suppliers, and research centers.67 Some research suggests that SEMATECH reduced the duplication of member R&D spending 68,69 and that economic returns to member companies outweighed their membership costs.70 Several lessons for the design and structure of public-private consortia can be drawn from the experience of SEMATECH. First, SEMATECH focused primarily on short-term research, with 80 percent of all R&D efforts 60 Grindley, P., D
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Similar to the situation in the semiconductor industry, the value of a photonics community coalition is apparent in providing leadership to help interface with in dustry and government on policy matters, as well as in informing the general public and the investment community on current matters. However, previous attempts to form photonics industry trade associations have had limited success, possibly because these organizations did not receive sufficiently broad industry participa tion.
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that led to the funding by ATP of 10 proposals from industry.81 In 1992, DARPA began a series of programs, which continued through 2009, to promote the development of new optoelectronics technologies, including direct funding for OIDA workshops and operating expenses. In 1994, NIST's Optoelectronics Division was founded "to provide the optoelectronics industry and its suppliers and customers with comprehensive and technically advanced measurement capabilities, standards, and traceability to those standards."82 As indicated by NIST,83 the division's mission was to maintain close contact with the optoelectronics industry through major industry associations, including the Optoelectronics Industry Development Association, and to represent NIST at the major domestic and international standards organizations in optoelectronics such as the Telecommunications Industry Association and the American National Standards Institute.
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is another semiconductor research and development consortium whose structure contrasts with that of SEMATECH. In 1982, the Semiconductor Industry Association launched the Semiconductor Research Association as a cooperative research organization to "enhance basic research in semiconductor related disciplines" by funding "long-term, pre-competitive research in semiconductor technology at U.S.
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and OSTP, and in its 2001 budget submission to Congress, the Clinton administration raised nanoscale science and technology to a federal initiative, referring to it as the National Nanotechnology Initiative (NNI)
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An interesting exception may be the model 92 National Nanotechnology Initiative. Available at http://www.nano.gov/.
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Accordingly, the committee's judgment is that the time is overdue for a federal initiative in photonics that seeks to engage industry, academic, and government researchers and policy makers in the design and oversight of R&D and related programs that include federal as well as industry funding. Proposed National Photonics Initiative A national photonics initiative would coordinate agency-level investment in photonics-related R&D and could provide partial support for other technologydevelopment initiatives, including R&D consortia funded by federal and industry sources.
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The diversity of applications associated with photonics technologies makes it difficult to quantify accurately the economic impacts of photonics in the past and even more difficult to predict the future eco nomic and employment impacts of photonics. Key Finding: Given the diversity of its applications and the enabling character of photonics technology, data on photonics industry output, employment, and firm financed R&D investment are not currently reported by U.S.
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Key Recommendation: The committee recommends that the proposed national photonics initiative spearhead a collaborative effort to improve the collection and reporting of R&D and economic data on the optics and photonics sector, including the development of a set of North American Industry Classification System (NAICS) codes that cover photonics; the collection of data on employment, output, and privately funded R&D in photonics; and the reporting of federal photonicsrelated R&D investment for all federal agencies and programs.
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