Why did we analyse this subject? Well, German photonics manufacturers have adopted a strong international position in core segments of photonics like production technologies, medical technology, and machine vision. Yet Asia has also been attracting attention for a while now as a major potential market for photonics. The region is home to many world market leaders, specifically in the IT-based fields of photonics such as displays or optical communication. In times of globalisation and growing digitisation of the economy, Asia adopts a key role in the international arena, which has been keeping the German and European photonics industry busy now for several years.
To gain a better understanding of how globally competitive China, Japan and South Korea are and how well they support their local photonics industry, Euro Asia Consulting PartG analysed more than 5,000 research programmes and conducted detailed interviews with key local decision makers and market experts, all with a focus on Europe’s strong photonics core segments, namely production technology, machine vision and medical technology. The findings were presented at the Laser World of Photonics trade fair at the end of June in Munich, Germany.
Challenges of competing with Asia
The study believes that, in the next few years, the focus of Asian research and innovation policies will shift towards the domain of today’s German and European photonics suppliers, mainly regarding laser material processing, lithography, machine vision and medical technology. The amount of support given by the three countries will double from €2.1 billion in 2014 to €4.2 billion in 2020. Compared to the €600 million of European photonics support to be provided by 2020, these figures alone are enough to sound alarm bells.
But there is no constructive criticism in simply demanding to keep up with Asian funding. A much more critical point is that the Asian countries have modified their research and innovation strategies. China in particular will experience a paradigm shift: in 2017, the country will start to implement industry-driven agenda processes for shaping its official support activities, an example set by Germany and Europe. All three countries aim to bridge the ‘valley of death’ by intensifying the strategic cooperation of government and industry and, thus, speed up the conversion of research results into marketable products. This Asian learning curve is all the more alarming in that it may be assumed not to be limited to the photonics segments alone but to encompass other industries such as mechanical engineering, electronics, etc. in the future.
In order to protect our strengths, technologies and markets, European industry and politics will have to respond soon. Gerhard Hein, director of VDMA Laser and Laser Systems, said in Munich: ‘From our current strong position, we consider this a signal to German and European manufacturers. It certainly makes more sense to point out risk potentials that the German industry and the BMBF [the German Federal Ministry of Education and Research] have intentionally put on the agenda than to lean back and enjoy the comfort of our current know-how edge and temporarily competitive prices.’
China restructures its support strategies
Looking at China, you will realise that, mainly owing to the huge domestic market, the photonics industry is experiencing rapid and constant growth. Whereas the photonics segments of photovoltaics and information technology are known to be strong, the Chinese government is and will be focused on production technology, currently one of the major German and European photonics strengths. Machine vision and medical technology, though not the centre of attention yet, will gain in strategic relevance in the next few years.
The top-down approach of political steering processes concentrates on basic research and development. But this will change in 2017 because China has noticed the weak points of its support policy and responds by introducing new, market-driven strategies. Apart from just receiving the benefits of official promotion programmes, the private sector will become an active contributor to the expansion of innovation and process chains aiming to enhance the efficiency of technology transfer and the commercialisation of innovations.
Japan focuses on future-oriented topics
Once the fiercest global photonics competitor, Japan has lately been facing powerful competition from more cost-effective producing countries such as China or South Korea. Owing to the loss in market shares, the government’s strategic and research impetus is moving away from production technologies and towards medical technology and machine vision.
A major motivating factor is the fast ageing of Japan’s population or rather the ensuing emphasis on robotics and smart factories. Despite Japan’s high technological level, photonics support is not expected to increase significantly by 2020. What is more likely to happen is that the available funds will be redistributed, leaving less for production engineering and giving more to medical technology and machine vision. The Japanese government has a bottom-up approach in that its political steering processes are market and industry-driven. Government, industry and researchers are cooperating in a remarkably close manner providing Japan with an efficient technology transfer to commercialisation in response to their competitors.
South Korea pursues the most efficient industrial policy
South Korea has had a large share in the displays and information technology market. Of the three countries, it is and will also be investing the greatest support in the photonics segments under investigation. But that’s not all: its combined top-down and bottom-up approach provides the country with the most efficient political steering strategies and the highest technological maturity of the three. The government focuses its support on small and medium-sized enterprises as well as the cooperation of research and industry in consortiums and clusters – both have been successful models in Germany and Europe for years. By aiming to localise core technologies, increase its export capacity and further streamline its support policy with market needs, South Korea has become a particularly serious threat.
Need for action
The study findings suggest that we must not leave the topic to itself; they should galvanise European industry and politics and make them aware of the strategic Asian targets. This is the only way for Germany and Europe to establish a common footing and to discuss recommended activities. Challenges may also evoke chances. European companies will have to ask themselves to what extent they should be open for cooperation with Asian partners in order to prevent a loss in market shares – and whether they should actively seize the opportunity of benefitting from Asian support initiatives and placing themselves nearer the centre of the global photonics market. However, this would imply a more localised development or at least production facilities.
The study was initiated by the German Engineering Association VDMA in collaboration with Spectaris and the German Federal Ministry of Education and Research (BMBF). The executive report is available for download at: http://photonik.vdma.org/en/article/-/articleview/8476098
