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Europe's leading photonics nation?

Warren Clark and Tom Wilkie find out how German optics companies feel about their own nation’s standing in the world of photonics

For Dr Andreas Nitze, CEO of Berliner Glas, the German photonics industry draws its strength in part from the long history of optics in Germany, dating back at least to the foundation of Schott in the late 1800s. Allied to that is the longstanding German tradition of precision engineering, which is nowadays applied not just to optical design but also to the combination of optics with mechanics. A third source of strength is education and research – not just the excellence of the university system but also the apprenticeship scheme. ‘That is difficult to find in other countries such as the US. In other countries, we have to train technical staff,’ he said.

But the downside for a company competing in international markets is the high level of wages expected by the German workforce. This has led companies to outsource manufacturing to the Far East, or to Eastern European countries such as the Czech Republic or Poland. ‘We will continue to have high salaries, so we have to focus on innovation here, for products to be manufactured elsewhere.’

But Dr Nitze also identified a structural problem in the German economy that might inhibit the country benefiting from the full fruits of innovation. Germany has a preponderance of small- to medium-sized enterprises (of which Berliner Glas is one), and these tend not to have sufficient capital to take an idea all the way through to the development and manufacturing of a product for sale in a globalised market. ‘It is a challenge to a manufacturing company to think globally.’

Germany does provide the strong domestic market necessary for a strong national capability in photonics, Dr Nitze said. However, export markets are growing more strongly. ‘Around 60 per cent of the sales of the main players are now in export.’ For Berliner Glas, the main export areas are other European countries and the USA. The defence sectors in France and the UK are important to the company, as is the electronics industry in the Netherlands. The company opened a US subsidiary in 1995 because ‘it helps to have a US name. In the US, people want to buy from there. They do not want to be bothered about Euros or the nine-hour time difference or shipping costs. We wanted to be closer to the market.’

However, the company found that it was easier to develop the ‘technical glass’ side of its business from the US sales office, rather than the photonics side. Dr Nitze said that its photonics customers wanted to discuss their requirements in depth with engineers, and so a team of sales representatives by themselves could not be successful. The company will be developing this strategy in the future. Founded in 1952, the company currently has around 720 employees. Despite this substantial size, in an echo of his earlier comments about the numbers of small to medium-sized enterprises in Germany, Dr Nitze thought that Berliner Glas was probably too small to go into Asia – certainly in the photonics side of the business.

He believes that the photonics sector in Germany had benefited from the ‘Optics Agenda’ initiative taken at the beginning of the decade, which tried to bring home to all sectors of society – but especially politicians and Government – the importance of the optics and photonics industries to Germany. One result had been a revival in the numbers of school leavers who sought a career in the industry – whether at the graduate level or at the apprenticeship stage. However, Dr Nitze drew attention to the demographic changes in Germany which entailed a shrinking workforce in the future. ‘We have to make sure we have good education in the field of photonics at all levels, that the population sees a future in photonics and that it draws the kids there. Every company can do something – subsidise the education of physicists or open their doors and invite the public in.’

Jens Meyer, who runs the European operation of Edmund Optics, is positive about Germany’s current standing: ‘The market in Germany is growing at the moment, particularly the vision market. In our view, that is because labour is becoming more and more expensive, so many manufacturers are turning to automation – and with automation you need vision systems.

‘As a nation, Germany has a great deal of expertise in the vision sector, particularly in cameras and lenses. As a result, we export these high-quality components worldwide. I believe German products are seen as offering high quality and high reliability, and there are many German companies who are leaders in their field.

‘If you want to do business in Germany, you have to be in Germany itself – for all sorts of reasons: the local language, the time zone and the ability to understand and offer the level of service that customers expect here in Germany.

‘In terms of export, we sell a lot of high-value products to Switzerland, Italy and Austria, and a lot of components to countries in Eastern Europe.

‘The Government does have funds available for general developments in science, and photonics certainly forms a part of that.’

Werner Ziegs, director of European field sales for Coherent’s scientific and instrumentation division, believes the landscape is changing: ‘For us, the photonics market is split between the scientific market and the commercial/industrial market. In the past, Germany accounted for as much as 50 per cent of all the photonics business in Europe. As other nations have developed faster, such as the UK, that has dropped to a share of around 30 to 35 per cent.

‘There is a great deal of expertise here that straddles academic research and industrial application. For example, the Fraunhofer Institute operates with a combination of government and private funding, and is tasked with developing new technologies or products for specific industrial use. Historically, Germany has a very good reputation for mechanics and optics – and that is a good basis for the photonics market of today. This means that technical design is a major strength.

‘With this high level of research excellence and the level of manufacturing expertise at the nation’s disposal, you tend to find that products get to market much quicker, and also that the market becomes saturated much more quickly. The sales curve is very steep to start with, but then drops off much sooner than it would in other countries.

‘A major market in Germany is that of lasers for measurement and inspection, with applications ranging from eye tests to tyre tests, as well as surface inspection for the optics market itself.

‘Germany is also the home to, in my opinion, the best photonics exhibition in the world – Laser Munich. I don’t think it is a coincidence that the show is based here in Germany. That has fuelled also a lot of small and mid-size photonics companies here with good international contacts.

‘As a nation, we do struggle – comparatively speaking – to attract overseas personnel to work here. We have had various government incentives to encourage foreigners to come to Germany to work, but most have failed. I also think that the opportunities for growing a business, from a political and small business support point of view, are not as great as you would find in, say, the UK or the US.   

‘Germany is highly dependent on its export business. We have good trade relationships with many countries worldwide: the rest of the EU, obviously, but also Eastern Europe, the Middle East and China.’

Dr Mazo of Frankfurt Laser Co has also seen a period of massive change in recent years: ‘When Frankfurt Laser Co started back in 1994, the laser industry in Germany was a desert compared to today. At that time, a number of people began to see that the laser market was potentially lucrative. This attracted a lot of private investment, as well as a considerable amount of support from the Government.

‘With this level of support, it meant that by the end of the 90s, Germany had become one of the leaders in the photonics industry, on level terms with countries such as the USA, the UK and France. As a nation, we very quickly developed a range of products, which placed us in a much stronger position than many other European countries.

‘Laser diodes now represent around 80 per cent of the laser market, and Germany is particularly strong in this area.

‘Much of this relatively quick success comes from the traditional German expertise in high-tech industries. We also tend to be very good at quality control, and that is critical in something like laser production. Before Germany became a major force, buyers were obliged to import laser products, and for many this was very frustrating, due to inconsistency of the products being supplied.

‘There is – and has been – plenty of indigenous demand for lasers within Germany, because there is a strong industrial infrastructure in areas such as automotive, machine production and medicine.’

‘Exporting from Germany is reasonably straightforward, with no significant restrictions. In some cases you require an export licence, but this is reasonably straightforward to obtain. It’s certainly easy enough to export to our major customers in the US, Japan and Israel, though certain other countries may impose their own restrictions.

‘What does make it difficult for German companies – and this is not restricted to Germany but applies to the whole of the Euro zone – is the high cost of the euro compared to the dollar. Right now, the exchange rate is not in our favour, which makes our products significantly more expensive for US customers.

‘Finally, in terms of recruitment, good people are hard to find. That’s not just a problem in Germany, but across the photonics industry in general.’

So, German companies have seen a fascinating period within their country in recent times, and have also had to respond to competition from other nations. And, in common with many engineering-based industries, there is a need to ensure that the next generation of optics specialists is nurtured to preserve future growth of the world of photonics.