For US photonics and optoelectronics companies that are in the shadow of Japanese industry, a new report from the National Science Foundation (NSF) may provide some interesting reading. The report, Science and Engineering Indicators 1996, is a biennial study laden with statistics that paint a picture of the health of US science and engineering.* When it comes to exports of optoelectronics, there is a good-news/bad-news story to tell. The good news is that from 1990 to 1994, exports of optoelectronic products by US companies nearly doubled, from $524 million to $929 million.
"They are certainly gaining more success in selling products in international markets," Lawrence Rausch, a senior analyst in the NSF division of science resource studies, says of US optoelectronics firms. Much of the growth in US exports was in Asian markets, where US exports grew from $156 million in 1990 to $312 million in 1994. The lion's share of those US exports went to Japan, with Malaysia a distant second.
But the bad news in the NSF report is that optoelectronics imports from other countries into the US grew even more quickly than US exports, rising from $1.138 billion in 1990 to $2.536 billion in 1994. As a result, America's trade imbalance in optoelectronics ballooned from a deficit of $620 million in 1990 to $1.608 billion in 1994.
As is the case in other high-technology industries, much of the growth in US imports is due to the growth of high-technology industries in Asia. "Basically, Asian countries accounted for nearly 90% of US imports in 1994," says Rausch. "Japan alone accounted for 57% of those imports." However, Malaysia also accounted for 15% of US imports in 1994, up from less than 2% as recently as 1990.
As a whole, high-technology trade produced a surplus for the US economy of $22.4 billion in 1994, down from $35.3 billion in 1990. The growing trade deficit in optoelectronics was only one factor—during that period, the USA also went from a trade surplus to a deficit in the field of computers and telecommunications. And the report warns that other newly industrializing countries in Asia, such as Korea and Taiwan, may bite further into US exports as they improve their technological capabilities.
The NSF report indicates that when the entire global marketplace is taken into account—not just trade between the United States and other countries—Germany actually had the biggest piece of the world optoelectronics export market in 1994, with 24% of exports to other countries, while Japan was the source of 22.8 % of world exports, and the USA trailed with 13.7% of world exports.
Patent explosion
Japanese manufacturing companies are putting an increasing amount of money into research and development, while American manufacturing companies have failed to boost their research spending enough to keep up with inflation since 1973, says the NSF report. Since 1980, Japanese manufacturing firms have increased their spending on research and development faster than all other industrialized countries.
One payoff from Japan's spending on research may be in generating patentable inventions: Japanese companies filed so many patent applications with the US Patent and Trademark Office in 1993 and 1994 that six of the 10 companies with the most patent applications were from Japan rather than the USA. "From improved information-storage technology for computers to superconductor technology, Japanese inventions are earning US patents in areas that aid the processing, storage, and transmission of information," says the report.
By contrast, German companies appear to be concentrating more on technology for printing, motor vehicles, chemistry, materials, and power generation. Until 1991, US patent applications suggested that German companies were working hard in optoelectronics, but German efforts in the industry appear to have tapered off since then, says the report.
Fewer startups
Startup companies in optics and other fields are now forming at a slower rate in the USA than a decade ago. The report says that 977 high-technology companies have been formed in optics and photonics in the United States since 1960—but 52% of those were formed since 1980. The first half of the 1980s was the hottest period for optics startups, with 221 companies formed from 1980 to 1984. By contrast, the first half of the 1990s saw only 95 new companies formed in photonics and optics in the United States.
In this regard, the photonics and optics industry is not unique. Other high-technology industries experienced growth of new startup companies in the 1980s that has waned in the 1990s, says the NSF report. Automation, biotechnology, computer hardware, advanced materials, software, electronic components, and telecommunications all have experienced a slowing of the pace of formation of new startup companies. One possibility is that much of the burst of growth of company startups in the 1980s was driven by the sudden emergence of personal computers in the marketplace, which has begun to taper off, says the NSF report.
The report documents another way in which Japan exerts influence on the US photonics industry—by owning companies. In 1995, Japanese companies owned 3.3% of the 1210 photonics and optics companies that were operating in the United States. That made Japan the biggest foreign owner of US photonics companies, owning 40 US concerns, compared to the 33 that were owned by companies in the United Kingdom and 30 that were owned by companies in Germany. "Not only is Japan a leading supplier to the US market in photonics and optics, it is also the leader in foreign ownership of US companies," Rausch says. In other words, US and Japanese companies might just as well get used to one another—they are inextricably linked, and neither is likely to disappear anytime soon.