Laser companies both small and large are feeling the recent surge of tech-sector M&A activity. Whether a time-to-market or portfolio expansion play, the details reveal much about where the laser industry is headed in the next decade—notwithstanding surprises related to Brexit or U.S. elections.

Han's Laser Technology Industry Group Co., Ltd, a public company that is established in 1996, has now become the flagship of Chinese national laser industry and the world's famous laser equipment manufacturer. Web: https://us.hanslaser.net, Tel: (+1) 408-774-9428,Email: [email protected].

Once considered a solution in search of a problem, the laser has become an important tool forging the next generation of innovative technologies.1 And while many laser manufacturers are content to focus on a pure-play laser portfolio and trump the worldwide economic slowdown2 with mid-single-digit sales growth, many laser—and increasingly, non-laser—companies are keen to leverage the intellectual property (IP) value of laser technology and speed time to market.

Unfortunately, it becomes more difficult to forecast pure laser sales when a laser is just one component of a vertical or upstream systems offering. The laser revenue gets lost in the shuffle, especially when quarterly financial statements from multinational conglomerates seldom call out the product or technology mix that contributes to the bottom-line numbers.

So, where have all the lasers gone? Whether part of a technology portfolio acquired by a non-laser company seeking IP differentiation and time-to-market leverage, absorbed by another pure-play laser manufacturer looking to grow its product portfolio, or remaining intact as a non-commodity specialty product that meets niche market demands, you can bet that lasers are coming to an airport, hardware store, holiday display, theatre, auto dealership, or dental/medical office near you.

For all that they do, lasers will continue to be instrumental in existing and emerging markets worldwide that will, by our estimates, grow laser sales to nearly $11.1 billion in 2017—a roughly 6.6% increase from the revised $10.4 billion in sales for 2016. The secret is out: laser-enabled technologies are big business, and some companies are ripe for picking.

"Market consolidation is normal when products mature and enter commodity status," says Markus Röhner, director of sales in the Healthcare Business Unit of Jenoptik (Jena, Germany), whose laser segment is focused on diode and ultrafast lasers for automotive, medical technology, and materials processing applications. "Economic growth rates have been stuck at a few percent in the last few years and in order to increase sales and revenue, entering new markets is appealing. Even though product complexity has increased over the last few decades, there is pressure to shorten development times for new technologies—contrary trends that impose 'make or buy' decisions crucial to a smart development strategy."

Consider what has happened to light detection and ranging (lidar) laser technologies, for example. "In August of 2016, lidar company Quanergy Systems joined autonomous robotics startup Zoox as a member of the billion-dollar-valuation unicorn club, Ford and Chinese Internet company Baidu invested $150 million in Velodyne,3 and in October 2016, Infineon complemented its radar IC portfolio with MEMS chips for solid-state laser lidar by acquiring Innoluce," says Alex Lidow, founder and CEO of Efficient Power Conversion Corporation (EPC; El Segundo, CA), manufacturer of gallium-nitride (GaN) power semiconductors that enable lasers to emit and detect photons 100X faster than silicon devices for centimeter ranging resolution. "It's no secret that lidar has emerged as one of the hottest laser-enabled technologies in recent memory, but what is surprising is how rapidly—a short 2 to 3 years—the technology went from Google-car curiosity to mainstream driver-assist implementation."

There is a reason lidar is becoming ubiquitous.4 The ranging capability of lasers cannot be matched by visual camera technology-case in point: the Tesla car on Autopilot could have seen that semi-trailer truck and avoided the tragic collision that made headlines in late June 2016 had it been equipped with a lidar system.5

Despite this consumer setback, Lidow predicts that merger and acquisition (M&A) activity in the autonomous vehicle market will continue as companies seek to differentiate their lidar systems offering and enter the market faster with lower-cost lidar options. In fact, the Cars 2025: Vol. 3 Global Investment Research report from the Goldman Sachs Group (New York, NY) entitled "Monetizing the rise of Autonomous Vehicles"6 predicts that lidar will be a $10.6 billion—yes, billion—market by 2025.

In August 2016, Bloomberg (New York, NY) reported that Uber's acquisition of self-driving technology company Otto7would allow Uber to replace its 100 million human drivers with robot drivers as quickly as possible. Lidow sees lidar as the sensor of choice not only for self-driving cars and driver assistance, but also for drone navigation and autonomous industrial robotics.

"Whenever you hear the word 'autonomy,' you can bet that optical sensing technology will be key and photons will be running around somewhere," says Mark Bendett, strategist in the Advanced Technology Laboratories of Lockheed Martin (Cherry Hill, NJ). Bendett argues that the investment, consolidation, and M&A activity in the lidar sector is consistent with the maturity, commoditization, and reliability of laser technology—whether in the defense, medical, or industrial markets. "Directed-energy weapons are moving from R&D experiments to real-world deployment on ships as well as on other ground and air defense systems, and ultrafast lasers are the workhorses of ophthalmology and materials processing."

But lidar and LASIK surgery didn't pop up overnight, Bendett emphasizes. "IMRA got it right with femtosecond fiber laser technology8 for ophthalmic applications in the mid-1990s. Not only did they manufacture a laser that machined human tissue, they also built tens and then hundreds of lasers that each delivered identical performance parameters over and over, year after year. And in 1992-1997, they prototyped autonomous vehicle lidar systems that are just now cheap enough and reliable enough for implementation on a commercial scale," he adds.

"Laser technology seems to come out in bursts, but markets are driven by the dollar. Even though 3D holograms9 were neat to laser technologists decades ago, the flat-screen experience will only be replaced with something like holographic television when the technology is cost-effective for the masses," says Bendett. "Lidar has finally arrived as $80,000 system prices have dropped to $8000 and soon to just hundreds of dollars. The flurry of laser M&A activity in the lidar sector is following a historic progression wherein the 'invention' stage of a technology is replaced by a 'reliability, incremental improvement, and cost-reduction' stage."

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