Private Equity Investments in Photonics Highlights for First Half 2018
At the EY World Entrepreneur of the Year Forum, Linda Smith of Ceres will join entrepreneurs and CEO's from around the world for discussion on how in this transformative age, the consumer, retail, real estate, government, financial services, insurance, media, pharmaceutical, transportation and Photonics industries are colliding to improve our world. This transformation is redefining how value is captured, shifting power from the traditional incumbents to consumers and new entrants. Photonics technology and component providers have finally caught up with their OEM and end-user customers in the public markets to capture their share of the value. However, even more exciting for the Photonics industry are the private capital markets. The value and number of investments have skyrocketed since Ceres started tracking private equity in 2012.
Private PlacementsIn the first half of 2018, $17billion of the $456billion in private placements worldwide goes to work commercializing photonics technology and scaling businesses with core photonics technology. Private placement transactions for target companies are researched with closing, effective, or announce dates from January 1 to July 9, 2018. Private placements include private equity or growth capital, venture capital and private investments in public entities. Transactions volumes, values, geographies and market segments are analyzed. Values are in $US at historical rates of exchange. <Download First Half 2018 Photonics Private Placement Transaction Detail> The Information Technology sectors saw by far the most investment. Segments include displays, fiber optic communications, 3D sensing and facial recognition, internet of things, computing and imaging. Investments crossed start-up to growth capital. North America, in line with history, saw the most investment, more than 50%. Historically, Asia, namely China and South Korea, are realizing more and more of the global private placement market. Photonics Colliding with Other IndustriesInformation TechnologyThe Gartner Hype Cycles provide a snapshot of emerging technologies along a predictable pattern of enthusiasm, disillusionment and eventual realism. "The Hype Cycle for Emerging Technologies distills insights from more than 2,000 technologies into a succinct set of must-know emerging technologies and trends that will have the single greatest impact on an organization's strategic planning," said Mike Walker, research director at Gartner. "This Hype Cycle specifically focuses on the set of technologies that is showing promise in delivering a high degree of competitive advantage over the next five to 10 years." Referencing below, Photonics is the key enabling technology for these emerging information technologies. Quantum ComputingQuantum computing harnesses the ability to coherently control quantum systems at the level of single quanta (atoms, ions, electron spins, photons). It is heralding a new technological revolution. Quantum cryptography, also termed quantum encryption, applies these principals of quantum mechanics to encrypt messages in a way that a message is never read by anyone outside of the intended recipient. The most common example today is Quantum Key Distribution (QKD) where photons distributed at the microscopic quantum scale are horizontally or vertically polarized. Observing or measuring disturbs the quantum state. It is possible to see that it has been disturbed and thus, to not trust the message. Other examples today are quantum key encrypted payments by smartphones, online voting, satellite communications and smart grid utility networks. Quantum encryption demand is driven by growing incidents of cyber-attacks and increasing data security and privacy concerns. In 2017, it is $300million market. By 2023, it is projected to surpass $1.2billion (CAGR 27%). Further, quantum computing and simulation promise to solve computational tasks impossible to solve with today’s binary digital electronic computers. Quantum computing technologies have the potential to dramatically change long-held dynamics in commerce, intelligence, military affairs and strategic balance of power. The market for quantum computing hardware and software is projected to grow over the next six years at CAGR of 24.6% to $8.5billion in 2024. Virtual and Augmented RealityAugmented Reality is jumping out of the “Trough of Disillusionment” onto the “Slope of Enlightenment” with Virtual Reality. Augmented Reality (AR) and Virtual Reality (VR) are forecast to be $120 and $30billion markets by 2020 (Digi-Capital). This maps to $45 and $6billion markets for display and content creation hardware that integrate optics and photonics by 2020. In addition to today’s core gaming and 3D film markets, virtual reality is used in high-end simulation and training applications, including military flight simulators. It is also used in scientific visualization and modeling - including geo-modeling in the oil industry and genome mapping, as well as for product design, where VR systems are used to experience automobile or equipment design. Medical professionals will use VR for telepresence doctoring and remote surgery. Currently, augmented reality applications or mixed-reality scenarios (where HMDs and context-aware software are used in a hybrid augmented/virtual environment) are popular technology approaches to the problem of marrying immersive VR to a consumer setting. Consumer AR implementations are external-facing solutions intended to be used directly by the consumer. To date, these have been for marketing, advertising, gaming, and education. Business AR implementations are typically internal-facing AR solutions. These solutions include training and maintenance, product and parts visualization, maintenance and repair, prototyping, and connecting human workers with information real time. Private placement investments in 2018 were made across the value chain in companies providing display hardware to companies supplying content and software applications. Surveillance and NavigationUnmanned Ground and Aerial VehiclesLight Imaging, Detection, And Ranging (LIDAR) is a metrology method that measures distance to a target by illuminating it with a laser. It is a key enabling technology in Drones, Self Driving Cars and Smart Robots. It is used to make high-resolution maps, with applications in geography, geology, geomorphology, forestry, laser guidance and altimetry. For the autonomous applications, LIDAR with a laser 3D scanner is used for obstacle detection and collision avoidance. The Unmanned Aerial Vehicle (UAV) market is estimated at $15billion in 2017 and projected to reach $28.3Billion by 2022, at a CAGR of 13.5%. The Unmanned Ground Vehicle (UGV) market is projected to grow from $9.8billion in 2017 to $18.7billion by 2020, at a CAGR of 23.7%. The market for Smart Robots is projected to grow from $4.9billion in 2018 to $14.3billion by 2020, at a CAGR of 24%. HealthcareBiophotonics - Medical DiagnosticsIn the $55billion In Vitro Diagnostics market, there is a concentrated base of instrument manufacturers employing fluorescence, optical label-free and molecular imaging methods to gene, protein and cell based diagnostics. Thousands of companies worldwide are developing assays and pharmaceuticals with those instruments. The Wearables market is estimated at $25billion by 2019. In 2018, Biophotonics is fueling economic growth and investment in improved platform technology, point-of-care devices, bioinformatics, reagents, sample collection and clinical laboratory services - as well as prolific commercialization of disease-specific and personalized assays and pharmaceuticals. PhotonicsThere is a significantly higher concentration of transaction value in Asia since 2012. The increase is even higher, since 2012, in Asia based photonics companies compared to the global private placement market as whole. North America & Europe, historically with larger private equity markets, are lagging Asia in growth capital investments to scale manufacturing operations. Materials and CoatingsIn the Photonics segment, with the exception of $1billion investment in Foxconn, a contract manufacture, Materials and Coatings sees the most investment in 2018. Larger private placements are announced or closed by suppliers of silicon for photovoltaics, smart optical glass, display panel glass, and fluoro molecules for LCD's and functional optical films for display based in China and Taiwan. $5million and smaller private placements are announced and closed by early stage companies developing quantum dots and other nanoparticles based in US.
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