NBSIR-86/3369

A111DE M 3 b 2 7 3

PLANNING

REPORT

Technology and Economic

Assessment of Optoelectronics

Gregory Tassey

Senior Economist

National Bureau of Standards

October 1985

100

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86-3369

1985

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PLANNING REPORT 23

TECHNOLOGY AND ECONOMIC ASSESSMENT OF

OPTOELECTRONICS

Gregory Tassev

Senior Economist

National Bureau of Standards

October 1985

ABSTRACT

Optoelectronics is one of the two major technologies driving the revolution in

communications, which will not only have profound effects on the economy but on social and political structures as well. The other technology, optical fibers, is

already beginning to mature, but optoelectronics is rapidly catching ud, enabling

the acceleration of the "information age".

Future productivity advances in optoelectronics will come from integration of the

various signal processing functions and from improved manufacturing technologies . Integration may occur in two important stages. The first, referred to "hybrid"

integration, is almost at the point of commercialization. Hybrid devices use oxide-based (ceramic) materials and integrate some of the signal processing

functions. Total or "monolithic" integration, based on gallium arsenide and related

materials may not reach commercialization for another 8-10 years. In both cases,

the economic impact will be substantial as information technologies become a critical element of most industries.

As a result, the U.S. and its major competitors, especially Japan, are making major

R&D investments in optoelectronics. Worldwide R&D expenditures are expected to

reach $1 billion by 1987. In terms of market penetration, fiberoptic systems will

attain annual sales of more than S3 billion by 1989. The Japanese have made a national commitment to becoming the world leader in this market, borrowing from

their substantial expertise in semiconductor technology.

Competitive positions in world markets will be determined by which countries rapidly

advance all elements of the overall technological base. This base includes basic

science, generic technology, applications (proprietary product and process

technologies), and infratechnology. The last of these consists of

measurement-related methods and data and has been shown to have significant effects

on productivity growth in other technological areas. Optoelectronics is projected

to be equally dependent on this technology element for rapid development and market

penet ration.
,

i '-J

•' : :rf !

'
ACKNOWLEDGEMENTS

A number of NBS staff gave of their

time to provide very useful comments on

drafts and consultations on technical

matters. In particular, thank., are due

to Michael Bell, Elaine B unt e n- Mi ne s

,

Richard Forman, Judson French, Ronald

Powell, Aaron Sanders, Robert Scace,

Bruce Steiner, and Stephen Weber. A number of industry officials also gave

considerable assistance in various areas

covered by the report.
'

-
TABLE OF CONTENTS

PART 1: INTRODUCTION.... 1

PART 2: OPTOELECTRONIC TECHNOLOGY 6

DESCRIPTION OF THE TECHNOLOGY 10

Integrated Optics 13

Hybrid Integrated Optics 14

Technical Barriers 17

Me as ur e me nt - Re 1 a t e d Barriers 19

Monolithic Integrated Optics 21

Technical Barriers 23

Part 3: RESEARCH 8, DEVELOPMENT TRENDS IN

OPTOELECTRONIC TECHNOLOGY 26

RESEARCH & DEVELOPMENT INVESTMENT TRENDS 27

R&D TRENDS IN COMMUNICATIONS 31

R8.D TRENDS IN TELECOMMUNICATIONS 35

LOCAL AREA NETWORKS 42

CONCLUSION 44

Part 4: PROJECTIONS OF MARKET GROWTH AND ECONOMIC

BENEFITS 4b

MARKET GROWTH PROJECTIONS 46

Assumptions Underlying Optical Modulator/

Filter Projections 53

Assumptions Underlying Optical Switch

Pro j ect i ons 58

BENEFITS TO THE ECONOMY FROM OPTOELECTRONICS

i
TECHNOLOGY 60

Nature of Expected Benefits 60

Estimated Benefits from the Generic

Technology 61

Estimated Benefits from Measurement

Research and Standards 62

Relationship Between Component and

System Productivity 65

Part 5: COMPETITIVE STRATEGIES AND GOVERNMENT POLICIES 66

ADVANCING GENERIC TECHNOLOGIES 66

THE ROLE OF INFRATECHNOLOGIES 71

Part 6: CONCLUSION 73

REFERENCES 76

BIBLIOGRAPHY 82

ii
LIST OF TABLES

Table Title Page

1 U. S. and Foreign Companies Involved

in Optoelectronic R&D 28

2 Estimates of Optoelectronic R&D

Expendi tures 30

3 Worldwide Fiberoptic Market by

Component Segment, 1981 -1989 48

4 Worldwide Market for Optoelectronic

Devices, 1980 -1990 49

5 Projected Worldwide Sales of Integrated

Optic Devices for Communications 51

b Assumptions Underlying Projections of

U. S. Sales of Integrated Optic Devices:

Modulators and Filters 54

7 Assumptions Underlying Projections of

U. S. Sales of Integrated Optic Devices:

Optical Switches 58

ill
IIII*
NATIONAL BUREAU OF STANDARDS

Part 1

INTRODUCTION

The economic potential of lightwave technology is vast, and,

perhaps even more important, so is the potential for significant

social and political impacts.

Light pulses can move through a glass fiber more than 50 percent

faster than can electrons through, a copper wire and many times

faster than electrons through ordinary semiconductor materials.

Moreover, although t r ans i s t ors - - t he fundamental building block of the

electronic computer- - can switch on and off TOO million times per

second while processing information, researchers have already built

experimental light switches that are 10,000 times faster. They can

cycle on and off in an incredible 1 trillionth of a second. 1 The

optical fiber has equally superior capabilities when compared to

copper wire--its counterpart in an electronic system. A strand of

optical fiber can carry 500 times the amount of information. In

fact, the main limit on further increases in the information-carrying

capacity of a lightwave system is the speed of the optoelectronic

components, in particular, the laser source.

The demand for optoelectronic components is derived from the

demand for lightwave systems that perform functions such as

communications, sensing, and control of large industrial plants. One

1
OPTOELECTRONICS

indicator of the rate at which this system demand is mushrooming is

t he fact that the U. S. demand for optical fiber is expected to reach

2. 0 million km in 1986, almost seven times the amount installed as recently as 1983. “ Audio, video, and huge volumes of data will be

transmitted simultaneously. This will make possible video phones,

working at home, and potentially a more participatory political

process. The technology also has important military applications.

The competition for commercial markets will be fierce. The

Japanese believe that fiber and optoelectronic technologies are the

keys to their goal of becoming the world leader in information

industries. Nowhere is their characteristic aggressiveness more

apparent than in this critical technology. The United States must

remain competitive in all aspects of optoelectronics, not only to

reap the substantial economic rewards, but to have control over the

directions that the socially and politically important applications

take.

This report analyzes technological and economic trends in the

markets for optoelectronics technology. The primary objectives are

to provide analyses and quantitative estimates of the economic

benefits to the U. S. economy from the emergence of this technology

and to identify and assess major technological barriers to the

realization of these benefits. An analysis of measurement-related

barriers and the associated economic costs is included in order to

provide a basis for designing future research programs at the

National Bureau of Standards.

Reports such as this one are important for planning in both

industry and government because the estimates of the magnitude of

various technical barriers can be used to help design private and

public research programs with the highest payoff to U. S. industry.

If, in fact, these programs lead to the accelerated removal of

technical barriers, several major categories of economic benefits can

be realized. First, commercial introduction may be accelerated if

product -related problems such as optical damage can be overcome.

2
NATIONAL BUREAU OF STANDARDS

Second, initial commercial acceptance may be accelerated if problems

such as life-time testing are solved, so that users have adequate

data on the expected life times and reliability of optoelectronic

devices. Third, diffusion can be accelerated if improved process

monitoring and control leads to lower costs, or if improved material

consistency leads to better, more consistent devices.

Sensitivity analyses performed by Charles River Associates

[1984] indicated that relatively small shifts in the time profile of

commercial introduction, initial commercial acceptance, and/or market

diffusion for optoelectronic devices can ha'r

... substantial leverage on

sales of these products and hence on the cost savings and performance

benefits that result from their use. Relatively small shifts in the

timing of commercial introduction may also be important determinants

of which country gains the competitive advantage in this technology

and hence achieves the largest market share. The implication is that

research programs which accelerate the removal of these barriers or

problems can provide substantial economic leverage.

The concept of optical technology derives from the invention of

the laser and also includes new applications of conventional optical

techniques, such as lenses in high output lasers and LEDs (light

emitting diodes) in optical communications and printers. The idea of

transmitting information on a beam of light became practical about

1970, when Corning Glass demonstrated new high silica fibers having

relatively low attenuation (signal loss). At that time sources of

coherent light or lasers were already available and so the rudiments

of a working system could be put together. Although research

continued over the decade of the '70s, private investment and

progress in this field has been accelerating significantly in the

1980s as the commercial potential of this technology has become

better understood.

This report focuses on applications of optoelectronics for

i nf orma t i on- handl i ng systems (excluding optical computing). 3 A revolution is underway in the application of information technology

3
OPTOELECTRONICS

to office, the factory, and the that will continue for several

decades. Opportunities will proliferate for developing new products

to meet a growing variety of information needs. Similarly, the

availability of new and varied sources of information will permit

more efficient and productive operations of all kinds. In the area

of information applications, the most important characteristics of

the optoelectronic technology are those relating to signal processing

techni ques.

In some specific and very important application areas such as

telecommunications, the dominant trend in signal processing

technology is integration of the various functions performed directly

on an optical wave. Integrated optical circuits are optical guidedwave devices that perform a variety of processing functions on the

light beams which they guide, and the degree of integration may turn

out to be highly correlated with increases in such performance

attributes as processing speed and with declining cost of production.

The main advantages of light wave technology for commercial

information-related applications, from which is derived much of the

demand for optoelectronic devices, are

A Higher transmission rates and transmission

capacities for all types of information (audio,

video, data, and combinations of the three)

A Secure communications channels--tamperi ng

without detection is virtually impossible

A Immunity from electromagnetic and radiofrequency interference that would otherwise

compromise performance (also important for military

appli cati ons)

A Higher performance sensors, such as optical

fiber gyros

Integrated optoelectronic circuits for telecommunications

4
NATIONAL BUREAU OF STANDARDS

applications can be envisioned as eventually consisting of single

semiconductor chips with integrated optoelectronic transmitters,

comprising lasers and electronic support circuitry, not only for

driving the laser, but also for monitoring, stabili2ing, and shaping

its light pulses. Similarly, future receiver chips would include

amplifiers, equalizers, and pulse reshapers, as well as the

photodetectors themselves.

Because lasers are already being used in ranging, printing, and

optical disk writing, as well as in such optical fiber sensors as

hydrophones, magnetic sensors, and gyroscopes, optoelectronic

technology is likely to benefit these applications also.

The economic potential of optoelectronic technology is immense.

Collectively, the applications for this technology should grow over

the next 15 years at a rate at least as fast as any other area of

electronics. Not only will the economic impact be substantial, but

the social and political impacts of changes in the way people work and

live may be even greater, brought about by as much as a hundred-fold

reduction in the cost of accessing information.

5
OPTOELECTRONICS

PART 2

OPTOELECTRONIC TECHNOLOGY

This new but rapidly emerging technology has been widely

discussed in trade publications, technology forecasts, market studies,

and go ve r nme nt - s ponsored competitive assessments. The majority of

these analyses have focused on communications applications, in

particular, optical fibers. Other application areas with substantial

market potential have been given less attention, probably because

their development cycles are somewhat behind that of optical fibers.

The only comprehensive comparative analysis to date of these other

areas is a study of the Japanese optoelectronics industry by the Yano

Research Institute [19833 of Tokyo. Although the statistical data are

limited to Japan and are only of historical interest (1981 or earlier)

in this rapidly changing area, the classification system is

comprehensive and still relevant.

An ideal classification system emphasizes applications which are

described in the context of the major functions that the technology is

being targeted to perform. Classifying applications under an umbrella

of mar ke t - or i e nt ed functions that the new technology and existing

competing technologies perform is an important characteristic of

Japanese planning. 4 The major functional classifications used in the

6
NATIONAL BUREAU OF STANDARDS

Yano report are

Information-Handling

Photo-applied equipment (such

as laser printers or

optical video disks

Photo-applied sensing (such as

laser radar or fiber

sensors)

Communications (data, image,

voice transmission)

Optical Information Processing

(such as space parallel

processing or spectrum

analyzers)

Energy-Related

Machining techniques

Power generation

Li ght i ng

Heati ng

Below the market-oriented classification level is a productoriented level such as the classification scheme adapted from Holman

and Hood f 19851 :

si mple de vi ces:

fibers

lasers

photodetectors

microelectronic control

passive connectors

passive couplers

complex devices:

electroopti cal switches

mod ul a tors

mult iplexers

repeaters

signal processors

optical amplifiers

materials:

III-V SEMICONDUCTORS 3 oxide electrooptics

organics

7
OPTOELECTRONICS

glasses

processi ng:

crystal growth

thin-film deposition

ion-implantation

lit hogr aphy

manufacturing technology:

mi croassembly

pac kagi ng

process control

reproducibility

aut omat i on

The evolution of optoelectronics technology is expected to occur

in three phases. In the first phase (current market), optoelectronic

systems have been composed of distinctly separate electronic circuits

(for signal generation, modulation, amplification, detection,

switching, and filtering) and optical components (light sources and

detectors). Acoustic components may be used for coupling. These

systems resemble electronic circuits prior to integration, when

circuits consisted of a number of discrete components such as

transistors. "The components are fairly bulky, and can be subject to

alignment problems, temperature drifts, vibration, moisture, and dust.

In addition, they require that 1 i ght -encoded signals be converted to

electronic ones for switching and other processing". 6

The second phase is the current state of the art in the sense

that progress has moved beyond the research stage into development,

with initial commercialization of new products imminent. This phase

includes some integration of the electronic and optical components.

Basically, such "hybrid" integration consists of semiconductor

components, which perform various waveguide functions, deposited on

the same substrate. These forthcoming integrated optic devices are

expected to be manufactured using monocrystalline ( s i ngl e - c r ys t al

)

substrate such as lithium niobate because of their acceptable

electrooptic properties and relative ease of fabrication.

8
NATIONAL BUREAU OF STANDARDS

The third phase will produce totally integrated structures on a single-material substrate of a ternary or quaternary semiconductor

(i.e., a semiconductor composed of three or four elements). These

substrates will likely be based on gallium arsenide. The important

implication is that most of the production requirements of electronic

and optical devices can be met by a single material and single basic

production process, rather than two or more materials with distinctly

different production processes. The expectation is that such total

integration will provide greater reliability, circuit density, and

speed.

An important advantage of integration is the reduction of

interconnection problems that occur during electronic/optical and

opt i cal / e lec t r oni c signal conversion. A single integrated

optoelectronic circuit on, say, a gallium arsenide chip might, for

example, link electronic equipment and optical fibers, thereby

replacing an elaborate interface with several parts. Moreover,

because integration reduces unwanted path delays and other effects of

electrical interconnections, the integrated device would be speedier

and less noisy. In addition to processing light itself without

conversion to electricity, the eventual integration of several

components on a single substrate or chip will provide the substantial

advantage of increased stability. This is the key to achieving

circuits that can handle coherent optical waves in small, denselypacked, and highly versatile configurations . 7

9
OPTOELECTRONICS

DESCRIPTION OF THE TECHNOLOGY

Although electronic components will interface with optical

components at some point in an opt oe 1 e c t r oni c - bas ed system, the

development of optical technology will be the critical driving force

in determining the rate and direction of advance of the overall

technology and the evolution of market applications.

Particularly important is the interface between fiber optics and

microelectronics. Optical fiber technology is well developed at this

time. Continued materials and production process advances will likely

continue, but radical technological advances in fibers for 1.3 micron

and 1.5 micron transmission windows are neither needed nor expected.

The "interface" technology is another matter. This technology

performs functions such as switching, modulating, control, test, and

distribution, which are just as critical to the overall system

productivity. The interface requirement derives from the fact that

microelectronics is based on electrons and optical fibers is based on

photons. Interaction between the two requires an "optoelectronic"

function that provides a transition between the two domains.

Optoelectronic technology therefore encompasses "the broad range of

materials and devices that generate light (lasers and light emitting

diodes), amplify light (optical amplifiers), detect light

(photodiodes), and control light (electrooptic circuits)". 8 Each of

these functions requires electrical energy to operate and depends on

electronic devices to sense and control this energy.

One exception to the requirement for electrical energy is a group

of optical materials whose refractive indices depend in a nonlinear

way on the intensity of the light passing through them. Potential

applications of this property are configurations known as optical

bistable devices ( OBD) , in which the optical signal itself biases the

optical device without electrons or conversion to the electronic

domai n.

9

10
NATIONAL BUREAU OF STANDARDS

Four major areas of optoelectronic technology appear to be

pivotal in determining which competitors dominate the emerging

markets:

< 1) monolithic optoelectronic integration . The

objective of monolithic integration is to combine

on a semiconductor wafer or chip the high-speed

microelectronic functions, laser signal sources,

aligned optoelectronic switching circuits, and

photodetectors. This technical achievement

promises to simplify, improve the quality, and

increase the performance of the interface between

microprocessors and the optical fibers that will

interconnect them in all future high-performance

systems applications.

The importance of technical and commercial

developments in monolithic integration cannot be

overemphasized. Japan is attempting to direct its

impressive skills in XXX-V semiconductor lasers

toward full wafer-scale monolithic optoelectronic

integration technology. Achieving practical

monolithic optoelectronic integration on a common

IIX-V semiconductor substrate is certainly Japan's

primary, if not only, target for the next 15

years. 10 If the Japanese succeed, the reason will

be the development of thin-film process

technology. Mass production of low-cost circuits

will not be possible without significant progress

in this area.

Holman and Wood [1985] point to two shortterm technical goals that the Japanese may be near

achieving:

DBR and DFB lasers 1

1

-- Tokyo Institute, of Technology,

Hiroshima Uni v. , KDD, NTT, NEC, Toshiba

Partial monolithic integration--

laser and electronics - Hitachi

detector and electronics - Fujitsu

laser and FET 1

2

- Fujitsu

detector and electronics - NEC

( 2 ) In-line optoelectronic amplifiers . These

devices may replace the conventional repeaters

currently being used in long-haul

telecommunications systems. No signs of

commercialization are yet evident. Japan's R8.D

efforts are primarily at NTT's Electrical

Communications Laboratory. In the United States
OPTOELECTRONICS

no significant R&D effort has been identified.

Some R&D is apparently underway at British

Telecom.

(3) Bistable materials and devices . An important

application could be a bistable optical switch in

which the switching state can be controlled

directly and rapidly by the very optical signal to

be switched. Development of such a switch would

eliminate the expensive opti cal -to-electri cal

conversion necessary in f i r s

t

- ge ne r a t i on

electroopti cal switching technology. Optical

bistability would allow response to a destination

pulse in the incoming optical signal to correctly

bias or position the switch for subsequent data

pulses. 1

No comme rci al

2 at i on seems possible in the

near future. The United States appears to be as

far along as Japan and European countries in the

development of bistable optical switching science

and technology. However, the Japanese appear to

be building a "very strong theoretical,

experimental, and materials base". Bistable

switching is also the subject of a major

international research initiative in Europe. 14

( 4) Optoelectronic Couplers and Switches . These

devices are essential for cost-effective singlemode optical fiber systems. Among the types of

practical components needed are isolators,

polarization filters, intensity modulators, phase

shifters, switches, multiplexers, and

demultiplexers.

Three primary obstacles exist to costeffective, high-volume manufacturing of such

components: process control, package development,

and automated asssembly. The Japanese appear to

be in the strongest position to integrate these

key technologies, as all three areas are major

strengths of their electronic firms both at the

R&D and production stages.

Of the above four areas of optoelectronic technology, monolithic

integration has the greatest potential impact. However, this is a "next generation" technology. Ahead of it and just now entering the

market place is hybrid integration. Thus, the general topic of

integrated optics requires considerable discussion.

12
NATIONAL BUREAU OF STANDARDS

Integrated Optics Technology

As summarised by Alferness [1981], the acceleration of interest

and progress in integrated optics in the United States "is no doubt a result of the rapid progress in low-loss, high bandwidth single-mode

fibers and semiconductor lasers, as well as the interest in integrated

optic devices for use in noncommunication applications such as the

spectrum analyzer and fiber sensors." Sever' 1 years later, Alferness

[1984] observed that integrated optics has "the potential to provide

efficient, low-power, compact, mass producible electrooptic waveguide

devices for a number of years, [and] appears to have imminent

applications in three primary areas: telecommunications, high-speed

signal processing, and fiber sensor processing."

As a result, U. S. firms have dramatically increased their

investment in integrated optics research and development ( R&D) . Many

firms, which were not visibly in optoelectronics as recently as 1983,

now have major dedicated research efforts underway. The same pattern

of increased investment in optical technology R8.D is being observed in

Japan. The Yano Research Institute [1983] observes that "most of

Japan's leading companies have organized special departments called

'Optical Systems Divisions', and the actual pace of the

commercialization of optical technology has proved more accelerated

than expected several years ago."

The name integrated optics encompasses all optical or guided-wave

devices used to perform functions directly on an optical wave. The

basic fiber optic system consists of a light source to initiate the

light beam, a glass fiber waveguide (optical fiber) to guide the light

beam, and a receiver or detector to decode the information and

transform it back to electricity. The light source is either a laser

or a 1 i ght -emi t t i ng diode, and the receiver has a light detector made

from a semiconductor material. For transmitting over long distances,

13
OPTOELECTRONI CS

repeators are required to amplify the signal.

Hybrid Integrated Optics

Hybrid integrated optic waveguide devices are usually made from a single crystal wafer designed to confine the wave in a narrow channel

a few microns wide and deep. The device has specific paths or

channels of higher refractive index than the surrounding medium, and

this enables it to contain and conduct the wave. Some such devices

employ a physical property possessed by certain materials called the

electrooptic effect . This effect is characterized by a change of the

optical index of refraction when an electric field is applied to the

material. 15

In the generation of integrated optic devices currently reaching

the commercialization stage, oxide-based materials such as lithium

niobate, lithium tantalate, and other related materials are being

used. These substances provide waveguide functions (switching,

modulating, multiplexing or filtering, and coupling) but not signal

generation or reception functions, i.e., they do not serve as sources

or detectors. In a "hybrid" optical system, therefore, other

components must perform these functions and be physically attached to

the substrate.

Ceramic-based ( oxi de - based) substrates such as lithium niobate

have relatively strong electrooptic effects (measured by the

electrooptic coefficients along the crystallographic directions), so

that modest voltages are required to produce an effect strong enough

to serve as the basis for practical devices. "Active devices" employ

an electric field to induce a change in refractive index which forms

the basis for a switch, a modulator, or a ( de ) mul t i pi e xe r . "Passive

devices" do not require the use of an electric field. Rather,

waveguide channels are positioned in a configuration that allows the

14
NATIONAL BUREAU OF STANDARDS

device to perform a coupling or filtering, but not a switching

function.

Lithium niobate is currently the preferred material for making

optoelectronic devices for two reasons. It has relatively similar

values of the electrooptic coefficient in the different

crystallographic directions, making it nearly insensitive to the plane

of polarization of the incoming light signal. This ceramic material

also has the potential to yield large single, homogeneous crystals of

reasonably high quality. For switching and modulation applications,

lithium niobate has an advantage along one f . . Tormance dimension over

III-V semiconductors because of its considerably larger electrooptic

effect.

Several oxide materials possess electrooptic "figures of merit"

larger than that of lithium niobate: barium strontium niobate, barium

sodium niobate, and barium titanate. However, lithium niobate is

expected to remain the material of choice for some time because it

should soon be readily available as 1 ar ge - di ame t e r single crystals of

optical quality higher than that of other materials with comparable

electrooptic coefficients. This compound also offers excellent

chemical and adequate physical ruggedness, is a superb electrical

insulator, and is well suited to the formation of guided-wave

circuits. None of these other materials possesses all these

advantages. 1

Lithium niobate does, however, have two performance limitations

that could lead to its eventual replacement in optoelectronic

applications. Its optical properties are not sufficiently nonlinear

to allow the development of monolithic bistable optical switches. And

even more important, lithium niobate does not have the potential to

perform as a practical laser source, photodiode, or electronic

circuit. 17 These functions must therefore be integrated with lithium

niobate circuits in a hybrid manner. While this is not impractical,

the potential cost is high unless automated microassembly and

packaging methods can be developed.

15
OPTOELECTRONI CS

Lithium niobate crystals are grown from a melt by the Czochralski

method, a standard c r ys t al - pul 1 i ng technology used widely in the

semiconductor industry for making semiconductor-grade silicon. The

crystals can be grown in t hr e

e - i nc h- di ame t e r by t wo- f oot - 1 ong

dimensions from the melt. ia

There are three competing methods for forming waveguide devices

from lithium niobate. Of these, the most extensively practiced is the

in-diffusion of titanium because of the ease with which threedimensional or channel-type waveguide structures can be formed. The

steps in the process for producing lithium niobate waveguides using

titanium in-diffusion are

(1) lithium carbonate, which is a relatively

cheap material, and niobium pentoxide, which is

more expensive, are mixed and melted in a crucible. A single crystal of lithium niobate is

grown by the Czochralski technique, which involves

slowly drawing a starting seed crystal out of the

melt contained in a crucible, with the crystal

continually solidifying as it is drawn out. The

Czochralski technique is the only commercial

technique known to be currently in used for making

lithium niobate crystals.

(2) The finished single crystal is cut into one

millimeter thick wafers; during the cutting step a sizable portion of the lithium niobate is lost in

the form of dust. The wafer is then polished and

prepared for actual waveguide production.

(3) In order to produce a waveguide, channels of

higher refractive index (to contain the light)

must be formed in the wafer. The channels are

only a few microns in diameter. Different kinds

of devices from couplers to switches and

modulators are formed by changing the design of

the channel patterns and the modulating electrode

configuration. The favored technique is to indiffuse evaporated titanium onto the surface of

the lithium niobate in the presence of oxygen.

Before in-diffusion, the desired channel pattern

is delineated by photolithographic techniques

similar to those used in integrated circuit

t e c hnol ogy.

16
NATIONAL BUREAU OF STANDARDS

(4) A layer of photoresist is deposited on the

wafer. The photoresist is exposed to ultraviolet

light through a mask with the desired channel

pattern in it; a solvent is then used to dissolve

the photoresist, either where the channels are

desired or on the remainder of the wafer

(depending on the process used).

(5) Titanium is then evaporated onto the surface

to the desired thickness.

(6) The wafer is placed in a second chemical bath

which removes the titanium except in the regions

of the channels. This leaves very fine strips of

titanium across the surface in the desired channel

pattern.

(7) The titanium is then diffused a few microns

into the wafer surface at high temperature in the

presence of oxygen.

Technical Barriers . In spite of the significant research advances in

recent years, the Charles River Associates report and additional

industry interviews have identified a number of technical barriers

that are currently inhibiting further technical development and

subsequent c omme r c i al2 a t i on of ceramic-based integrated optic

devices. These barriers are related to both material limitations and

to limitations inherent in the physics of the devices themselves:

Optical damage . the currently preferred optical

device production technique, titanium in-diffusion

of lithium niobate,. yields waveguides which suffer

from significant photoref racti ve sensitivity (or

susceptibility to optical damage) in the visible

region of the spectrum compared to other

production techniques. (The optical damage is a change in refractive index of the waveguide during

exposure to visible light and is characterized by

a loss of transmitted power.

)

The effect can be minimized to a large extent

by heating crystals or waveguides above 300

degrees Centigrade, by using a longer wavelength

light (such as in the infrared region), or by

using a light beam with very low power densities.

However, the propensity for optical damage remains

a problem in designing systems, even though over

the last few years a partial understanding of

mechanisms causing optical damage has been

achieved.

17
OPTOELECTRONICS

Factors facilitating long-term resistance to

optical damage at the long wavelengths have not

yet been adequately characterized. Accelerated

life-time testing is not deemed adequate for

lithium niobate devices and long-term tests (of at

least one-year duration) in the infrared region

are needed. 1

Availability of consistent material . Lithium

niobate is often found in a nonstoi chi ometri

state. 20 That is, the ratio of Li20 to NbaOs is

not always one-to-one and the optical properties

vary significantly with the stoichiometric change.

Variations in starting compositions for material

used in waveguides can cause significant and

intolerable variation in waveguide performance.

First, uniform formation of the waveguide is

strongly affected by the stoichiometry. Second,

such variations imply that the refractive index

will vary and the electrooptic effect induced by

the externally applied field will also vary across

devices. If variations occur across a wafer,

switches in a set have different properties.

Variation along the boule leads to wafer

differences and with the result that one set of

switches varies from another. 21

Over the long term, optical properties appear

to change. This phenomenon is called " dri f t back" . The source of driftback is unknown, although a suspected cause is the existence of traps in the

material or the presence of fields that affect

t rappi ng.

The control of stoichiometry and impurity

levels will be critical for quality control and

the achievement of high yields in the production

of devices which exhibit a standard, uniform

response.

Electrooptical Coefficient and Implications for

Device Configuration . Basic problems remain

related to the inherent bulki ness and size of

waveguide devices relative to electronic devices

that perform similar functions. The length of a single switch made from lithium niobate can be up

to one-half centimeter. A larger switching array

(for example, a 16-by-16 array) would be quite

large compared to an electronic integrated circuit

chip designed to perform switching applications.

The lithography to downsize is available, but in . order to obtain tolerably small switching voltages

the device must be several millimeters long. The

18
NATIONAL BUREAU OF STANDARDS

change in the index of refraction must be large

enough to result in a sufficient phase change in

the light signal to effect switching. The index

change must be integrated over a sufficient length

in the waveguide to achieve the phase change

necessary to switch, and this therefore requires

the waveguide to be relatively long.

Materials with higher electrooptic

coefficients are highly desirable as these would

allow the development of more compact devices.

Alternatively, to make the proper index change

over a shorter distance, the applied field would

have to be larger, which is less desirable.

Materials with higher electrooptic coefficients

than lithium niobate include strontium niobate and

sodium barium niobate. However, tue crystals of

these two materials are defect-prone. More work

is needed on the basic engineering of growing

defect-free crystals of these types of

materials . 22 To this end, development of

potassium niobate has been advocated.

These barriers to the commercialization of hybrid integrated

optic devices have important measurement-related components. The

important areas of deficiency are

Optical Material Characterization . A need exists

to define and qualify an optical grade of lithium

niobate. Characterization of required impurity

levels, their distribution, and the permissible

level of nonstoichiometry in lithium niobate are

needed.

An ability to achieve greater consistency in

material quality from one production run to

another is required. Lithium niobate wafers are

very expensive because customers are asking for

extreme control of all properties. The demands

result from lack of knowledge of the purity needed

and what impurities are significant. If suppliers

knew what to control and to what degree,

production costs could be significantly lowered.

Meeting such requirements will necessitate

greater control and monitoring of processing,

which will, in turn, require standards as to what

constitutes an optical grade of lithium niobate as

a function of system requirements and device

perf ormance.

Such standards would also need to take into

most

19
OPTOELECTRONI CS

account the effects of variations in lithium

niobate stoichiometry on device performance.

Phase Equilibria . Research on the phase

equilibria of melting relations in lithium niobate

containing additives such as magnesia and titania

would be of considerable help to industry.

Availability of these phase equilibria data would

enable better control of the crystal growth

process and allow improved characterization of the

final crystalline product.

Waveguide Fabrication Monitoring Techniques . Researchers at a leading laboratory have stated

that measurements of lightwave guide properties

have been found to vary significantly for

properties such as insertion loss and coupl i ng

loss . They have found 20 to 30 percent

differences in the measurement of coupling loss.

Examples exist of one group seeing phenomena such

as "double moding" using the same measurement

methods as another group which did not observe it.

As development nears the pilot production

stage prior to commercialization, measurement

techniques to monitor the operations involved in

making waveguide devices will be needed. This

would include developing techniques to monitor the

channel size of the waveguide and a rapid

technique for monitoring the titanium diffusion

profile in the in-diffused waveguides without

having to process the device all the way.

Measurement of these i ndex prof i les is important,

as smooth profiles are not necessarily expected

due to variations in dislocation density,

scattering, etc. Ho fully acceptable technique

exists for determining the radial index profile of

a light guide.

Lifetime Testing. Performing extended lifetime

testing of waveguide devices for times of one year

or more. Apparently no one has done such test

using infrared light. Accelerated life tests have

been performed but are considered inadequate in

giving true assessments of long-term performance.

Industry needs methods to obtain the test data to

accurately assess long-term performance and

resistance to optical damage in the infrared.

In summary, significant progress has been made in waveguide

device research (primarily titanium-doped lithium niobate), but

significant development is still needed to make this a practical

20
NATIONAL BUREAU OF STANDARDS

technology for mass-produced components. According to Alferness

[19841, "if very high bandwidths are desired, integrated optic

components may prove useful and economical. For such large volume

applications, the thin film manufacture of integrated optic devices

like taps, switches or wavelength demultiplexers would provide a tremendous economical benefit over bulk components."

With respect to measurement technology and related data, the

state of the art is at the same stage of development as measurement s for fiber optics were seven to ten years ago . Currently lacking

suitable measurement methods, users cannot tell if suppliers'

materials meet specifications. Failure or inability to to measure and

control each process step results in low yield rates or overdesign,

either of which adds significantly to cost. Trying for zero percent

error in each process step because the significance of each step is

not known is currently characteristic but very impractical. Given the

rapid progress of foreign competitors, particularly the Japanese,

failure to close these gaps will impose significant economic costs on

U. S. industry and result in reduced shares of world markets.

Monolithic Integrated Optics

Combining lasers, detectors, and active electronic devices for

modulating light signals on a single-crystal chip was first suggested

13 years ago by Amnon Yariv. Advances in the fabrication of

electronic and optical de vi ces-- t ransi stors as well as lasers and

phot ode t e c t or s - - ha ve confirmed the feasibility of combining the two

types of devices into one circuit to create a new, powerful class of

monol ithically integrated circuits for a number of applications.

The current view is that such circuits, made from gallium

arsenide (GaAs) and other elements (such as aluminum or indium and

phosphorous) will not only be smaller than electrically connected

21
OPTOELECTRONICS

discrete devices (including hybrid integrated circuits), but more

rugged and reliable. They should also cost less. 23 Ceramic

materials provide only the functions of a substrate for the other

circuit elements and as a waveguide for the light beam--hence, the

label "hybrid" integrated circuits. The degree of integration is

therefore limited to the wa ve gui de - r e 1 a t ed functions such as

switching, modulating, multiplexing or filtering, and coupling.

Gallium arsenide circuits are also capable of being used for signal

generation and reception, i. e. , as sources, repeators, detectors,

etc., and hence have been characterized as providing "monolithic"

integration. Typical lasers formed in these structures will generate

light in the near infrared and infrared regions of the spectrum, from

0. 75 to 1. 6 micron wavelengths.

Note must be taken, however, of recent research at Stanford by T.

Y. Fan and R. L. Byer [19853 which may eventually upset the threestage evolution of integrated technology discussed above. Fan and

Byer have demonstrated an optically-excited lithium niobate laser at

1.09 microns. If subsequent research can adjust the dopants to

lengthen the operating wavelength, the predicted evolutionary

transition to gallium arsenide may become subject to challenge. At

this time, however, most researchers remain adamant that oxide

materials like lithium niobate cannot be made into a viable laser in

which the lasing is stimulated by an electric current as opposed to a li ght source.

Farther into the future, II-VI semiconductors may become the

materials of choice at longer wavelengths. Research in this direction

would benefit from existing technology developed for infrared

detectors.

R&D investment in monolithic integration of waveguide devices,

active components (lasers and detectors) and the associated

microelectronics will continue to increase. According to Alferness

[19843, this increased investment is due to encouraging progress in

reducing semiconductor waveguide losses, improved epitaxial growth

22
NATIONAL BUREAU OF STANDARDS

techniques, and a maturing laser technology. Nevertheless, although

achieving practical and cost-competitive monolithic integration in

1 1 1 - V materials is a promising goal, a commercially successful outcome

is not inevitable. A number of nontrivial obstacles must be overcome.

These obstacles are discussed below. Because of the experimental

nature of gallium arsenide-based optoelectronics, a discussion of

specific product and process technologies is postponed to Part 3,

which examines R&D trends.

Technical Barriers . Some of the significant barriers to eventual

commercialization, organized by major category, are

Materi als-related barriers:

(1) The most suitable III-V substrate material

depends on the particular device application.

According to Holman and Hood (19851, high-speed

electronic circuits, semiconductor lasers,

photodetector arrays, and guided-wave electrooptic

circuits may each have their own unique substrate

and active layer requirements. Significant

technical developments will be required before

these performance requirements can be attained

with a common substrate.

(2) For some applications, the power and

frequency requirements are leading researchers to

materials which have shorter lifetimes; but,

lifetime testing methods are inadequate for

effective research. 2

(3) Heat dissipation problems and the larger

optical losses inherent in GaAs may be

characteristics intrinsic to this material and not

removable or mitigated by further processing

i mprovements.

(4) GaAs also has a much lower electrooptic

coefficient than lithium niobate, so a higher

driving voltage is likely to be required.

Process-related barriers ;

(1) Production yields . Perhaps the ultimate

limitation with respect to yield in the production

of GaAs devices will be the quality and uniformity

of the substrate material. The defect density is

still quite high, although the Japanese have made

23
OPTOELECTRONICS

substantial progress. The high- yield production

of very high-quality, low-dislocation density,

III-V substrates requires the minimization of

extended crystal defects (dislocations).

The multilayer III-V optoelectronic

fabrication process yields must be increased

significantly over their present levels if waferscale integration is to become commercially

successful. For example, infrared laser diode

sources are now commercially available, but lack

of effective production technology is still a serious problem. Yields of 10 percent were being

reported until recently. Within the past two

years, yields of laser production have risen to 50

to 70 percent, but this is still not acceptable.

The laser diode light sources have multiplelayered structures, the production of which is

difficult.

Even more important is the total yield of the

monolithic integrated chip which is the yield of

the laser, multiplied by the yield of the

electronics, multiplied by the yield of the

waveguide circuit, multiplied by the yield of the

detector array. 25

( 2 ) Wafer-scale integration. Difficult substrate

compatibility problems must be overcome before

high-speed electronic circuits, photodiode arrays,

distributed Bragg reflector ( DBR) lasers, and

optical waveguide circuits can be integrated onto

a common substrate. For example, the monolithic

integration of a semiconductor laser and an

e 1 e c t r oopt i c al guided-wave circuit requires that

the laser cavity be formed by distributed

feedback, distributed Bragg reflection, or some

similar process that puts the output beam directly

in the waveguide plane.

According to Holman and Wood [19851,

excellent progress in this area recently has been

made in Japan, particularly at the Tokyo Institute

of Technology and at NEC, but commercial laser

sources are still formed with cleaved facets as no

major effort has been made to bring to a commercially viable level the somewhat intricate

grating etching processes.

(3) Thin-film technologies . This general

approach seems to hold the key to competitive

advantage through low-cost production. However,

promising thin-film processing techniques (such as MBE and MOCVD) currently require the use of toxic

24
NATIONAL BUREAU OF STANDARDS

chemicals and complicated control electronics. 24

The complexity of process control plus slow

deposition rates are barriers to cost-effective

production. Mass production at competitive cost

will not be possible without significant progress

in developing new process concepts and control

techniques.

(4) Mi croassembly . The assembly of costeffective optoelectronic components requires that

the various elements (the lasers, fibers, optical

circuits, electronic circuits, and photodetectors)

be packaged quickly and in an automated manner.

According to Holman and Hood [19851, the most

critical aspect is that optoelectronic elements

have to be positioned precisely wi * u respect to

each other. The alignment tolerance needed is

usually measured in fractions of a micron. Proper

design of packaging materials and substrates,

automated micromanipulation, automated

microbonding, and feedback control are the

characteristics of a successful approach.

Industry sources interviewed by Charles River Associates [19841

indicated that ten years will likely be required for this technology

to reach the stage which lithium niobate has achieved today (that is,

early in the development stage as opposed to the research stage).

Thus, monolithic integrated devices may not begin to substitute for

ceramic integrated optic devices until the mid 1990s, assuming the

current projected productivity differentials remain intact over the

next ten years. Nevertheless, the astonishingly total commitment by

the Japanese to monolithic integration based on III-V semiconductor

materials means that future U. S. competitiveness demands a sustained

and intensive R8.D response.

25
OPTOELECTRONICS

Part 3

RESEARCH 8, DEVELOPMENT TRENDS IN

OPTOELECTRONIC TECHNOLOGY

No integrated-optic devices are commercially available today,

with the exception of one relatively simple device recently introduced

by Toshiba. However, as evidenced by the market projections in the

following sections, the growth rates for devices based on integratedoptic technology will be exceptionally high. Moreover, the demand for

integrated-optic devices is derived from the demand for systems or

final user applications which have orders-of -magni t ude greater markets

as measured in terms of sales (although not necessarily in terms of

value added).

An increasingly large and diverse number of firms have become

convinced of the economic gains from this technology to the point of

taking results of their applied research to the considerably more

expensive development stage. This commitment is based on the belief

that at least communications markets and likely others will grow

extremely fast over the next 10 years.

However, before optoelectronic devices reach their target markets

in communications and other areas, the functions to be performed or

the level at which they will be performed will have to be more

accurately defined. High-speed optical switches, modulators,

wavelength filters, and polarization manipulators have been made in

26
NATIONAL BUREAU OF STANDARDS

the laboratory, but in the simple systems currently being developed

these devices are not yet utilized. Existing systems consist of three

separate ( non-i ntegrated) components: a laser, a fiber, and a detector. Current commercial lasers are capable of being turned off

and on for such applications as switching at speeds of over 1 Gigahertz (1 billion times per second). This speed equals the current

maximum for a electronic switch, but higher data transmission capacity

will be required. Optical switches can potentially be turned on and

off in an incredible one trillionth of a second. Integrated optics

will be needed to perform these more sophisticated, high-speed

f unct i ons.

The following sections discuss R&D investment trends and emerging

commercial markets for optoelectronic technology.

RESEARCH & DEVELOPMENT INVESTMENT TRENDS

Besides the United States, Japan is a major factor in world

markets for optoelectronic technology. A number of European firms

have also made major commitments to this technology. In the United

States, AT&T has been the dominant performer of generic technology

research, at least for communications applications. Its counterpart

in Japan, NTT (Nippon Telegraph & Telephone), has played a similar

dominant role in that country. Many other firms in both countries

have radically increased their R&D investments in recent years, with

the result that the amount of applied research and development has

increased significantly. A reasonably comprehensive list of market

participants is given in Table 1.

The United Sates may actually be the world leader in basic and

generic III-V microelectronic technology research, but the Japanese

are ahead in the all-important applied R&D. The Japanese have made a strong national commitment to achieving world leadership in

27
OPTOELECTRONICS

Table 1

U. S. and Foreign Companies Involved in

U. S. Compani es Japanese Companies

Allied

AMP

ASA

AT&T

Battelle Laboratories

Crystal Technology

Cyberoptics

Dukane

Dupont

General Optronics

GTE

Hewlett-Packard

Hone y we 1

Hughes

IBM

I TT

Kodak

Lasertron

Li 1 1 on

Lyt e 1 McDonnell-Douglas

MMM

Motorola

Opto vision

Opt r on

Or t e 1 Polaroid

RCA

Rockwell

TRW

West i nghouse

Canon

De nki

Fujitsu

Furukawa

Hi tachi

KDD R&D Labs

Matsushi ta

Mitsubishi

NEC

NTT

Oki

Omron Tateisi

Shin-Etsu Handotai

Sony

Sumi t omo

Toshiba

28

Optoelectronic R&D

European Companies

British Telecom ( U. K. ) CNET ( France)

Ericsson (Sweden)

Philips (Holland)

Plessey ( U. K. ) Siemens (Germany)

Thompson CSF ( France)
NATIONAL BUREAU OF STANDARDS

optoelectronics technology. Although they actually entered this field

in earnest after the United States and Western Europe, Japan currently

is the world leader in the cost-effective production of semiconductor

lasers, and their optical fiber technology is second to none. Japanese

private-sector R&D investment in optoelectronics is growing at a rapid

rate. The total European R&D effort in this area is estimated to be

about one-half the total U. S. investment. The technology leader in

Europe is believed to be France.

Table 2 provides some rough estimates of worldwide private and

public R&D expenditures for optoelectronic technology. These

estimates were c ompi led by surveying domestic and foreign industry

officials and U. S. observers of this industry, some of whom have

recently visited foreign research facilities. Respondents were asked

to estimate the the number of full-time equivalent scientists and

engineers engaged in optoelectronic R&D for firms actively pursuing

this technology. An attempt was made to focus the estimates on

dedicated optoelectronic research. A substantial additional

investment in III-V (gallium arsenide) semiconductors is being made

for microelectronic applications as well as for optoelectronics. Where

possible, a portion of these funds was added to the estimates in Table

2.~ 7 Average annual expenditure rates per employee were then applied

to estimate R&D expenditures. These rates varied depending on the

sophistication of the research and the country in which the firm’s R&D

facility is located. The data collection was not comprehensive or

highly structured, and the estimates and trends should be considered

quite rough.

The estimated year-to-year increases are substantial due to

increased investments by firms already committed to optoelectronics

and to the entry of new participants. For example, Japan's NTT

increased its total R&D expenditures between 1983 and 1984 by 35

percent. During this same time, a number of U. S. firms such as

Dupont, Kodak, and Polaroid formed dedicated R&D programs. In just

two years (1987), total worldwide R&D expenditures for optoelectronics

29
OPTOELECTRONICS

Table 2

Estimates of

Optoelectronic R&D Expenditures

( in $millions)

1981 1982 19 83 1984 1985 1986 1987

Uni ted States

Industry 65 98 122 192 250 312 375

Government 4 5. 6 18 27. 21 18

Total 69 103 128 210 277 339 413

Japan

I ndustry 106 132 160 206 258 322 386

Government b 1

. 21 24 26 22 12.

Total 112 147 181 230 284 344 405

Europe

Industry

Government

Total 30 45 65 90 140 165 190

World Total 211 295 374 530 701 848 1008

Sources: industry and government interviews, MITI documents

Note: U. S. R&D expenditures estimated by obtaining estimates of fulltime equivalent scientists and engineers currently engaged in

optoelectronic R&D in the United States at levels from $150,000 to

$250,000 per scientist year, with the level depending on the type of

research; similarly, estimates for Japanese industry research

expenditures were obtained by multiplying estimated full-time

equivalents by $125,000 to $200,000.
NATIONAL BUREAU OF STANDARDS

are expected to reach an annual rate of approximately $1 billion.

Government funding will be a small, although critical, percentage of

total R&D expenditures. 28

In terms of U. S. industry structure, a survey by Kessler

Marketing Intelligence (KMI) yielded an average estimate of 233

systems firms and 200 to 300 components manufacturers. 2

But, as

pointed out by KMI, the industry structure in 10 years will likely

parallel the electronics industries in which the number of systems

manufacturers is orders of magnitude greater than the number of

component suppliers.

Finally, although telecommunications is the dominant application

area today (58 percent), the KMI survey indicated that in 10 years the

portion of the market represented by telecommunications will have

fallen below 50 percent. 30

R&D TRENDS IN COMMUNICATIONS

"What Marshall McLuhan called the 'Global Village' will come

about through advanced technology in fiberoptics and electrooptics in

the future. All communications will be digitized and integrated onto

a single system. The main transmission portion of that system will

use optical technology." 31 The integration process is already

underway. For example the distinction between voice and data is

disappearing. Fiber optic systems are increasingly using telephone

hierarchies, originally designed for voice channels, for both voice

and data. In the future, "the amount of information transfer will

become so vast that only optical communications will have the capacity

to handle the traffic." In the not-too-distant future, architects

designing buildings and houses will assume that the contractors that

install lighting, heating, and air conditioning systems will also have

the expertise to install fiberoptic systems for centralized

31
OPTOELECTRONICS

communications. The centralized systems will include telephone, data,

vi deotex- type services, along with the control systems for these

services and communications. 32

With respect to major R&D strategies, both the United States and

Japan are pursuing the development of currently more successful oxidebased electrooptics such as lithium niobate and the more distant but

currently more versatile III-V semi conductors such as gallium arsenide

and indium phosphide. Based on the published literature, Japan

appears to be allocating most of its optoelectronic R&D to III-V

semiconductors. The main reason is the desire to draw upon their

existing comparative advantage as the world's leader in manufacturing

III-V semiconductor laser diodes. They thus have the requisite

process technology well developed and should have an advantage in

developing the process technology for integrating laser, electronics,

detectors, and optical switches on large III-V chips or wafers (i.e.,

the optoelectronic integrated circuit). 33

However, Japan is not ignoring hybrid integrated optics based on

oxides such as lithium niobate. As pointed out by Holman and Wood

[19853, a few more assembly steps are required, but Japan is "skilled

in working cost effectively with small parts and in automating complex

assembly." Holman and Wood also argue that the "Japanese can take the

best III-V laser sources, and separate detector chips (either or both

monol i t hi cal 1 y integrated with electronic circuits), and use them with

electroopti cal switches and circuits made from oxide electrooptics

such as lithium niobate".

Japan is, in fact, still pursuing lithium niobate and related

oxide-based electrooptics. On the one hand, NTT's research labs

appear to be doing "very little work on lithium niobate", if the

scientific literature is used as an indicator. On the other hand,

lithium niobate technology may simply be in the process of transfer to

development at NTT. Moreover, "niobate technology appears to be

spreading into a number of industrial laboratories that were either

minimally involved (NEC and Mitsubishi) or previously uninvolved

32
NATIONAL BUREAU OF STANDARDS

(Fujitsu and Canon). 34

AT&T seems to be following a pattern similar to that of NTT by

downgrading long-term (generic) lithium niobate research. AT&T's

current R&D in this area appears to be quite applied in content

(device-oriented) and thus is located in the development oriented

di vi si ons.

With respect to process technology, Japan has made significant

progress in developing techniques critical to the high-yield

integration of high-density electronic circuits with optical circuits

based on gallium arsenide. The focus of this progress has been on

producing defect-free crystalline gallium arsenide wafers as starting

material for the subsequent production of optoelectronic integrated

circuits (OEICs). The production technology is liquid-encapsulated

crystal growth (LEC). LEC is a modification of the Czochralski

crystal-pulling techniques which has become the standard process in

all countries for growing 1 ar ge -di ame t e r boules for III-V materials. 35

NTT developed the major improvements to the LEC process over the

past several years, and the improvements are being incorporated into

c omme r c i al - s c al e production technologies by both Japanese and U. S. firms. Four main approaches are currently being investigated for

enhancing the uniformity of bulk LEC-grown gallium arsenide: (1)

reducing the thermal gradient from the center to the outside of the

crystal; (2) doping the melt with indium; (3) growing the crystal in a magnetic field; and (4) automatically controlling the diameter of the

crystal under computer control. 36 The Japanese are also experimenting

with the injection of arsenic during crystal growth to provide more

homogeneous crystals. Most of the laboratories in both the United

States and Japan are investigating two or more of these approaches in

the same crystal puller. However, although R&D progress in LEC bulk

crystal growth in the United States and Japan is believed to be about

even, some U. S. industry officials think that Japan will be the first

to commercialize the improved technology. Currently, Japanese firms

seem to be the only commercial sources for GaAs substrates. 3 '

33
OPTOELECTRONI CS

Recently, a new process under development by Bellcore (Bell

Communications Research) has shown the potential to give the United

States a process technology lead. The technology, called vapor

levitation epitaxy (VLE) , may prove to produce high-quality

optoelectronic wafers at a fraction of the cost of existing epitaxial

processes--and in a fraction of the time. VLE may also turn out to be

more flexible in terms of its suitability for a wide range of

applications. 38

The VLE process works in the following way. The raw wafer moves

along a conveyor belt on a cushion of vapor and is positioned over a porous disk. Then a blast of vaporized semiconductor elements is

sprayed through holes in the disk. The vapor condenses as a thin,

ultrasmooth crystal layer which, because of the uniformity of the

condensation, is largely defect-free. The possible composition and

number of layers are large, as the wafer can easily be moved over

different disks to deposit different vapors. This flexibility offers

the possibility of custom-designed chips.

Claims have been made that VLE will offer substantial processing

cost reductions for the manufacture of semiconductor lasers. Such a development would likely bring the cost of multimedia communication

systems down to market penetrating levels.

Once defect-free wafers are produced, a second process technology

is needed to actually produce the OEICs. At Japan's Optoelectronic

Joint Research Laboratory ( OJRL) , such a process is under development

in which a combination of molecular-beam epitaxy ( MBE) and metalorganic chemical vapor deposition ( MOCVD) is used to build up thin

layers on the gallium arsenide substrate . 39 A process called reactive

ion beam etching (RIBE), using chlorine, is being developed for

etching the chips. Physical etching is done with chlorine ions

accelerated in an electric field, and the chlorine radical is used for

chemical etching. This dry process produces a sharp profile, whereas

the unfocused ion beam previously used tended to undercut the channels

34
NATIONAL BUREAU OF STANDARDS

in the resist masks. Wafers are moved from station to station within

linked vacuum chambers while these processes are performed in

sequence. 40

R&D TRENDS IN TELECOMMUNICATIONS

The two major performance attributes in telecommunications systems are

transmission speed and capacity. Devices which can exhibit these

attributes at higher and stable levels of performance over extended

periods of time at lower unit costs will rapidly penetrate

telecommunications markets.

In the area of semiconductor waveguides, the two currently most

promising applications, according to Alferness [1984], are optical

switching and high-speed optical modulation. Other classes of devices

promise applications in multiplexing or filtering, and coupling. 41

With respect to wa ve gui des . the rapid emergence of single-mode fiber

technology has been a primary factor in the increased interest in

i n t e gr a t e d - opt i c devices, which are s i ngl e - mode . 4Titanium-diffused

lithium niobate (Ti:LiNb03> waveguide technology is currently the most

developed. A variety of telecommunication devices have been

demonstrated using this material. However, the reduction of

propagation losses in gallium aluminum arsenide ( GaAlAs) semiconductor

waveguides to approximately 1 dB/cm has rejuvenated research activity

in this materi al.

Stable emission of the light pulse at a single frequency gives

less dispersion . Dispersion or pulse broadening can occur from two

separate causes. First, signals of the same wavelength which follow

different paths through a multimode optical fiber become separated by

virtue of having traveled different distances. Dispersion from this

source is eliminated by the use of "single-mode" fiber. Single-mode

fibers have very narrow cores clad in an outer layer of glass of lower

35
OPTOELECTRONICS

index of refraction. The 4-micron diameter glass core transmits only

a single mode of light down the fiber and thereby eliminates the

dispersion that would otherwise be caused by the presence of other

modes. A very short light pulse can propagate great distances (10 to

100 km) without suffering pulse shape degradation. The result is

higher transmission speed and thus greater information capacity or

"bandwidth". Also, because of the elimination of dispersion, singlemode fiber systems require fewer repeaters than do multimode fibers.

The spacing is important because repeaters can cost $40,000 to $60,000

each. 43

Second, even single-mode fibers display some dispersion of the

index of refraction across the range of wavelengths in the light

signal. However, single-mode lasers minimize the effects of this

dispersion. They also offer the small emitting area desirable for

coupling output into monomode fibers.

However, even with single-mode lasers such as distributed

feedback and C

3 lasers, direct current modulati on can affect

temperature and the laser wavelength, thereby creating pulse

broadening (a phenomenon called "chirping"). This results in a serious penalty for data rates above about one Gbit/s. For such longhaul, very high bandwidth systems, dispersion limitations due to

chirping can be avoided by using a CW single-frequency laser, and an

external integrated optic modulator. 44 In 1983, a significant R&D

milestone was reached toward producing a cost-effective very highspeed switching and modulating device. A team of scientists at Bell

Labs developed a lithium niobate device called a high-speed travelingwave directional coupler switch/modulator that operates at a wavelength of 1.32 microns. 45 The device is significant because it

can operate at this desirable wavelength, where optical fiber losses

are optimally low, without the previous undesirable requirement of

substantially increasing the drive voltage. The new coupler

switch/modulator device allows the laser diode to be left running

continuously, with the switch being used to perform intensity

modulation. This is expected to eliminate modal noise. The 58

36
NATIONAL BUREAU OF STANDARDS

picosecond pulses so generated may permit modulation rates up to 16

Gbit/s, according to the Bell researchers. Some researchers have

speculated that continuous laser operation rather than off-on

switching may also prolong a laser's operating life.

Because the use of single-mode fibers requires injection of a light beam into a much narrower fiber (a few microns across compared

to approximately 50 micron diameters for multimode fibers), which is

necessary to restrict propagation to a single wavelength mode,

difficult alignment problems remain to be solved. For long-distance

transmissions, low fiber-coupled insertion loss is essential. Much

research over the last several years has been aimed at increasing the

fiber waveguide coupling efficiency, and at reducing the propagation

loss in Ti:LiNb03 waveguide devices. Fiber-coupled insertion losses

as low as 1. 5 dB have been achieved. Generally, there must be

tradeoffs between insertion loss, and modulation bandwidth and drive

voltage. Detached focusing optics can collimate the light beam,

although with added bulk and cost. Also, too much power extraction

from an emitting region can damage the facet. However, some

laboratories have demonstrated modulators that appear to satisfy

practical r e q ui r erne nt s - - t he y operate at low voltages (less than 5 V)

,

have a broad bandwidth of 5 GHz, and a lower insertion loss of less

than 2.5 dB. 4 6

Toshiba has demonstrated a "multiplex transmitter" based on the

world's first integrated five-element semiconductor laser array. The

system transmits five optical signals simultaneously through a single

optical fiber, each at a different wavelength, compared with one

signal per fiber for most conventional optical transmission systems.

Five DFB lasers are connected to an optical multiplexer that bundles

signals for transmission. Development and testing of the multiplex

transmitter is underway at Japan’s MI TI -sponsored Optoelectronics

Joint Research Laboratory (OJRL) and is expected to be completed in

1986. Toshiba sees applications in telemetering and telecontrol

systems for large manufacturing units and in long-distance

telecommunications. 47

37
OPTOELECTRONICS

An equally active area of integrated optics research, and one

which has been emphasized since the early days of fiberoptic

communications is optical switching for signal routing and time

division mul t i plexi ng . As single-mode fiber technology advances, the

need for high-speed optical switches has become apparent. Mechanical

switches are useful only for speeds of a few milliseconds, so

integrated optic switches will be required for optical signal routing

at medium and high speeds.

Laboratories around the world, including AT&T's Bell

Laboratories, CNET in France, and NEC and Fujitsu in Japan, are

actively pursuing research on single-mode switching elements. NEC

researchers have reported a t i me - di vi s i on optical switch for video

switching. High-speed optical switching is important for timedivision multiplexing and demultiplexing, since it may enable

communications systems to take advantage of single-mode fiber's very

large bandwidth without requiring comparable broadband electronics.

Researchers at Bell Laboratories have recently demonstrated

multiplexing and demultiplexing optical pulses separated by as little

as 100 picoseconds. 48

The increased complexity of proposed future coherent lightwave

systems will require correspondingly sophisticated optical components

including polarization controllers , phase modulators , or frequency

shifters . Researchers at British Telecom Research Laboratories in

England have used titanium-diffused lithium niobate (TirLiNbOs)

waveguide phase modulators in their coherent detection systems

experiments. Very broadband (approximately 18 GHz) integrated optic

modulators have been used by researchers at Hughes Aircraft to

demonstrate a 0. 8 micron fiberoptic microwave link. Arrays of

independently modulated lasers can send several signals through an

optical fiber simultaneously (multiplexing), thereby saving on the

number of fibers while still allowing redundancy should any one device

fail. 4 9

38
NATIONAL BUREAU OF STANDARDS

Single-mode systems now operate at 1. 3 microns compared with

shorter wavelengths (0.8 to 0.9 microns) of first generation systems.

At this wavelength, dispersion in doped silica fibers can be

eliminated. However, such systems can potentially function best at

the 1.55 micron wavelength where the fiber has its lowest signal loss

(attenuation). Operating at the 1.55 micron wavelength with fibers

optimized for 1.3 micron transmission results in undesirable levels of

dispersion. Ideally, one would like to move the zero-dispersion

wavelength to 1.55 microns.

This can be achieved by doping the optical fiber, but this

significantly increases the cost of the fiber (which accounts for

about 75 percent of total system cost). Another approach is to use a very narrow emission bandwidth (i.e., a single-mode laser). This

requires a 1 ong- wa ve 1 e ngt h laser made from a quaternary semiconductor

material (InGaAsP). Such a semiconductor has a longer lifetime than

GaAs and the emission wavelength can be "tailored" or "tuned".

However, threshold currents are very sensitive to temperature, so

output power must be limited to several milliwatts to avoid

potentially destructive thermal runaway. 30

Single-mode 1.3 micron lasers are currently commercially

available. They can be classified into two groups: index-guided and

gain-guided lasers. The gain-guided type is easier to manufacture but

produces a less stable and uniform beam. However, production methods

for any class of 1 ong- wa ve 1 e ngt h laser are still in the development

stages. Production yields for 1. 3 micron lasers have recently been

increased from 10 percent to over 50 percent, but this is far from

satisfactory for commercial-scale production. 1.55 micron lasers are

even more difficult to make. Only a few small U. S. companies

currently produce them.

For commercial trend analyses, a distinction must be made between

trends in technological advances in the laboratory, as indicated by

periodic announcements of the results of "hero experiments" (so-called

because they keep breaking performance records), and levels of

39
OPTOELECTRONICS

performance that can be achieved at acceptable life-cycle costs

( production costs plus costs of use, including those costs related to

failure rates). For example, at the Conference on Optical Fiber

Communication ' 85, AT&T researchers announced new records for the

speed at which light signals can be modulated. Using both direct

modulation and indirect modulation approaches, they have demonstrated

maximum rates of modulation of 2 gigabits (2 billion bits) per second

and 4 gigabits per second, respectively. 51 These experiments

represent state-of-the-art research which has focused on lasers and

optical fiber systems using single mode (wavelength) light signals. 52

One AT&T researcher estimates that the system would be competitive for

modulation applications at a cost of about $300, but production

requirements, let alone production costs, are undefined.

More recently, NTT has developed an ultra high speed distributed

feedback-type ( DFB) laser diode capable of converting the equivalent

of 144,000 lines of telephone information into optical signals in one

second. This is equivalent to an optical signal conversion capacity

of 10 gigabits per second, compared with 400 megabit modulation rates

of recently installed fiberoptic systems! NTT researchers have

managed to reduce the parasitic capacitance markedly by shaving off

90% of the buried layers sandwiching the active layer and by changing

the crystal substrate from N-type to P-type, thereby allowing

efficient flow of current to the active layer. Also, the active layer

has been impregnated with zinc dopants to enhance the efficiency of

the substrate. A prototype DFB laser developed under the new method

featured a high output of 10 milliwatts. 53

As these lasers are difficult and expensive to make, the

marketplace may see multimode lasers for a while. Researchers at

Plessey Research Ltd. in England have used a buried heterostructure

(multimode) laser emitting at 1.556 microns to send 1.3 gigabits per

second over 103 kilometers of fiber. The fiber was engineered by

Corning Glass Works to have minimum signal dispersion for the laser' s wavelength. The multiple wavelengths emitted by the source travel at

approximately the same velocity in such a fiber, making the use of

40
NATIONAL BUREAU OF STANDARDS

multimode sources feasible for long-haul applications. Plessey claims

this approach yields the highest value yet recorded of the bit-ratetime s - di s t anc e figure, 139 gigabit-km per second for a multimode

laser. Plessey views this technology as a practical route to longhaul, high-speed systems in short-term. 54

Laser-generated light signals, even under optimal transmission

conditions, will periodically require regeneration. The current

technical approach is to detect an incoming optical signal, reform it

electronically, and then regenerate the signal with a laser. The cost

of a repeater is in the $40,000 to $60,000 range.

A much simpler method obviates the need to convert from the

optical to the electrical domain and back again. This approach uses a single laser amplifier. The incoming laser signal passes through the

laser cavity and is strengthened with the gain of the amplifier. In

the case of a local power failure, the device is transparent to the

incoming light signal. However, a disadvantage of the amplifier is

that any dispersion that has occurred in the course of transmission is

not treated. Such in-line optoelectronic amplifiers may be used

mainly in high-performance long-haul systems, in spite of the fact

that dispersion is not treated. The lack of a need for an electrical

interface simplifies the design of long-haul telecommunications

systems. For local area networks, the dispersion property is not a concern, although the transparency property is important. 55

NTT achieved the first demonstration of an in-line optoelectronic

amplifier. A major obstacle to the attainment of a commercial device

is the difficulty of producing a device with sufficient gain. Little

U. S. R&D activity is apparent at this time. AT&T currently has no

systems under design that include in-line amplifiers. However,

British Telecom has an R&D program for in-line amplifiers operating at

1.5 microns, which is part of a significant R&D effort aimed at the

development of coherent communication systems. 56

According to Holman and Wood [19851, optical bistabl e devices are

41
OPTOELECTRONICS

"fast becoming one of the most popular long-range research topics in

many laboratories throughout the world. " Such devices would allow

high-speed optical switching without leaving the optical domain.

Currently available e 1 e c t r oopt i c al switches, such as those made of

lithium niobate or gallium arsenide, require a control voltage pulse

to switch from one switch state one to another. For the switch

controller to know whether to apply a voltage to the switch or not,

the incoming optical signal (or part of it) must be detected to

receive proper destination instructions. The time required to detect

the destination signal, and then activate the switch, limits the

bandwidth of the optical network within which the switch can operate.

An optically bistable switch would avoid this limitation. The

incoming optical signal itself would cause the switch to enter the

desired state. The signal's destination pulse, in passing through the

switch, would program it directly by altering the switching material’s

refractive index. Switching speeds of a few picoseconds are believed

feasible. Such speeds would be very difficult to achieve with

conventional e 1 e c t r oopt i c al or magnetooptical techniques.

No one country has an identifiable technological lead, although

many are pursuing research in this potentially important area.

LOCAL AREA NETWORKS ( LANs)

Because these networks operate over distances of no more than 5

to 10 kilometers, designers are considering wavelengths of about 0.8

microns because sources and detectors for this wavelength are more

developed. However, enough demand should appear for the long distance

systems at 1.3 or 1.5 microns that the technology for such lasers and

detectors will develop.

In addition to the laser, another possible light source for

42
NATIONAL BUREAU OF STANDARDS

optical signals is the 1 i ght - e mi t t i ng diode (LED). At present, using

LEDs seems to be the desirable approach, particularly in LAN

applications, because of their low cost and high reliability compared

with lasers, but potential users have feared that LEDs put too little

power into the fiber. Moreover, the most efficient switching

technology may depend on single-mode laser sources. However, Fujitsu

has recently announced the development of an edge-emitter LED which,

unlike conventional surface-emitter types, greatly enhances the

coupling efficiency between the LED and single-mode optical fibers.

Compared with surface-emitter LEDs, which have a tendency to disperse

the light produced, the edge-emitter produces light in a narrow beam

with a spot diameter of less than one micron. The coupling efficiency

with single mode fibers is improved 10-fold over surface-emitter LEDs.

The Fujitsu device operates at 1.3 microns and has a transmission

speed of 300 megabits per second, a 50 percent improvement over

conventional LEDs. Price of this indium gallium arsenide LED is only

slightly higher than that of other LEDs. 57

However, researchers at AT&T Bell Labs have recently shown that

LEDs of both the surface-emitting and e d ge - emi t t i ng variety can

produce enough power to send a signal of 140 million bits per second

over several kilometers of fiber. This, AT&T says, is sufficient for

use in local loops. 38

At a recent conference, BellCore announced an edge-emitting LED

which can transmit with a bandwidth 560 Mbps over 15 km. At the same

conference, BellCore also announced a super-radiant LED which can send

with the same bandwidth over a distance of 25 km. 59 With these and

other recently announced hero experiments, LEDs seem to be creating at

least as much excitement as the laser and offering the potential for

applications beyond the LAN.

At the systems level, the telephone companies regard local area

network service as critical to their survival in the c ommun i cations

marketplace. About two years ago, computer companies were thought to

be the future developers of LANs, but now the telephone companies have

4 3
OPTOELECTRONI CS

clearly established themselves as the dominant providers.

LANs will soon become an important market. Roger Blantz,

President of Mountain Bell, is quoted in Kessler Marketing

Intelligence [1984] as saying that 60 percent of the total information

that moves e 1 e c t r oni c al 1 y- - voi c e , data, and video--moves less than two

miles, and an additional 25 percent of information moves within the

local exchanges. Thus, 85 percent of information moves within the

telephone LATAs (local access and transport areas).

With the move toward higher information transfer rates, which

includes a concurrent need for video and image transmission,

fiberoptic systems have begun to move into buildings and industrial

and university campuses. By 1986, fiberoptics will have moved into

the subscriber loop. 60

CONCLUSION

This section has attempted to group optoelectronic devices by

function and underlying technology, and to discuss trends in the

technology' s evolution. However, as the development of the Toshiba

"multiplex transmitter" and the AT&T traveling wave "switch modulator"

indicate, any classification scheme which separates functions on some

presumed technological basis is tenuous at best and raises questions

about the market projections made at this level of disaggregation in

the next sec t i on.

With respect to technological leadership, the current status is a mixed picture. The Japanese are ahead in the development and

commercialization of sources (lasers and LEDs) while the United States

has the lead in advanced optoelectronic detectors. The United States

may still have the lead at the systems level, with the Japanese in hot

44
NATIONAL BUREAU OF STANDARDS

pursuit.

AT&T Bell Laboratories and NTT are the dominant research leaders.

They both account for 28 percent of the published papers in their

respective countries. 61 However, an observation with implications for

the future is that a number of other large Japanese firms (such as

NEC) are appearing with greater frequency on the lists of hero

experiments. This trend is likely a cause for concern for the U. S. optoelectronics industry as a whole. No one will push AT&T out of the

technology race, but most other aspiring U. S. participants have only

recently established research facilities which puts them at least

several years behind their Japanese counterparts.

45
OPTOELECTRONICS

Part 4

PROJECTIONS OF MARKET GROWTH

AND ECONOMIC BENEFITS

The following sections present projections of growth rates for

optoelectronic devices and the product systems of which they are

components. These projections are then used to estimate aggregate

benefits to the economy from the diffusion of this technology into the

marketplace. The rate of market penetration will be influenced by the

rates at which various classes of technical barriers are overcome. In

optoelectronic technology, measurement-related barriers are

particularly important, and estimates are presented of the economic

benefits to be realized from the removal of this class of technical

barri ers.

MARKET GROWTH PROJECTIONS

The demand for optoelectronic devices is a derived demand. That

is, the demand depends to a large extent on the demand for the final

system (in this case, a communication system) of which the devices are

46
NATIONAL BUREAU OF STANDARDS

components. Sales of communications equipment of all types are

projected to grow to 90 billion dollars annually by 1990. 62 For

current generation optical technology, actual and projected worldwide

sales for the major categories of components in a fiber optic

communication system are presented in Table 3. These data are for

markets which involve systems based on optical fibers, such as

communications and sensors.

In communications technologies, the trend is towards integration

of optical signal processing functions. The projected explosive

growth in sales of integrated optical devices for communications

applications is expected to be the result of a number of factors.

First, the overall demand for fiber optics is expected to continue to

grow rapidly as the ratio of performance to price continues to

improve. Second, the share of single-mode fiber in total fiber sales

will grow rapidly due both to improvements in the single-mode

perf ormance-to-price ratio and to an increase in the demand for high

bandwidth and/or high data-rate transmission. Single-mode fiber will

depend relatively more on integrated optics to achieve its superior

productivity potential. Third, integrated optics will gain greater

market acceptance once initial commercial applications demonstrate

that target performance levels can be realized in a reliable manner.

Fourth, diffusion into the marketplace of products based on integrated

optic technology will depend greatly on learning economies in

production. Thus, as with other technologies, costs will decline

rapidly once initial market penetration occurs and the growth of sales

will accelerate. 6

Other markets are also emerging for optoelectronic devices which

do not involve optical fibers. Although not treated in this report,

these markets will contribute significantly to the aggregated demand

for optoelectronic technology. Actual and projected worldwide sales

data for optoelectronic devices for all markets are presented in Table

4. Extrapolations to 1992 of these projections from Dataquest are

47
OPTOELECTRONI CS

Table 3

WORLDWIDE FIBEROPTIC MARKET BY COMPONENT SEGMENT, 1981-1989

(current $ millions)

1981 1982 19 . 8. 3. 1984 1985 1986 1987 1988 1989

Fiber/cable 109. 7 217. 8 370. 8 542. 7 766. 6 1048. 7 1 390. 6 1810.8 2251.

Trans/ rec. 56. 8 92. 5 150. 4 179. 8 239. 3 313. 5 419.0 519. 0 665. 2

Conne c t or

10. 9 16. 6 28. 7 38. 4 51. 0 66. 5 o

CO 102. 2 127. 6

TOTAL 177. 4 326. 9 549. 8 760. 9 1056.1428.1890.

2432.3044.

Source: Kessler Marketing Intelligence [ 19833

48
NATIONAL BUREAU OF STANDARDS

Table 4

WORLDWIDE MARKET FOR OPTOELECTRONIC DEVICES, 1980-1990

(current $ millions)

Year Sales

1980 689

1981 797

1982 820

1983 1102

1984 1350

1985 1330

1986 1454

1987 1716

1988 1981

1989 2059

1990 2335

Source: Dataquest
OPTOELECTRONI CS

substantially lower than those from Japan’s MITI, which forecast an

aggregate 1992 world market for all optoelectronics applications of $4

to $8 billion. Using the broadest feasible set of markets potentially

affected by optoelectronics technology, a recent report by

International Resource Development estimates that in 1985 the total

value of shipments in these markets will be more than $9 billion. IRD

predicts that these markets will collectively growth an annual rate of

27 percent for the next few years, "outpacing computers,

telecommunications and just about all of the other high-tech

markets". 64

The importance of optoelectronic devices in determining the

competitiveness of products containing these devices is evidenced not

only by the mushrooming R&D investment aimed at increasing the

productivity, and hence the pri ce / performance ratio, but by the fact

that other major components such as optical fibers have already

experienced their more radical advances and hence price declines.

Projections of U. S. sales for particular ceramic (oxide-based)

integrated optical devices were prepared by Charles River Associates

for two groups or classes of products. Worldwide sales projections

were extrapolated from the CRA numbers for Japan and Europe using

sales projections from Kessler Marketing Intelligence. These

projections are presented in Table 5. The first device grouping

includes modulators and filters to be used in multiplexing

applications. These devices were grouped together because their use

will be closely connected with the use of sources, repeaters, and

detectors. Sales of modulators and filters were therefore projected

based on projections of sales of sources, detectors, and repeaters.

In contrast, optical switches are expected to be used primarily in

communications switching systems. The projections of integrated

optical switches were based on projections for sales of

telecommunications switching systems.

The sales of lightwave sources, detectors, and repeaters used to

derive the projections of modulator and filter sales are themselves

50
NATIONAL BUREAU OF STANDARDS

Table 5

PROJECTED WORLDWIDE SALES OF INTEGRATED OPTIC DEVICES FOR

COMMUNICATIONS

(millions of current dollars)

Cerami

c

Total

Modulators/ Cerami

c

I n-Li ne Cerami

c

Filters Swi t c hes Ampl i f i ers De vi ces

1990

Europe 4. 7 4. 7

Japan 1. 4 1. 4

U. S. 7. 0 7. 0

Total 13. 1 13.1

1995

Europe 57. 6 22. 1 79. 7

Japan 17.4 6. 7 24. 1

U. S. 85. 6 3 2.8 118.4

Total 160. 6 61. 6 222. 2

2000

Europe 434. 7 177. 8 612. 5

Japan 131.5 53. 8 185. 3

U. S. 6 46. 3 264. 3 910. 6

Total 1212. 5 495. 9 1708. 4

Sources: Charles River Associates [19841, Kessler Marketing

Intelligence [19831

51
OPTOELECTRONICS

projected based on forecasts that total U. S. fiber optic equipment

sales will reach $2 billion per year in 1990. This number represents

an approximate mean of the range of forecasts by credible sources.

Nevertheless, the range of forecasts is still wide in spite of several

years of significant sales on which to base trend projections. The

upper and lower bounds of the range of estimates ($1.5 to $2.5

billion) vary by 25 percent from the mean value. Consequently, the

derived estimates of device sales, such as modulators and filters,

have an equally wide variance.

Another problem with estimates of the markets for individual

optoelectronic devices is the uncertainty about the directions that

integration will take. The CRA report makes separate estimates for

mod ul a t or/i 1 t es and switches. However, current research is

combining (integrating) functions in different ways. For example,

with respect to hybrid integration, the previously described highspeed switching and modulating device demonstrated in 1983 by Bell

Labs casts doubt over the usefulness of developing separate market

estimates for "individual" integrated optic devices which may not

exist beyond the very early stages of market development. And if, as

projected in this report, monolithic integration arrives in the

marketplace earlier than current forecasts indicate, the question of

separate markets for many "devices" is moot.

The projections of fiber optic systems sales used to derive the

projections of ceramic integrated optic device sales imply an annual

growth rate of 20 percent, which is moderately conservative for an

advanced technology in the early and middle portions of its life

cycle.

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NATIONAL BUREAU OF STANDARDS

Assumptions Underlying Optical Modulator/ Fi Iter Projections

Following Charles River Associates, sales of sources, detectors,

and repeaters are assumed to constitute 37 percent of total sales of

fiber optic equipment in all years after 1990. This assumed share

used by CRA was in turn based on published estimates by Gunderson and

Keck [19831. Technology and market factors will both continue to

change and thus could easily shift this estimated share of sales over

time. For example, the increasing use of single-mode technology with

greater distance between repeaters should decrease the share of these

devices in total sales. On the other hand, as fiber optics penetrates

further into subscriber loops, local area networks, and other shorter

distance applications the share of sources and detectors may increase.

The effect of these trends may be to cancel one another.

In fact, in a survey of fiberoptics marketing executives by

Kessler Marketing Intelligence, the respondents estimated that 40

percent of equipment sales are currently accounted for by all

components other than cable and fiber (i.e., connectors, splicers,

sources and detectors, couplers, and test equipment).

CRA assumed that when full diffusion of integrated optic devices

is reached, sales of modulators and filters will be about half the

size (in dollar terms) of sales of sources, detectors, and repeators.

CRA arrived at this assumption by constructing a number of scenarios

of feasible trends in the prices of devices and the percentages of

sources, detectors, and repeators which would be attached to

modulators and/or filters once full diffusion of integrated optics is

reached. CRA concluded that 50 percent is a reasonable assumption as

to the eventual maximum ratio of the value of integrated optic

modulator and filter sales to sales of sources, detectors, and

repeaters. 63 However, CRA estimated that ratios varying about 10

percentage points (i.e., 20 percent) higher or lower could reasonably

be assumed. Changing the assumption by such an amount changes the

sales of modulators and filters by 20 percent in the same
OPTOELECTRONICS

V

m

Table 6

ASSUMPTIONS UNDERLYING PROJECTIONS OF U. S. SALES OF

INTEGRATED OPTIC DEVICES: MODULATORS AND FILTERS

Category Year Value Ass umpt i on

Total U. S. Fiber 1990 $2, 0 0 0 M Consensus forecast

Opt i c System 1995 $5, 000M 20% annual growth from 1990

Sales 2000 $10, 0 0 0 M 15% annual growth from 1995

U. S. Sales of 1990 $700M

Sources, 1995 $1, 800M 37% of total fiber optic sales

Detectors, & 2000 $3, 700M

Repeaters

Maxi mum (full 1990 $4 0 0 M 50% of source, detector, and

diffusion) U. S.

Sales of Modu19952000

$9 00 M repeater sales

lators & Fi Iters

Market Share (of 1990 1. 9% 1% market share achieved in

maximum sales) of 1995 9. 3% 1988; commercial diffusion

Modulators & 2000 34. 9 % follows a logistic curve

Filters

U. S. Sales of 1990 $7 M

Integrated Optic 1995 $86 M (market share) x( maximum sales)

Modulators & 2000 $6 4 6 M

Filters

Source: Charles River Associates [1984]

54
NATIONAL BUREAU OF STANDARDS

direction.

The final set of assumptions relates to the diffusion path that

modulators and filters will follow. First, these devices are assumed

to be introduced commercially by the late 1980s and to achieve a 1 percent share of potential applications by 1988. CRA based this

assumption on the results of industry interviews indicating commercial

introduction of such devices was probably three to five years away in

1983. Second, the diffusion of integrated optic devices is assumed to

likely follow a logistic (or s-shaped) ma r ke t

- pe ne t r a t i on curve. 66 A number of studies have found that such curves represent many market

diffusion patterns of new technologies. 67 A further assumption is

that the speed of diffusion in this case will be about the average

determined in past studies of diffusion. The implication is that

nearly 9 years will be required for market penetration to increase

from 5 percent to 50 percent. Based on these assumptions, ceramic

integrated optic signal modulators and filters will be used in about

35 percent of their potential applications by 2000.

The above assumptions, used in constructing the projections,

are summarized in Table 6. These sales projections are relatively

sensitive to the assumptions underlying them for several reasons.

First, while these devices are currently in the development

stage, problems must still be overcome before they can be produced

reliably, with high reproducibility, and at a cost that makes them

competitive with existing technologies. Second, even once these

products are commercialized, barriers to diffusion will have to be

overcome. For example, the section of this report on technical

barriers pointed out that existing lifetime testing methods have not

proved useful for testing these devices. Thus, even if conventional

lifetime testing methods were available and tests begun today, only

several years of data could be accumulated by the time of projected

commercial introduction. The result will be considerable uncertainty

on the part of users with respect to the reliability and useful

lifetimes of these devices. The consequent "transactions" costs

55
OPTOELECTRONICS

shared between buyer and seller will significantly slow market

penetration. Only if the i nf r a t e c hnol ogy (measurement technology)

advances to the point of providing accelerated test methods, will this

retarding effect on market penetration likely be removed.

Moreover, as CRA points out, the projections of integrated optic

sales in 2000 are very sensitive to the year in which 1 percent

diffusion is assumed to be attained. For example, a change in this

assumption by one year (to 1987 or 1989) results in a change in the

projected market share in 2000 of approximately 20 percent (to 43

percent or 28 percent, respectively). This adjustment will, in turn,

produce a change in the projected 2000 sales of modulator and filter

sales by approximately 20 percent (if all other assumptions remain

unc hanged) .

The implication of this finding is very important. The leverage

on the stream of future sales of moving the point at which 1 percent

diffusion is reached forward in time (i.e., closer to the present) can

be quite significant, even if the rate of diffusion beyond 1 percent

is unaffected. Moving this point forward in time can be accomplished

by moving up the point at which commercial introduction takes place or

by accelerating initial commercial acceptance and diffusion. Thus,

any strategy by industry or by industry and government cooperatively

which accelerates initial commercialization and subsequent diffusion

throughout U. S. industry will have net economic benefits, especially

for strategically important technologies such as this one.

For example, device reliability and lifetimes are of critical

importance to system designers; rapid initial diffusion requires

reliability in use and acceptable operational lifetimes. The

implication is that the payoff to the e conomy from the timely

availability of measurement techniques which improve and demonstrate

integrated optic device reliability and lifetime can be s i gni fic_an t

The projected sales of integrated optic devices are very

sensitive to the rate of diffusion assumed. CRA assumed an average

56
NATIONAL BUREAU OF STANDARDS

diffusion pattern of 9 years for market penetration to move from 5 percent to 50 percent. Decreasing the assumed diffusion time between

5 and 50 percent by one year while maintaining all other assumptions

would result in a 35 percent increase in the projected market share of

integrated optic modulators and filters in 2000 to 47 percent. The

projected level of sales of these devices would correspondingly

increase by 35 percent. A one-year increase in the assumed time

required for a 5~to-50 percent increase in diffusion would result in a 25 percent reduction in the projected market share in 2000 to 25

percent. 68

Assumptions Underlying Optical Switch Projections

The market projections for ceramic integrated optic switches were

derived in a similar but slightly different manner from those for

modulators and filters. The assumptions underlying these projections

are presented in Table 7.

Because optical switches are likely to find application in

central office and private branch exchange (PBX) switching systems,

these projections are based on projections of U. S. sales of commercial

telecommunications switching systems. Electronics (January 13, 1983)

projects that total U. S. sales of telecommunications switching systems

will reach $3. 9 billion in 1986. According to Electroni cs data,

reaching this level will require an average annual growth rate of

about 22 percent from 1982 levels. Sales of switching systems to the

end of the century were projected by assuming average annual growth

rates of sales of 20, 15, and 10 percent for the periods 1986 to 1990,

1990 to 1995, and 1995 to 2000, respectively.

57
OPTOELECTRONI CS

Table 7

ASSUMPTIONS UNDERLYING PROJECTIONS OF U. S. SALES OF

INTEGRATED OPTIC DEVICES: OPTICAL SWITCHES

Category Year Value Assumpti on

Total U. S. Sales 1986

of Communications

Switching Systems 1990

1995

2000

$3, 934 M

$8, 158 M

$16, 408 M

$26, 425 M

Projection from E lectronics

(January 13,1983)

20% growth from 1986

15% growth from 1990

10% growth from 1995

Market Share of 1990

Optical Communi - 1995 1 cations Switching 2000 5

Sys t e ms

1% market share achieved in

0 % 1995; commercial diffusion

0 % follows a logistic curve

. S. Sales of Opt- 1990 —

ical Communica- 1995 $164

tions Switchi ng 2000 $1 , 321

Devi c e s

U. S. Sales of 1990 —

Integrated Optic 1995 $33

Swi tches 2000 $264

Optical market share x total

M sales

M

20% of value of switching

M systems

M

Source: Charles River Associates [19841.

58
NATIONAL BUREAU OF STANDARDS

The diffusion of optical switching systems was projected based on

the assumption that 1 percent diffusion is achieved by 1995. While

integrated optic switches may be technically developed prior to this

time their large scale commercial application in switching systems

will probably be paced by the commercial development of a direct (inline) optical amplifier. The existence of a den ve

d

demand for

integrated optic switches is due to the fact that switching is usually

performed in conjunction with signal amplification. If conversion to

electricity is required for amplification, the advantages of optical

as opposed to electrical switching (i.e., increased data rates) will

be nullified. Industry interviews by CRA indicated that commercial

introduction of optical signal amplifiers is probably on the order of

10 years away. 69 The reason for this projection of relatively distant

commercialization and diffusion is that in-line amplifiers will be

based on the more difficult gallium arsenide technology.

The diffusion path for optical switching systems was projected

based on the same assumptions as was the diffusion path for modulators

and filters. Diffusion is assumed to be characterized by a logistic

curve calibrated so as to yield 1 percent diffusion in 1995 and to

predict a gap of about rune years between 5 and 50 percent diffusion.

These assumptions yield the projection that optical switching systems

will gain a 5 percent share of total U. S. sales of optical switching

s ys t e ms and could reach an annual sales rate of $1.3 billion by 2000.

As was the case for the modulator and filter- sales projections, if

diffusion were more rapid or if commercial introduction were to occur

sooner, the leverage on sales in year 2000 would be significant.

CRA predicts that optical switches will make up only a fraction

of the value of optical switching systems. This fraction is expected

to be about 20 percent. 70 Accordingly, sales of integrated optical

switching de vi ces are projected to be about $260 million in 2000.

59
OPTOELECTRONICS

BENEFITS TO THE ECONOMY FROM OPTOELECTRONICS TECHNOLOGY

Nature of Expected Benefits

Some of the productivity increases in i nf ormat i on- handl i ng

functions are:

( 1) multi pi exi ng . Integrated optics can be used

to lower the cost of multiplexing applications

which enable more information to move along an

optical fiber per unit of time. For example,

wavelength division multiplexing (WDM) allows

light signals generated by several sources to move

simultaneously along a single fiber by shifting

the wavelength of one or more of the light waves.

This approach has the effect of creating several

information-carrying channels on a single fiber.

The number and thus the cost of fibers in a communication system are reduced, while preserving

redundancy should one of the signal sources fail.

Multiplexing is presently accomplished with bulk

crystal technology. However, as pointed out by

Charles River Associates [19841, the use of

integrated optic devices on a single crystal

substrate offers several potential advantages over

existing technology. First, the use of integrated

optic multiplexers is expected to increase the

number of channels per single -mode fiber from one

or two to a total of four or five. Second,

integrated optic devices are expected to provide

qualitatively better multiplexing at higher data

rates than does bulk crystal technology on singlemode fibers. Third, with the realization of

substantial learning economies, the cost of

s 1 ngl e - c rys t al , ceramic-based multiplexers may

fall to as low as one-quarter to one-half the cost

of bulk crystal multiplexers.

(2) Modulation . Modulation or the encoding of

information in the light ray is presently

performed directly by switching the light on and

off. This method is acceptable at shorter

60
NATIONAL BUREAU OF STANDARDS

wavelengths and lower data transmission rates.

However, external modulation using a separate

(integrated optic) device may well be required to

achieve data transmission rates substantially

above one gigabit per second at longer wavelengths

without sacrificing distance between repeaters. 71

Moreover, researchers interviewed by CRA

speculated that the use of external modulation

will result in improvements in the reliability of

the light sources.

( 3 ) Switching . Integrated optic devices

represent the only feasible way to directly switch

light beams at high speeds (i.e., in the megabits

or gigabits per second range). Industry personnel

interviewed by CRA indicated that the cost of an

integrated optic switch based on s

' ~ gl e - c r ys t al

ceramic materials may eventually go as low as onetenth the cost of an equivalent electromechanical

switch. 72 Large-scale optical switching will

become cost-effective only through integrated

optic technology.

(4) In-line amplification . The reduction in the

required number of repeaters is a major objective

of optical fiber research. Repeaters are costly

and when they are needed their operation is

inefficient due to optical/electronic conversions.

These conversions can be eliminated with the

result that not only are costs reduced but

reliability is increased. Holman and Wood [19851

rank in-line amplification as one of the four most

important future application areas of

optoelectronic technology.

Estimated Benefits from the Generic Technology

As integrated optic technology diffuses into the marketplace

following the typical diffusion pattern of performance and process

improvements along with other "learning curve" effects, the average

annual cost savings (productivity gains) realized by the economy will

increase until some point of maturity is reached. For example, CRA

estimates that by the year 2000 the average cost savings resulting

from the installation of ceramic integrated optic modulators and

filters will be more than 1. 5 times the value of the sales of these
OPTOELECTRONI CS

integrated optic devices themselves. 73 Using the CRA U. S. market

forecasts for modulators and filters discussed above, the total

econo my -wide cost savings due to the use of integrated optics in

communications applications is projected to exceed $1 billion per year

by 2000 . The CRA estimate is probably quite conservative, given that

a second calculation by CRA using plausible assumptions yielded an

estimated annual cost savings at least twice this amount. Thus, a projected range of annual cost savings by 2000 would be $1 to $2

billion. Adding the projected cost savings from integrated optic

switches yields a total projected annual cost savings gain from these

two classes of optoelectronic devices of $1.4 to $2.8 billion by 2000.

The above projections do not include the potentially substantial

future economic benefits from performance enhancements projected for

optoelectronic technology. For example, integrated optic switching

will allow many times higher data rates in switching than are possible

with existing technology. The use of integrated optic filters for

multiplexing may result in better quality multiplexing as well as cheaper modulation. The projections of productivity gains are based

only on the latter category of benefits (i.e., cost savings).

Moreover, industry participants believe that external modulation with

integrated optic devices may increase the reliability and lifetimes of

light sources. Again, these types of benefits will be substantial but

are not included in the above estimates.

Estimated Benefits from Measurement Research and Standards

These estimates can be used to project the benefits from

measurement research conducted by the National Bureau of Standards.

Earlier discussion noted that product and process technologies and

thus research content and methods in optoelectronics are very similar

to those in semiconductor technology. Therefore, a reasonable

assumption is that the projected contribution by me as ur e me n

- r1 a t e

62
NATIONAL BUREAU OF STANDARDS

technology to the optoelectronic industry is proportional to the

documented NBS contribution to productivity growth in the

semiconductor industry. 74

Using the projections developed by CRA for the cost savings from

assumed market penetrations in 2000 by integrated optic

modulators/ fi Iters and switches and assuming an NBS research program

similar in relative scope and depth to the one which has supported the

semiconductor industry, the NBS contribution to the productivity

growth (measured in terms of cost savings) of U. S. suppliers of these

two classes of optoelectronics devices is projected to reach a level

(in current dollars) of $35-70 million per year by 2000. Because

these two device classes represent only a fraction of the 11 device

classes identified earlier in this report, a reasonable projection of

the aggregate annual cost savings to the optoelectronics industry from

NBS research is $100 to $200 million . Moreover, these estimates are

biased downward because they are derived from the above industry

estimates of certain categories of cost savings, which, as noted,

exclude likely substantial productivity benefits from other categories

of impact. Assuming a fairly comprehensive NBS metrology research

program in this area, funded at an average annual level of $5- $10

million and applying appropriate present value calculation will

clearly yield a high a benefit-cost ratio.

Examples of market penetration curves approximating the previous

projections for components of integrated optics technology and the

above estimates of possible NBS contributions are di a gr amme d in Figure

1. The productivity benefits of NBS-supplied technologies and

services appear to shift the penetration curve only slightly to the

left. However, as the sensitivity analyses performed by Charles River

Associates indicate, quite small forward shifts in time of market

penetration can result in sizable economic benefits. For example,

attaining 50 percent market penetration only one year earlier would

result in a 35 percent increase in the projected market share in the

year 2000. Conversely, a slower diffusion pattern would have large

negative effects on projected market shares. In Figure 1, the area
OPTOELECTRONICS

between the two curves represents the cumulative benefits to the

economy from NBS support. That these aggregate benefits would be

substantial is clear from the estimate of benefits of $100-200 million

for one year (2000). Of course, the distribution of benefits occurs

farther out in time than the distribution of research costs, so that,

even with substantial overlap, the application of an appropriate

discount rate lowers somewhat the nominal benefit-cost ratio. But, as

Figure 1

Examples of Possible Market Penetration Curves for

Integrated Optics

the estimate of the NBS contribution was based on the assumption of a moderate size research program, which would not exceed $5-7 million

annually in the peak years, the discounted benefit-cost ratio will be

quite large.

64
NATIONAL BUREAU OF STANDARDS

Relationship Between Component and System Productivity

A Final point relates to factors affecting productivity and hence

economic benefits. As with other technologies that exhibit a "systems"

character ( i. e.

,

a number of components/ devi ces combined in some way

to perform a specific function), the productivity of communications

systems is a combination of the productivities of the

components/ de vi ces of which they are composed plus an additional

increment due to the specific way in which the various devices are

"organized" into the system. The individual devices exert "leverage"

on the overall system productivity; conversely, a failure to advance

the productivity of a particular device will result in a lower system

productivity level. In fact, the KMI survey, referenced at several

earlier points in this report, indicated that systems manufacturers

added 76 cents of value for every dollar added by component

manuf act urers.

In cases of particularly critical devices, insufficient

productivity gains can cause a "bottleneck" to overall productivity

growth and result in greatly reduced rates of diffusion of the system

technology and thus slower market penetration. As will be discussed

shortly, both industry and government strategic planning must take

steps in their respective areas of responsibility to remove these

bottlenecks in a timely manner. Timing is particularly important to

attain a competitive position in increasingly contested world markets.

65
OPTOELECTRONI CS

Part 5

COMPETITIVE STRATEGIES AND GOVERNMENT POLICIES

In this section, an analysis is undertaken of the competitive

positions of the United States and other countries which have made a commitment to participate in the emerging markets for optoelectronic

devices. From a variety of domestic and international sources, this

report concludes that the Japanese are ahead in the critical race to

eommerci alize optoelectronic products and rapidly penetrate the target

ma t'kets.

ADVANCING GENERIC TECHNOLOGIES

Much has been written about Japanese economic strategies and

their continuing success. At the most general level, Japan's success

in commercializing advanced technologies stems from two overriding

factors-- determination and pol i c y/ i ns

1 t ut i onal flexibility :

(1) One aspect of these strengths with important

implications for the potentially enormous

optoelectronics markets is the well-known Japanese

propensity for pushing the technology towards the

market early in the technology's life cycle.

66
NATIONAL BUREAU OF STANDARDS

While commercial enterprises in other countries

are waiting and evaluating potential market

directions and rates of growth, the Japanese seem

to be able to reach a consensus decision as to a technology' s economic value and set up the

institutional apparatus and funding to

cooperatively advance the generic technology. 75

In the past, the Japanese have acquired

technology from other countries and rapidly

accomplished the applied R&D, thereby reaching the

market first or at least being a "fast second".

More and more, the Japanese are cooperatively

conducting the nonproprietary and high-risk

generic technology themselves in order to

accelerate the timing of the proprietary R&D and

subsequent commercialization.

(2) The Japanese are also willing to assume the

risks of early commercialization. They use the

advantage of early market participation to gain

production and marketing experience.

(3) After the initial market entry, the

determination of Japanese industry to succeed

becomes especially evident by their emphasis on

continual improvements in production efficiency in

addition to improvements in product performance.

In optoelectronics, the Japanese Government through its Ministry

of International Trade and Industry (MITI) has organized an 8- year,

$75 million program to advance the generic technology in this area.

The research is being conducted at a dedicated facility called the

Optoelectronic Joint Research Laboratory (OJRL). Although ostensibly

focused on optoelectronics applications for monitoring and control

systems, the publicly available literature from MITI as well as firsthand accounts of American visitors indicate that the content of

the research follows the typical Japanese pattern of developing

broadly applicable generic technology. A MITI brochure states the

followi ng:

"This system (of R&D financing] has been

established to conduct large-scale research

and development which is urgently required but

requires a large amount of risk and money over

a long [ time] period and cannot be borne by

the private sector alone."
OPTOELECTRONICS

The Japanese apply a philosophy of "appropriate competition" in

which the nonproprietary character of generic technology as well as

its frequent lengthy gestation period are recognized as important

factors in determining the timing of commercial entry and subsequent

market penetration. Japanese firms in concert in with their

government cooperatively advance the generic technology and throw the

game open to intense competition among themselves as well as with the

rest of the world. Holman and Wood [19853 offer the possibility that

the Japanese are also more adept than are U. S. firms in finding their

appropriate market niches and product lines without more competition

than any one firm can comfortably handle.

However, the often used simple model of the Japanese taking

American technology and adding value through improved production

efficiencies does not apply to optoelectronics. A major reason for

the projected Japanese success in this technology is the relevance of

semiconductor product and process technology in which the Japanese are

the world' s best. Not only do they have the technology lead but the

Japanese economy's financial structure and their industry's financial

health provide the cash flow needed to fund major applied R&D programs

and then to make the required capital investment to tool up for

product 1 on.

This assessment does not mean that U. S. industry is out of the

running any more than the Japanese were out of the running in the mid1970s when they quickly caught up with and passed U. S. firms through

their cooperative VLSI program. The United States is on par with the

Japanese in the advancement of generic optoelectronic technology and

the U. S. university system appears to have a decided edge over the

rest of world in the general capacity to conduct basic and generic

technology research.

However, neither U. S. industry nor the U. S. university system

appears to be accumulating the necessary R&D equipment and research

funds. Neither are the National laboratories being funded to provide

68
NATIONAL BUREAU OF STANDARDS

the threshold levels of research funds required to support a U. S. industry commitment to the development of this technology.

Specifically, no dedicated U. S. research program in optoelectronics

currently exists comparable to that at Japan's Electrotechnical

Laboratory. Moreover, not only are national laboratories such as

Japan’s OJRL efficient mechanisms for achieving the economies of scale

and scope inherent in generic and infratechnology research, but they

provide an efficient means for transferring the results of the

research to industry in a timely manner compatible with industry's

competitive strategies. In Japan, this research at national or

industry cooperative laboratories appears to leverag e industry R&D

investment at levels "several times that of MiTI". 76 Having

efficiently accomplished the generic and infratechnology research

together, the Japanese firms then plunge into intense competition with

each other.

Until recently, the United States had nothing underway to compare

with OJRL in Japan. However, Battelle's Columbus Laboratories has

initiated a cooperative research program, funded entirely by industry,

which will closely parallel the Japanese effort in organization,

although the research objectives are more focused on process

techniques. Unfortunately, the Battelle consortium will operate with

half the funding and is beginning seven years later than the

government-funded Japanese OJRL. The new Battelle program began in

1985 with six firms (Allied, AMP, Dukane, Hewlett-Packard, ITT, and

Litton Systems). Battelle hopes to expand to 14-20 firms in 1986.

The target funding level is $12 million for the first three years.

77

The proposed program has three major objectives: developing automated

microassembly and packaging technologies; developing manufacturing

processes for fabricating optical circuits; and, developing processes

for producing op t i c a 1 - gr ad e crystals for guided wave optics. These

objectives include not only the development of new generic

technologies and materials, but also infratechnologies such as testing

procedures and other standards. 78

In following the Japanese model, this cooperative research

69
OPTOELECTRONI CS

program is a distinct departure from the typical Battelle multiclient

arrangement in which industry "participates" only as a subscriber;

that is, the industry supporters receive the results of the research

but are not direct participants. The new optoelectronics research

program will utilize scientists and engineers from the participating

U. Z. firms, whose financial contributions will pay for the material

and equipment costs as well, while Battelle will absorb the overhead

costs. As previously discussed, one of the advantages of this form of

research consortium is that the direct participation of scientists and

engineers from member firms significantly speeds up the technology

transfer process--an increasingly important factor in determining

competitive advantage.

A noteworthy aspect of the proposed consortium is the substantial

effort required by Battelle to obtain the participation of a significant number of U. S. firms. Battelle is in effect playing the

role of MITI, but without MITI's advantage of research funds. In

fact, Battelle must ask participants for operating funds. However,

funding is not the only factor in determining whether a consortium is

created. Competitive motivation is, as previously discussed, an

essential determinant.

But perhaps the most overlooked factor is the coordination

requirement. Participating firms do not simply reach a decision to

join a consortium through some push-button internal decision process.

Instead, the divisions within a firm, which have a stake in the new

technology and which often operate at least semiautonomousl.y within

the corporate structure in order to promote internal competition, must

collectively reach a decision on participation. No one division wants

to fund the firm’ s participation in the consortium with the cost

counting against their measured rate of return, while other divisions

benefit from the funded research as "free riders". Often a champion

or facilitator is needed to organize and coalesce support within the

firm. This need is especially apparent in firms without central R8.D

functions. The facilitator role is frequently played by MITI in

Japan, and Battelle has had to do the same for their optoelectronics

70
NATIONAL BUREAU OF STANDARDS

cooperati ve.

THE ROLE OF INFRATECHNOLOGIES

In addition to generic technologies, individual firms

systematically underinvest in "infratechnologies" which are techniques

and methods (such as measurement methods) that must be uniformly used

by all firms in the market for a particular technology. 7

The

National Bureau of Standards is the primary supplier of nonproprietary

measurement and test methods as well as critically evaluated

scientific and engineering data used by industry in research,

production control, and market transactions. As evidenced by the

analysis of technical barriers facing U. S. firms investing in

optoelectronics technology, measurement methods and data will play

critical and pervasive roles in the evolution of this emerging

technology. Yet, for the reasons cited in the referenced literature,

industry will underinvest in these infratechnologies.

These methods and data provide the technical basis for voluntary

industry standards which increase the efficiency of the entire

technology -based economic process: (1) they allow the results of

experimental research to be determined, thereby permitting state-ofthe-art research to advance; (2) standards provide assurance that

specified production processes will yield the required levels of

quality and reliability; (3) standardized acceptance test methods

reduce transactions costs associated with custody transfer' in the

market place, Thus, standards improve the efficiency of R8.D.

production, and marketing so that the overall price of a new product

is reduced, thereby accelerating market penetration.

The timing as well as the provision of these infratechnologies

are critical factors in helping industry achieve competitiveness in

technology based markets. Thus, NBS must interact closely with U. S.

71
OPTOELECTRONI CS

a

I

firms individually and collectively (through industry associations and fto research cooperatives) to effectively plan its own complementary

TM

research programs.

72
NATIONAL BUREAU OF STANDARDS

Part 6

CONCLUSION

Optoelectronics technology is in the "takeoff" stage in its life

cycle. The crude hybrid integrated optic circuits currently emerging

from the laboratory will quickly be replaced by much more powerful

versions and later on by totally integrated circuits. This technology

along with the more developed optical fiber technology will be the

driving forces behind communications, sensing, storage and retrieval,

printing, and other information-handling applications which will have

major economic impacts over the next several decades.

The economic impacts of optoelectronic technology will be

substantial. Markets potentially penetrated by optoelectronic

technology are estimated to collectively have current ( 1985) sales of

$9 billion with an average projected growth rate of 27 percent.

Japan' s NTT alone plans to spend an astounding $80 billion over the

next 15 years to completely replace the national communication system.

One estimate of the cost savings to the U. S. economy from the use of

only two categories of integrated optic devices in communications

applications is $1.4 to $2. 8 billion annually by 2000. In terms of

the Government' s contribution of infratechnology, the cost savings to

the economy from the timely development of measurement technologies

73
OPTOELECTRONICS

which support industrial R&D, production, and marketing are estimated

to reach an annual rate of $100 to $200 million by 2000.

Decisions made right now by companies will greatly affect their

future competitiveness. These companies, collectively as an industry,

will determine their country's competitiveness in world markets. The

estimated worldwide expenditures in 1985 for optoelectronics R&D of

approximately $700 million represents a dramatic 40 percent increase

over the previous year and reflects the entry of a number of large

firms. R&D investment is expected to increase another 40 percent over

the next two years. New would-be competitors are joining in the race

to develop and market optoelectronic components, optical fibers, and

l nf or mat l on- handl l ng systems based on these two technologies. Annual

sales of such systems are estimated to be $3 billion in 1989--tri pie

the level for 1985.

One of the most important considerations in planning industry,

government, and joint i ndustry/ government R&D programs is timing.

Sensitivity analyses have shown the dramatic impact of only a year' s difference in the timing of c omme r c i alization. Given the long lead

times required to set up and carry out major research programs,

appropriate planning and implementation of R&D strategies are

essential to achieving competitiveness in world markets. At this

point in time, the United States and Japan are approximately equal in

terms of generic research aimed at product development. The Japanese

seem to have the lead, however, in the development of production

technology. This lead is not insurmountable if the appropriate

industry and government programs are carried out in the time frame

required to achieve early market entry. The window in time during

which strategies can be formulated and successfully carried out is not

large, given the formidable competition faced by U. S. firms. No

better testimony to the severity of this competition exists than the

fact that in 1984 the U. S. electronics industry experienced a negative

balance of trade for the first time in its history.

The appropriate strategies seem to be a continuation of the

74
NATIONAL BUREAU OF STANDARDS

buildup of private-sector R&D capabilities coupled with increased

cooperative research at the generic technology stage and accelerated

infratechnology research to enable competitive timing of industry's

product and process development as well rapid market penetration.

Cooperative research should include combinations of private firms,

universities, and government laboratories. Infratechnology research

will be focused at the National Bureau of Standards. A complete

understanding of the required steps in the development of

optoelectronics and identification of the most efficient performers

(from both private and public sectors) of each step are essential for

success in the intense international competition which is already

underwa y.

The importance to the United States economy of being competitive

in world markets for optoelectronic products cannot be overemphasized.

The projected sizes of the markets understate the importance of the

productivity-leveraging effects of these technologies on the

information systems which are the engine of the "information age".

Not only economic effects, but social and political effects will

result from orders of magnitude reduction in the cost of accessing

information in the home and the workplace. Work styles and, in fact,

life styles will change significantly.

The nations whose economies are competitive in information

services will be the ones with the highest rates of growth over the

next several decades. Most important for industry and policymakers to

recognize is the fact that although much of final demand for

information is in the form of services, the underlying manufacturing

base will be the major determining factor in the future rates of

productivity growth and hence international competitiveness in this

arena. Thus, because of the increasing pervasiveness of information

technologies in society, competitiveness in the production and sale of

computers, optical fibers, and optoelectronic components will be

critical to achieving increases in the standard of living in the

decades ahead.

75
OPTOELECTRONICS

REFERENCES

1. See Busi ness Week , May 21, 1984.

2. See Fiberoptic Marketing Intelligence [December 1984],

3. The other major area consists of energy-related applications.

4. Japan's Optoelectronic Industry and Technology Development

Association defines optoelectronics in similar appl i c a t i ons - or i e nt ed

and functional contexts. Such an approach may help explain why the

Japanese tend to be quick to identify and achieve market applications

of new technologies.

5. Ill and V refer to the third and fifth "groups" of the periodic

chart of the elements. Gallium arsenide is the most commonly

researched compound from the elements found in these two groups. The

shorthand "III-V semiconductors" is used to distinguish that group of

materials from silicon-based semiconductors.

6. Tien and Giordmaine [1980].

See, for example, Bar-Chaim, Ury, and Yariv [1982] and Kao [1983].

8. Holman and Wood [19853.

9. Holman and Wood [19851.

10 . Holman and Wood [19853.

1 1 . DBR = Distributed Bragg Reflector and D F B = Distributed Feedback.

12 . FET = Field Effect Transistor

13. Holman and Wood [19853.

14. Holman and Wood [19853.

15.

i n The index of refraction

a vacuum to the velocity

( n) is the

of light in

ratio of the

the material

velocity of light

and is always

greater than or equal to one (because in a vacuum, n = 1, and in

materials light always has a lower velocity).

16. Holman and Wood [19853.

17. Holman and Wood [19853. However, as discussed in another part of

this report, very recent research has claimed the potential of

76
NATIONAL BUREAU OF STANDARDS

developing a lasing Function for certain doped forms of lithium

ni oba t e

18. See Charles River Associates [1984],

19. Charles River Associates [1984, pp. 20-221.

20. Stoichiometry is the atomic proportion or ratio of the different

elements that make up a compound (eg., in lithium niobate,

LiNb 03 the stoichiometry is one lithium to one niobium to three oxygen

atoms) .

21. Charles River Associates [1984, pp. 22 - 231 .

22. Charles River Associates [1984, p. 231.

23. For a technical description of monolith!: integrated circuits,

see Bar-Chaim, Ur.y, and Yariv [ 19821.

24. The problem of shorter lifetimes inherent in these materials may

be mitigated somewhat by the possibility of using smaller geometries

(compared to lithium niobate), which may reduce the need for higher

drive voltages.

25. Holman and Smyth [19841.

26. MBE stands for molecular beam epitaxy and MOCVD for me t a

1 - or ga ni

c

chemical vapor deposition. The highest quality optoelectronic films

have been made recently by these processes.

27. For example, MITI is allocating approximately $15 million per

year for such horizon technologies as superlattices and

superstructures which have applications in optoelectronics.

28. Japanese government funding shows a declining trend because of

the winding down of MITI's support for OJRL. Any plans for future

funding other than support for programs at the Electrotechnical

Laboratory are not known at this time.

29. See Fiberoptic Marketing Intelligence , November 1984.

30. The remaining 42 percent of the current market is divided among

video, computer connect, and military applications.

31. Kessler [1984)

32. Kessler [ 1 984) .

33. Ho 1 ma n and Wood (1985).

34. Hoi ma n and Wood (1985).

35.

page

Holman

s 15 16

and

of

Wood

this

[ 1985)

report.

The Czochralski method is described on

77
OPTOELECTRONICS

3b. See the Japanese Technology Evaluation (JTECH) Program Panel

report [ 1985]

37. See Bell [ 1 9851 , p. 48.

38. See Breakthrough [August 1, 1985].

39. MBE, developed in the 1960s at Bell Laboratories, is based on the

epitaxial growth of thin layers from a few nanometers to hundreds of

nanometers thick. Molecular beams are directed toward a heated

substrate, where they condense in the form of a single crystal.

Growth proceeds at approximately one atomic layer per second. MOCVD

introduces the gaseous constituents of a semiconducting compound into

a reaction chamber, where they combine on a heated substrate. (See

Bell [1985]).

40. Haavi nd [ 1985] .

41. Switches allow the light to be moved from one channel to another,

l. e. . from one fiber to another. Modulators change the frequency,

amplitude, or phase of the optical signal to encode information.

Wavelength division multiplexers (KDMs) combine several optical

signals of different wavelength from separate fibers. A multiplexer

is also used to filter a specific wavelength from laser light sources.

The filter can be tuned to maintain a signal of unvarying wavelength.

Couplers transfer the light from one input channel to another channel

for transmission through a fiber.

42. There are two main types of optical fibers. One type, known as "multimode fibers", propagate light of a single frequency in discrete

optical paths called modes. Modes are characterized by the

distribution and direction of magnetic and electrical fields. These

pat 1 1 s or modes are determined by waveguide parameters such as

refractive index and geometry. Fiber waveguides of larger diameter

( i. e. , 50-100 microns) typically support hundreds of modes

simultaneously --he nee, the name "multimode" fiber. When the

waveguide's diameter is made sufficiently small (4-5 microns), only a single optical mode can be transmitted at the designed wavelength.

Such a "single-mode" waveguide does not display the modal interference

(dispersion) of multimode fiber.

43. Hecht [1984] provided these estimates, although more recently the

cost seems to have dropped by around 20 percent.

44. Alferness ( 1984]

45. Alferness [1983].

46. Alferness [1984],

47. See Davidson [19851.

48. Alferness [19841.

78
NATIONAL BUREAU OF STANDARDS

49. Alferness [1984],

50. Hecht [1984].

51. This rate is equivalent to 14,000 telephone conversations or 100

average novels per second.

52. In the internal modulation experiment, the Bell Labs researchers

used a specially designed distributed-feedback laser and showed that

they could turn it on and off 2 billion times a second to produce

pulses with extremely stable wavelength. They transmitted these

signals over 103 kilometers of fiber without needing a repeater to

boost the power and restore the signal.

In the external modulation experiment, an optical switch was used

made of a titanium-diffused lithium niobate w',,r e guide element that

shifted the light signal in and out of the fiber in response to an

electrical signal pulsed 4 billion times a second. With the external

modulation device,' a somewhat hi ghe r - po we r e d laser could be used, and

the researchers were able to send the signal without repeaters over

117 km of fiber (Thompson [19853).

53. See Japan Electronics [November 15, 19851.

54. The bit-rate-times-distance figure is obtained by multiplying the

bandwidth (maximum modulation rate) times distance to get a basis for

comparing the results of different experiments. For example, the

external modulation experiment at AT&T established a record for single

fiber systems of 470 billion bit kilometers per second.

55. Holman and Wood [19851.

5b. Holman and Wood [19851.

57. See Japan Electronics [September 1, 19851.

58. Thompson 119851.

59. See Fiberoptic Marketing Intelligence , October 1985.

60. See Kessler Marketing Intelligence [19841, p. 23.

61. Bell [ 19851

62. See Business Conditions Reports [January 19851.

63. Charles River Associates [19841.

64. International Resource Development [19851.

65. Charles River Associates [1984, pp. 39-401. CRA arrived at this

assumption in the following way. They assumed that modulators and

filters will eventually cost approximately twice as much as detectors.

Repeaters are more complex and might cost as much as four to five

79
OPTOELECTRONICS

times as much as sources (as estimated by Montgomery and Dixon

[1981]). CRA also assumed that modulators have the potential to be

used with 25 to 50 percent of all light sources (and repeaters) once

full diffusion is reached. This assumption reflects the fact that the

benefits of external modulators will be realized primarily in high

data-rate, 1 ong- wa ve 1 e ngt h transmission and that not all applications

will require 1 ong- wa ve 1 e ngt h systems or even perhaps the data rates

offered by external modulation. Filters have the potential to achieve

more universal usage than modulators because they provide benefits

even at shorter wavelengths and data rates. Multiplexers are assumed

to have the potential to be used with 75 to 100 percent of all fiber

optic sources, detectors, and repeaters, once full diffusion is

reached. Thus, a rough average use rate for the two classes of

devices is 50 percent.

66. A number of related curves of the general "s" shape have been

proposed and tested empirically. See Martino [19831.

67. See. for example, Charles River Associates [19831 for a partial

review of the relevant literature.

68. Charles River Associates [1984, p. 421.

69. Charles River Associates [1984, p. 441.

70. Based on data in Integrated Circuit Engineering [19801 and

Electronics [January 13, 19831, CRA estimated that the ratio of the

value of integrated circuits used in communications switching systems

to total systems value was approximately 20 percent in 1980.

71. At such speeds internal modulation causes instability problems in

the light signals generated by the laser. Instability causes higher

signal losses which decrease the required distance between repeaters.

72. The alternative to integrated optic switching is more likely to

be digital electronic switching rather than electromechanical optical

switching.

73. CRA (1984, p. 471 also characterized the potential savings in the

following way. Industry interviews indicate that integrated optic

filters used in wavelength division multiplexing applications on

single- mode fibers are expected to have the capacity to handle 33 to

67 percent more channels while costing 50 to 75 percent less than

existing multiplexers. The implication is that the cost savings from

substituting integrated optic filters for existing multiplexers will

be 1. 67 to 5. 67 times the value of filters installed. That is, on a per channel basis, the cost of the existing approach to multiplexing

is 2. 67 to 6. 67 times greater than the expected ultimate cost of

multiplexing with integrated optics.

74. See Charles River Associates [19811.

75. See Tassey [19851 for a discussion of the nature of generic

technology and the possible roles for government in supporting its

80
NATIONAL BUREAU OF STANDARDS

de ve 1 opme nt

76.

Spicer [19831.

77. Note that the MITI-funded program is at an average annual rate of

about $10 million compared to the proposed Battelle program for which

proposed funding is at an average annual rate of $4 million. Spicer

[19831 estimated that the total eight-year MITI program, estimated at

$75 million, could not be duplicated in the United States for less

than $100 million.

78. See Inside R&D [October 23, 19851.

79. See Tassey (19851.

81
BIBLIOGRAPHY

Alferness, R. C. 1981. "Guided-Wave Devices for Optical

Communication." IEEE Journal of Quantum Electronics OE-17, 6 (June):

946-959.

Alferness, R. C. 1984. "A Strong Potential for Integrated Optics

Applications", Laser Focus/ Electro-Optics (October): 186-188.

Bell, T. E. 1985. "Japan Reaches Beyond Silicon", IEEE Spectrum

(October): 46-52.

Breakt hrough . 1985. New York: Boardroom Reports, Vol. 3:15

( August)

Business Conditions Reports . (various issues). Washington, DC:

U. S. Department of Commerce, International Trade Administration.

Charles River Associates, 1981. Productivity Impacts of NBS R8.D: A Case Study of the NBS Semi conductor Technology Program; prepared for

the National Bureau of Standards (Planning Report 8). Gaithersburg,

MD: National Bureau of Standards (June).

Charles River Associates. 1984. Technological and Economic

Assessment of Advanced Ceramic Materials, Volume 4: A Case Study of

Integrated Optic Devices ; prepared for the National Bureau of

Standards (Planning Report 19). Gaithersburg, MD: National Bureau

of Standards (August).

Davidson, Robert L. , editor. 1985. Annual Report on Research and

Development . Fort Lee, NJ: Technical Insights, pp. 123-124.

Fan, T. Y. and R. L. Byer. 1985. " Nd: MgO: Li Nb0 3 Laser", paper

presented at the Conference on Lasers and El e c t r o - Op t i c s . Baltimore,

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MD: Conference Proceedings (May).

Fiberoptic Marketing Intelligence . (various issues). Newport, RI:

Kessler Marketing Intelligence.

Gunderson, L. C. and D. B. Keck. 1983. "Optical Fibers: Where

Light Outperforms Electrons", Technology Review 86:4 (May/June): 32-

44.

Haavind, Robert. 1985. "Lighting the Way in Lasers", Hi gh

Technology (August): 39~41.

Hecht, Jeff. 1984. "Outlook Bright for Semiconductor Lasers", High

Technology (January): 43~50.

Holman, R. L. and D. M. Smyth, editors. 1984. Proceedings of SPIE

-- The International Society for Optical Engineering, Vol. 460:

Processing of Guided Wave Optoelectronic Materials . January 24-25.

Holman, R. L. and V. E. Wood. 1985. Assessment of Foreign

Technology in Optoelectronic Materials and Devices ; prepared for the

U. S. Government by Battelle Columbus Laboratories.

International Resource Development. 1985. Opto-Electroni c Market

Oppor t unities (Report #672). Norwalk, CT.

Japan Electronics . (various issues). Los Angeles, CA: Advanced

American Technology Publishing.

JTECH. 1985. Panel Report on Opto- and Microelectronics in Japan . Department of Commerce (May).

Kao, C. K. 1983. "Rapid Evolution of Fiber Optics", Electrical

Communi cation , Vol. 58, No. 1.

Kessler, John N. 1984. "The Future for Fiberoptics Promises

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Integrated Services for Consumers", Laser Focus/Electro-Optics

(October): 172-173.

Kessler Marketing Intelligence. 1984. Summary Report on Fiberoptic

Markets in the U. S, Newport, RI.

Kessler Marketing Intelligence. 1983. Worldwide Markets for

Fiberoptic Communications . Newport, RI.

Spicer, W. E. 1983. "Observations on Electronics Research,

Development, and Production in Japan with Emphasis on Hardware

Issues." Palo Alto, CA: Stanford University.

Thompson, D. E. 1985. "More Heroes of Optical Communications",

Science News , Vol. 27 (March 2): 134.

Tassey, G. 1985. "The Role of the National Bureau of Standards in

Supporting Industrial Innovation". Gaithersburg, MD: the National

Bureau of Standards.

Tien, P. K. , and J. A. Giordmaine. 1980. "Integrated Optics: Wave

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Yario Research Institute Ltd. 1983.

Tokyo: ( Apri 1)

Optoelectronic Industry in Japan .
KXM NSS-H4A (KV l l-U)

U.s. DEPT. OF COMM.

BIBLIOGRAPHIC DATA

SHEET (See instructions)

1. PUBLICATION OR

REPORT NO.

2. Performing Organ. Report No.

NBSIR-86/3369

4. TITLE AND SUBTITLE

Technology and Economic Assessment of Optoelectronics

October 1985

5. AUTHOR(S)

Dr. Gregory Tassey

fi. PERFORMING ORGANIZATION (If joint or other than NBS. see instruction s)

NATIONAL BUREAU Of STANDARDS

U.S. DEPARTMENT Of COMMERCE

GAITHERSBURG, MD 20B99

7. Contract/Grant No.

I. Type of Report & Period Covered

9. SPONSORING ORGANIZATION NAME AND COMPLETE ADDRESS (Street. City. Stote, ZIP)

10. SUPPLEMENTARY NOTES

| | Document describes a computer procram; SF-185, FlPS Software Summary, is attached.

11. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant

bi bl iography or literature survey, mention it here

)

Optoelectronics is one of the two major technologies driving the revolution in

communications, which will not only have profound effects on the economy but on social

and political structures as well. Future productivity advances in optoelectronics

will come from integration of the various signal processing functions and from

improved manufacturing technologies . "Hybrid" integration, which uses oxide-based

materials and integrates some of the signal processing functions, is close to

commercialization. Total or "monolithic" integration, based on gallium arsenide, may

not reach commercialization for another 8-10 years. In both cases, the economic

impact will be substantial.

As a result, the U.S. and its major competitors, especially Japan, are making major

R&D investments in optoelectronics. Worldwide R&D expenditures are expected to reach

$1 billion by 1987. In terms of market penetration, fiberoptic systems will attain

annual sales of more than $3 billion by 1989. The Japanese have made a national

commitment to becoming the world leader in this market.

Competitive positions in world markets will be determined by which countries rapidly

advance all elements of the overall technological base. This base includes

measurement-related methods and data which have been shown to have significant effects

on productivity growth in other technological areas. Optoelectronics is projected to

be equally dependent on this technology element for rapid development and market

penetrat ion.

12. KEY WORDS (Si* to twelve entries ; alphabetical order; capitalize only proper names; and separate key words bv semicolon s) economic growth; government laboratories ; industrial growth; infrastructure;

innovation; policy; productivity; standards; technological change; technology

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