Surging Adoption of Optical Coatings in the Electronics & Semiconductor Sector Is Driving the Market Growth

The Optical coatings market is growing at a significant rate during the forecast period, owing to the increasing usage of optical coatings in the semiconductor and electronics sector. The optical coatings are primarily used to improve the transmission, reflection, and polarization properties of optical components that are used in electronic devices and semiconductors such as reflectors, display screens, lightings, and other similar components. According to the Semiconductor Industry Association (SIA), U.S. semiconductor industry R&D expenditures grew at an annual growth rate of 7.2% from 2000 to 2020. In 2020, total U.S. semiconductor industry investment in R&D totaled US$ 44 billion. R&D expenditures on the semiconductor industry alone account for 18.6% of the total spending. According to recent insights published by the Global System for Mobile Communications (GSMA) Intelligence, around US$ 99 million smartphone connections were installed in Nigeria in 2020, and it is expected to reach up to US$ 155.4 million by the end of 2025. It also states that around 24 million smartphone connections were installed in Morocco in 2020, which is expected to increase up to 34.9 million by the end of 2025. In this way, an increase in demand for electronics products, will also increase the demand for optical coatings.

Optical coatings are used in semiconductors along with electronic equipment and devices to extend the shelf-life and improve the overall efficiency of semiconductors and other electronic components. According to the annual reports published by Samsung during the fourth quarter of 2020, the semiconductors division obtained a total revenue of US$15.1 billion. Likewise, in October, 2020, the Semiconductor Industry Association (SIA) stated that global semiconductor industry sales reached up to US$47.2 billion in August 2021, and increased by 29.7% in comparison to the total sales of US$36.4 billion in August 2020. An increase in sales and production of semiconductors will also increase the use of optical coatings on reflectors for components used in semiconductors, thus, driving the market growth. Furthermore, Lenovo Group, a leading brand in consumer electronics such as laptops, smartphones, desktops, monitors, and display screens, published the annual report for the fiscal year that ended in March 2021, which stated that the total revenue of the company reached up to US$60,742 million in fiscal year 2020/21, an increase by 20% in comparison to fiscal year 2019/20. These electronic products use optical coatings on display screen, lightings systems, surface reflectors, and camera optics. Hence, an increase in sales and demand for use of electronics products, components and semiconductors will also increase the demand for optical coatings required during their production, thus, leading to market growth in the forecast period.

Asia Pacific is anticipated to emerge as a major player in the global market over the forecast period owning to increased production of semiconductor and electronics product in the region. According to recent insights from the Semiconductor Industry Association, China imported around US$378 billion in semiconductors, accumulated 35% of the world’s electronic devices and was responsible for 30% to 70% of the global PC, TV, and mobile phone exports in 2020. It also states that China’s National IC Fund has invested US$39 billion until July 2021, among which 69.7% has been allotted for front-end manufacturing with the aim of increasing China’s share of global semiconductor production. In addition to this, China has also proclaimed more than 15 local government IC funds worth US$25 billion along with the National Fund that amounts to US$ 73 billion in total for funding Chinese semiconductor companies. According to the Statistical Handbook of Japan 2021, the production and shipments of electronic equipment reached up to US$52.6 billion during the fourth quarter of 2020, and is expected to increase in the upcoming year. Hence, an increase in productions activities and investments in the electronics & semiconductor industries, are likely to increase the demand for optical coatings required during their production, leading to market growth in APAC during the forecast period.

However, COVID-19 has led to a reduction in demand, supply interruptions, financial pressure and workforce impairment in the industry. According to Airports Council International, a global trade representative of the world's airport authorities, the impact of the COVID-19 crisis removed more than 1 billion passengers for the whole year of 2020 compared to the projected baseline (pre-COVID-19 forecast for 2020), representing a decline of 64.6% of global passenger traffic, a decline of 63.3% as compared to the year 2019. Furthermore, following the “Great Lockdown” of April 2020 following the global outbreak of covid-19 pandemic in March 2020, international passenger traffic was virtually non-existent in the second half of 2020. International passenger volume ended the year below an average of 1 billion passengers, a decrease of more than 75% compared to the volume in 2019. This majorly affected the use and demand of optical coatings across various end use industries.

The rapid growth in the semiconductors industry is supported by the rising electrical and electronics industry, which is, in turn, driving the demand for the optical coatings market. Optical coatings help in enhancing the optoelectronic properties of printed circuit boards (PCBs), integrated circuits (ICs), and macroscale devices used in electronic devices and appliances. According to Semiconductor Industry Association, the global semiconductor industry sales increased at a rate of 6.5% from US$412.3 billion in 2019 to US$439 billion in 2020. The global sales of semiconductors for one month during December itself increased at a rate of 8.3% from US$36.19 billion in 2019 to US$39.2 billion in 2020. This is rapidly increasing the demand for optical coatings from the semiconductors industry, as optical coatings are widely used for optoelectronics properties in semiconductors. The optical coatings used in the electronics & semiconductor industry withstand the high-temperature gradients and high rates of heat transfer in rapid thermal processing, which are commonly applied to printed circuit board (PCB) coating, ICs, and wafers to modify their optoelectronic properties. Optical coatings help in enabling parts of a semiconductor to withstand the extreme temperatures of wafer processing. The annual sales of logic products in the semiconductor industry increased by 10.3% to US$117.5 billion during 2020 and memory products increased by 10.2% to US$117.3 billion during 2020. Additionally, the continuous development and product launches in the electronics & semiconductor industry have increased the need and demand for new-generation wafers in semiconductors, which is further driving the demand for optical coatings. Thus, optical coatings are considered the preferred material to enhance the performance of products. This, in turn, is expected to further drive the demand for optical coatings from the electronics & semiconductor industry during the forecast period.

The emergence of next-generation artificial computing systems owing to their potential advantages such as robust learning, highly energy-efficient computing, parallel processing and fault tolerance has led to the development of optoelectronics and all-optical neuromorphic devices. During November 2020, Innatera Nanosystems, a Dutch based neuromorphic processor company, raised US$5.71 million (€5M) in seed funding for developing a revolutionary brain-inspired processing technology to sensors and sensor-based devices. These sensor based devices requires the use of optical coatings as the function of light is significant in a sensor based device. Innatera’s neuromorphic processing chip closely resembles the human brain’s mechanisms for pattern recognition, enabling sensor data that can be processed 100 times more faster (with optoelectronic devices) and with up to 500 times lesser energy than with conventional processors. These performance gains and radical efficiency helps in achieving advanced Artificial Intelligence (AI) to be embedded into the sensor-edge and unlocking a wide range of applications such as intelligent speech processing in target recognition in Radars & Lidars, vitals monitoring in wearable devices, human-machine interfaces and fault detection in industrial and automotive equipment, which majorly makes use of optical coatings. The technology relies on the latest breed of analog-mixed signal computing circuits that can recreate the behavior of human brain’s fundamental building blocks – spiking neurons and synapses. Innatera’s architecture provides a combination of ultra-low power as well as ultra-short recognition latency, which has up to 10,000x higher performance per watt than typical digital processors and conventional AI accelerators. This is increasing the scope for optoelectronic and all-optical neuromorphic devices, which is creating opportunities for optical coatings market.

The major companies in the Optical Coatings market include Nippon Electric Glass Co., Ltd., PPG Industries, Inc., VIAVI Solutions Inc., AGC Inc., and others. These industry players are involved in various strategic initiatives to expand their presence. For instance, in September 2019, AGC announced the establishment of a new production plant at AGC Automotive Inc. to manufacture large 3D/complex-shaped cover glass for car-mounted displays. The facilities include a fully integrated production line with cutting-edge technology that handles every stage of the process, from optical thin coating to decorative printing and composite moulding of complex curved surfaces. In February 2021, VIAVI Solutions Inc. announced that its Optical Security and Performance Products (OSP) division will establish a new production facility in Chandler, Arizona to meet rising demand for its products. VIAVI also intends to relocate its headquarters to the new facility, which will be able to accommodate at least 100 employees by 2022.