Nextrom Photonics, founded by Nextrom Holding, is an independent venture that aims to automate the assembly of fibre optic cable components for the world's photonics manufacturers.This content was published on April 11, 2002 - 08:15
Nextrom Photonics makes, sells, and integrates photonics automation equipment for the world's leading optical manufacturers, all of whom are customers of its parent company. They include Nortel Networks, Lucent, Alcatel, and Corning.
It is an independent company that belongs to a new breed of ambitious photonics automation companies emerging here - others include Dr Tresky and Microcut - whose goal is to do in the photonics industry what SEZ, Unaxis, ESEC and Ismeca (recently acquired by Schweiter), have done in the semiconductor industry.
Nextrom Photonics will offer systems that perform fibre termination, fibre attachment and optical component assembly; that is, it will sell the equipment that puts the connectors onto the ends of the cables.
Connectors in fibre optics look like those plastic-shielded plugs that connect our TVs to the cable television network outlet in our homes. The company will act as a "systems integrator" of its own and other equipment manufacturers products.
"Today much of the assembly is still done by hand," says Marc Schulthess, an investment analyst at Pictet in Geneva. It is usually a painstaking process requiring hundreds of workers.
Because the volumes have been fairly low until now, this production method was viable, but it is not very efficient or accurate.
"A lot of components get damaged in the assembly process, which leads to low yields," points out Alan Hutchison, Managing Director, Nextrom Photonics. The low yield problem is driving the demand for machines that do the work with greater precision and care.
The drive towards automation is not necessarily to save costs, which is normally the reason to invest in automation, but "to increase yield, quality, and repeatability".
"If it was only about saving labour costs, companies based in China [where labour is cheap] would not be interested in our equipment - and the Chinese are interested," says Hutchison, who is leaving next week for a sales trip to Asia.
Nextrom Photonics, which currently employs 20 people and plans to take on a further ten new staff this year, can leverage the parent's distribution network and its valuable customer base.
Half the company's employees were hired from Nextrom Holding, a large chunk of which is controlled by Nokia. The parent company has built a half a billion franc a year business out of selling and installing the equipment used to manufacture the spun glass cables used in fibre optic networks.
It is the world's largest, according to Beat Fueglistaller, an investment analyst at Credit Suisse First Boston, who covers the Nextrom Holding share.
The other half of the employees come from Sysmelec, a company that has signed a partnership agreement with Nextrom. The 20-year-old, privately owned Sysmelec is recognised internationally as a leader in high precision handling and assembly equipment.
It has built itself a reputation in the area of nano-positioning and micro-systems assembly, automation and robotics. It has effectively spun off its photonics assembly business division to Nextrom.
"Sysmelec SA has built up know-how in photonics assembly. It will continue to be a key partner for us in the development of our manufacturing solutions," says Hutchison. The contract involves 11 Sysmelec employees and the photonics business unit transferring to Nextrom Photonics.
Hutchison is confident his firm can achieve its goals. The young company will benefit from piggybacking Nextrom's supply chain, customer relationships, and its knowledge on how to commercialise manufacturing equipment.
It will also emulate the parent company's existing operational model. "It's a sub-contracting business model, one that works well in a cyclical industry. The American firms in this space tend to a vertical approach," says Hutchison. "We don't think that this approach is the best practice."
Hutchison is referring to the practice of vertical integration in a market segment, where a manufacturing firm keeps as much of the supply chain in-house.
A former Accenture consultant and business development specialist, Hutchison says the company has a lot going for it, not least of which is its location in Gals, Switzerland, in the same building as Sysmelec, which employs 60 people, and MTA Automation. Just down the street is Alcatel Space.
Gals has a population of 700 people and is a stone's throw from the Neuchâtel region, where the Institute for Microtechnology of the Swiss Federal Technical University, the Swiss Center for Electronics and Microtechnology, Colibrys, and a number of optical industry start-ups are located.
Hutchison, who was born in Britain, but is now a Swiss citizen, is excited about the prospects for the photonics industry in the region. He calls it a "Gulliver - or hidden giant".
"There is a passion for precision in the fabric of the economy here. This part of Switzerland could become a photonics hot spot or cluster, driving the development and growth of the photonics industry, the way it has in the watch industry," says Hutchison.
But Hutchison has no illusions about potential stumbling blocks that could thwart growth in Switzerland - one being the inter-cantonal rivalries that exist.
Cantons are competing against each other to attract photonics firms and investment money, rather than working together to develop a national strength. "An effort at the level of the federal government might be required," says Hutchison.
A market with promise
The number of potential customers for Nextrom Photonics is limited at this time. Hutchison probably could count them off on one hand.
"A very high production volume is required to amortise the assembly line cost at a low cost per unit," points out Jeff D Montgomery from the market research firm, ElectroniCast's, in a recent report on the market for optical assembly and packaging systems.
There are very few vendors today with production rates of 1,000 units per day or more of any [optical] product family these days.
But the situation is expected to change soon. There is an emerging trend in the photonics sector that will see the dismantling of some of the vertical integration mentioned earlier in this report.
"The big players, like Nortel and Lucent, are going to be outsourcing photonics to contract manufacturers, just like they have been outsourcing electronics manufacturing to the likes of Flextronics," says Hutchison. "We are targeting these emerging photonics contract manufacturers right now."
A sign that the market for photonics automation is starting to mature is the growing number of competitors entering the fray. The market leader is Newport, a US firm that has stepped up its acquisition activity recently, including firms that have a competency in microassembly.
Exfo, a Canadian maker of photonics test equipment has its eye on the assembly market too. It recently acquired Burleigh Instruments Inc, a company that makes nano-positioning equipment to precisely align component parts.
Others emerging in the photonics automation segment are Adept, Meikle Automation, and Newport. Systems integrators include RTS, Jot Automation, and AIS Automation.
by Valerie Thompson
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