Erica Fuchs
Process-based Cost Modeling for Optoelectronics Production
Whitepaper Overview
The past four years have seen the optoelectronics industry transform from one dominated by the speed and performance of innovation to one where efficiency and cost play a determinant role in a company's future. A plot of the U.S. fiber-optic market size over time shows an underlying driving force of this transformation, namely, the collapse of the optical fiber market coincident with the burst of the internet bubble following the year 2000. By 2002, actual optical fiber sales fell short of 24 month projections by more than 80 percent. (Cahners Business Information 2000; Turbini and Stafford 2003)
Among the possible strategies for reversing this market trend, an important one will be realizing lower manufactured costs for optoelectronic components. This paper examines the role of three levers available to lower costs in the optoelectronics industry. These three levers are (1) scale, (2) technology, and (3) location. The opportunities to influence each of these areas stem from the unique market and technology which make up the optoelectronics industry. Through the development of a process-based cost modeling tool, the cost-benefit potential of the different opportunities are explored. Balancing the feasibility of each cost-reducing opportunity against the respective potential benefits is left to each firm to assess for itself, based on local strengths and weaknesses.
This paper describes the application of the process-based cost modeling (PBCM) method to assess the economic questions associated with optoelectronic component integration. The model which is described represents a broad-scope PBCM, developed as an element of the MIT Communications Technology Roadmapping Project (CTR), for the optoelectronics components industry. Although the model was first developed around a specific InP device case and is currently being extended to analyze specific optical subassembly architectures, the aim of this project has been to develop a model easily adapted to address most designs, processes, and materials emerging within the optoelectronics industry. Read More...
Other CTR related publications by Erica Fuchs:
Consolidate? Integrate? Go East? Or Get Out? Mapping the Cost Drivers in Optoelectronics Production
Economic Insights into Design, Process, and Production StrategyEconomic Insights into Design, Process, and Production Strategy
