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Value-Centered Approach Urged for MEMS-Based Component Vendors

Photonics.com
Apr 2005
PALO ALTO, Calif., April 22 -- The slow rate of innovation in the recovering telecommunications market is restraining the rapid expansion of the microelectromechanical systems (MEMS)-based components market, according to Frost & Sullivan, a market research firm. Although MEMS is an important technology, the need for time-based value engineering in a potentially high-demand industry compels vendors to adopt different strategies to stay active in a price-sensitive market, it said.

A new analysis by the company, "World MEMS-Based Tunable and Dynamic Component Markets for Telecom Applications," reveals that this market generated revenue of $98.9 million in 2004 and that total market revenue is expected to reach $427.7 million in 2011.

It said although technological superiority is not considered a competitive advantage by MEMS vendors at present, this trend is expected to change as customers try to use supplier technology to increase the technological superiority of their end products.

"Price is the most important competitive factor in this market as of now," said Frost & Sullivan Research Analyst Projjal Kumar Roy. "Hence, MEMS-based component vendors are more likely to follow customer demands with a small phase lag, rather than a large phase lead noticed during the days of telecom boom."

He said the challenge for MEMS vendors lies in meeting value-engineering specifications at an acceptable market price. This requires extensive study of consumer behavior along with the pricing trends in the market.

"While existing architecture is fully functional, the next big overhaul is set to bring in dynamic MEMS architecture comprising tunable lasers and receivers. Clients are likely to opt for multisource agreements (MSA), which can substantially lower their switching costs by allowing them to dictate specification terms to several vendors. MSAs also expect to bolster cost competitiveness in a market that is already very price sensitive," Roy said.

The bargaining power of the customer exceeds that of the suppliers throughout the length of the telecom industry value chain; therefore, MEMS-based optical component manufacturers should focus on shifting customers from a price-centered approach toward one that is value centered and highlights the price-performance ratio, according to the analysis.

"The slow but steady move to push the fiber-to-the-premises is expected to make the 'all-optical networks' a reality, leading to rapid adoption of newer applications that will give a fillip to the MEMS-based optical components market," Roy said.

For more information, visit: www.frost.com; For an overview of the MEMS analysis, contact Trisha Bradley at trisha.bradley@frost.com, with the following information: your full name, company name, title, telephone number, fax number and e-mail address.



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