No matter the strength of your strategy or technology advantage, business conditions beyond your control always seem ready to upend even the best plans. So, staying aware of and preparing to counter them is vital. Several not-so-often-discussed trends called out during SPIE's Global Business Forum in January strike me as critical to share with the broader photonics community.
1. Uneven growth rates: Citing IMF data, John R. Lincoln, chief executive of Photonics Leadership Group (UK), highlighted how recent growth in developed economies has diverged, noting disparate growth rates across regions and even of countries within regions. “So having a universal global strategy might have worked two years ago, but it does not work now, and it certainly will not work next year,” he said. Instead, he advised considering how your policies, pricing, sales, marketing, and customer strategies should differ in the various locations you sell into.
2. Fluctuating currency exchange rates: Lincoln also advised paying close attention to currency exchange rate changes, arguing that they have a greater or equal impact on pricing changes than U.S. inflation and at least the same impact as your core price changes. After sharing a few examples, he urged: “I encourage you to think about the dates you fix your prices and exchange rates because they can make a difference between you being competitive or not.”
3. Increasing investment, trade, and export restrictions: Speaking from an investment and merger and acquisition (M&A) perspective, Brian Perrault, managing director of Needham & Company LLC (US), stressed that “Regulatory uncertainty maybe doesn’t get as much airplay, but is something to keep in the back of mind.” He highlighted that increased vigilance of the Committee on Foreign Investment in the U.S. (CFIUS) is a significant hurdle for foreign companies that want to invest in or acquire a U.S. company, adding, “and if you sell into the A&D [aerospace and defense] market, it’s making it basically impossible to take outside acquisition or investment dollars.” Additionally, he said the Hart-Scott-Rodino Act (HSR) antitrust scrutiny is increasing.
Separately, Jennifer O’Bryan, SPIE’s director of government affairs, recounted the various restrictions on U.S. and EU outbound investments in China, U.S. controls on semiconductor exports to China and their effects, China’s new export controls on rare earth materials, and the extension of Section 301 tariff exclusions.
4. Adoption of artificial intelligence (AI): Describing his research in China, Bo Gu, president of BOS Photonics, predicted companies’ use of AI there would increase from 15% now to 60% in three years. “[AI] is going to be completely changing the landscape; this is coming, and you cannot stop it,” he declared, urging, “you need to be prepared.”
5. Potential U.S. interest rate changes: Perrault sounded a measured tone in his analysis of U.S. interest rates, saying that “though interest rates are in the medium to high range, the stability in interest rates is probably going to make 2024 a better environment for investors and those seeking investment.” He explained that when rates are stable, it helps buyers’ and investors’ ability to assess business and financial risk and, thus, make decisions.
Further, he added: “There’s still triple the amount of capital in the system than there are investable ideas, so, if you’re a top-performing company, you’re in the pole position.” Additionally, he reported a significant increase over the last five years in private equity capital seeking opportunities in the photonics industry.
6. Election-year uncertainty: Several speakers highlighted that the vast number of elections scheduled worldwide in 2024, especially the volatile U.S. presidential election, is creating unpredictable conditions. “This historic year, more people and more countries go to the polls than has ever happened in the history of mankind,” Lincoln declared, emphasizing, “countries home to 50% of the global population will hold elections in 2024.” Still, he asserted the inevitable lull in policymaking as a silver lining in the election year. “So for one year, we have the perfect business environment. It’s predictable, stable, and nothing changes,” he said, prompting laughs from the audience.
These are the top six global business trends discussed at the Forum that resonated for me as among the most critical for photonics leaders. Though tracking and adapting to a fast-changing environment likely isn’t as interesting as competing to develop the next technological advance, doing so can help you retain or increase your company’s competitive advantage—and keep the photonics sector growing strong.
