The slowdown in the telecommunications market has affected giants in the field, with companies such as Cisco Systems Inc. and Lucent Technologies Inc. paying the price with hefty losses, slashed earnings and reduced stock prices.
But it is also being felt in Howard County, where photonics companies have clustered to feed off fiber optic companies such as Ciena Corp. and Corvis Corp. The component makers are holding on, though, hoping for better times in the next year.
"It is a tough market," said Paul Yazge, marketing director for Codeon Corp., an equipment maker. "There's just not a lot of volume these days."
While Howard has promoted its photonics cluster as a sector bound for growth, the companies that have come in are facing bitter times.
Growth in photonics was the main reason for expansion in the county's manufacturing base, Howard's Economic Development Authority said. According to state Department of Labor Licensing and Regulation, nearly 1,150 manufacturing jobs came to the county from 1998 to 2000, and most of those were in photonics.
The industry, though, has suffered from lower demand for its products.
This time last year, the photonics sector was expected to create hundreds of jobs in the county, but growth has all but stopped.
Bookham Technology PLC, which last year decided to move its North American headquarters to a 150,000-square-foot space along Old Annapolis Road, is "coming in slower than expected," said Richard W. Story, executive director of the county's Economic Development Authority. Bookham's losses grew in the second quarter despite an increase in revenue.
Another company, Israel-based Trellis Photonics Ltd., set up North American headquarters in Columbia and expected to receive money from the state to help build a production facility in Gateway business park. But Trellis left Columbia altogether and returned to Israel.
"We see many of the photonics companies catching their breath," Story said. "We are positioned still to have the primary cluster of photonics companies in the world. The question is, how strong are [those companies'] fingernails? Are they able to hang in there until the market bounces back?"
The outlook for the photonics market isn't so grim. Some analysts are predicting a stronger market by next year.
"There's still a need for optical out there," said Mark Lutkowitz, vice president of optical networking research for CIR Communications Industry Research in Charlottesville, Va.
"Odds are, next year is going to be better," he said. "There's been a major correction here. They'll start looking better, assuming the economy doesn't get much worse."
That's what Howard companies are hoping for.
At Codeon, next year could play a major part in charting the company's future. Yazge said Codeon components are scheduled to be used in many next-generation models of equipment, so a 2002 rebound would be right on time.
"The consensus is that we've bottomed out," he said. "We're in the middle of a couple of flat quarters. The upswing will probably start in the middle of 2002."
Other companies, such as Optinel Systems, say they haven't felt many effects of the sagging economy because they're developing new products. Optinel's latest project is an optical application for the cable industry.
But an economic rebound next year would help companies such as Hanover-based Yafo Networks, which hopes to be selling and shipping its product next year.
"We are in trials now [and] expecting to have revenue next year," said Jeffrey Ferry, vice president of marketing.