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Optorun: specialists in optical thin film formation equipment

Interview - January 31, 2023

Since its establishment in 1999, Optorun has manufactured and sold various coating equipment in the fields such as optical tele-communications, digital consumer electronics, solar cells, LEDs, smartphones, among others.


Since the end of WWII Japan has developed an excellent reputation for its ingenuity and its attention to detail in its manufacturing processes. Japanese companies are competing with regional competitors and QCD is becoming much more important. As a specialized manufacturer of thin film equipment, could you give us your take on the advantages of Japanese manufacturing and why Japanese firms are so successful when it comes to high-mix-low-volume production?

We started up in 1999 producing optical thin film coaters for telecom applications, and our investors asked us to set up a company in the US or Japan, and our founder Mr. Daiyu Son decided to start up the company here in Japan. The main reason is that in the past, especially in the 1990s, more than 90% of the tech industry’s manufacturing came from Japan. The Japanese were very good at vacuum-based industries and the decision was made for both a factory and company to be established in Japan. We have a very good base technology for example with our surface processing. Our vendors provided outstanding parts and we could build excellent systems here.

At that time, I had just personally gotten my Ph.D. in optoelectronics from the Shanghai Institute of Technical Physics, Chinese Academy of Sciences. When I joined Optorun the big impression I got was that the company was using the capital they had in order to buy the best parts and the best tools so that they can make the best products for their customers. We sourced the best equipment we could find including the ion beam equipment from JEOL and parts from companies such as Ferrotech, a US-originated Japanese company. The Optorun systems that we leverage are a combination of the best parts and best equipment sourced from some leading companies around the world. Bringing this together has enabled Optorun to create the best quality products for our customers and supply telecom companies with our products when we started out.

The latest advancements in telecommunication technology seem to leap ahead every 10 years. In 2000 there were advancements in intercontinental connections, in 2010 it was fiber optics, and then in 2020, it was 5G connections. Every 10 years we see some kind of evolution, and to match those changes we upgrade our own systems every 10 years too. From international fiber optics to 5G we have tried to upgrade our systems to cut costs. Starting in 2000 the cost was around USD 250 for one chip, but now it costs less than USD 1.

To answer your question, I think it comes down to having a very good technological base, which Japan obviously has had for decades now and was the reason for setting up Optorun here.


How is Optorun reacting to the demographic changes in Japan and what opportunities or challenges are they presenting?

You are correct, and I think that there are a lot of side effects to this population issue. It is not just isolated to Japan either, with countries such as Korea, Taiwan, China, and Italy all having very similar issues. When we do business the first thing we think about is that we need to have the base technology, and then after that, we think about the market itself. If you don’t find a market, then it really doesn’t matter how good your product is because you have no one to sell those products to.

In regards to labor, it is a kind of competition for the cost of manufacturing. 10 years ago we set up a subsidiary in Vietnam and it failed, and during that time we felt that labor was very cheap. Many companies were set up there in the same field, and we had the feeling that the market was big enough to accommodate but unfortunately that was not the case.

In the 1990s the biggest vendors were coming from Japan, and then they tried to change course and shifted to Taiwan. Taiwan then moved to China, and I see nowadays that it is starting to shift again to Southeast Asia. The reason those big vendors move is that they are trying to transfer the technology step by step. When we set up our subsidiary in Vietnam, there was no supply chain. Even something as simple as a stainless steel pipe was imported from Japan, and the only real thing they had was cheap labor, and we all know that labor does not make a supply chain.

Today, we see Vietnam differently.  There are a lot of customers there that not only need products, but also customer after-sales services and technical support. At the same time, their supply chain has gotten better and better, and this is making the Vietnamese market an appealing one right now and we are looking to repeat our attempts there again.

In terms of the population issues in Japan, yes you are right that there are prevalent issues, but I see two possible things that should be taken advantage of right now. Japan has had some excellent experiences in the fiber optics industry in the past, meaning there are some truly excellent engineers with expertise in the field domestically. What we saw 20 years ago in China was that despite the staff really working their hardest, their work wasn’t the best in the world. In Japan, it is very different and they understand much more fully the benchmarks and standards that must be met in order to produce some of the best products in the world, and that comes from deep-rooted experience and expertise. Those engineers can then train the next generation of engineers on what they need to do, and for the fields of semiconductors and optics, this is so vitally important.

For optical cords, 10 microns is the best performance and it is normally used for long-distance transmissions with laser diode-based fiber optic transmission equipment. When you look at the semiconductor industry, however, mass production has chip sizes of around 10 nanometers, but recently TMSC has been producing chip as small as 5 nanometers; over 2000 times smaller than the best-performing 10 micron fiber strands for optical cords. This is a big difference, and the Japanese are very familiar with semiconductors, so we need to take that experience and combine it with other businesses in order to transfer that technology to the optics industry. The reason we have been so successful with optics is that we have stayed in Japan the whole time and have received a lot of support from the semiconductor industry.

With the aging Asian societies as a comparison, Japan is doing quite well with its health care, and we have started up our own biosensor business in collaboration with Osaka University as a joint research venture. Health care is a consumer market and it keeps growing. Japan has been handling an aging society for many decades now and is the world’s first super-aged society. The rest of the world can learn from the experiences of Japan and then transfer that to other countries.


Your core technology is OptoNano technology which is a very exciting field that has immense potential. We know that your company is one of only a small handful of companies that is able to provide a full suite of solutions when it comes to thin film processing. Could you run us through some of your main technologies and who your future customer base will be in the years to come?

I think our main technology will still be optically based and will rely on our optical coating process. We have established a very solid base in our technologies and our business model is based on following the needs of the end user. Along with those customers we build a system together and try and understand the process. Once we understand a process we can then take that and build upon it as a core component of our business, and we feel that we are able to do things that other companies cannot copy.

I think that from the beginning till as recently as 10 years ago Optorun just tried to compete with competitors using older technology, but around 10 years ago we really tried to follow the best practice and established a unique technology. That is when we introduced our ion beam technology used for ion source beam-assisted deposition systems, which has become a success. We also have found success in our sputtering technology. Sputtering is a physical vapor deposition (PVD) class of thin film technology. The mater­ial to be coated is bombarded with plasma ions and the removed particles enter into the gas phase. The vapor then condenses on the substrate surface, adheres to it firmly, and forms a very thin layer. This sputtering technology was invented in the US in the 1980s but really didn’t make any headway in the market until the early 2000s. We have upgraded and developed that technology to make the best-performing systems. Compared with our competitors’, our technology exhibits a very stable performance. For us it is a revolutionary technology, however, it is based on older tech that we have brought forward to become more modern and have combined with semiconductor-based technology to offer our customers unique products by working hand in hand with them. This practice is something that we are very focused on right now.

The pathway of evolution Optorun has walked is targeted towards the surge of each boom that has come every 5-10 years. Right now that boom is related to smartphones, tablets, PCs, and IoT area and we see next one coming as part of the technological trends of semiconductor optical fusion.


With your ion systems such as the OTFC-900, you have identified optical-semiconductor fusion as the next vector of growth. The semiconductor industry, especially when we talk about equipment is very R&D and financially heavy. Competitiveness comes from your ability to spend money on technologies that you will develop 15-20 years from now. What is your strategy to get into such a tough, R&D-focused market in regard to the management of resources? How much are you going to allocate to this research and development?

It is actually a very good question to ask myself too, and the answer I think is that we will just be focusing on optics. I think we would be in trouble trying to keep up with the Moore’s Law under which the latest move is toward 2nm. If you visit Intel, you will see that they are already starting to merge with semiconductor electronics, and I think the same is true with optics. Not a lot of optical interconnections or optical switches follow the Moore’s Law-like trend to get narrower and narrower. Now we are moving more towards 3D integration and stacking, and optics is the same. This is why I think we have a big chance here, and our confidence in that is coming from our experiences in 2016.

We were trying to manipulate the diffractive optical elements (DOE) structure on a wafer level and ship it to the biggest semiconductor fabricator. We went to the customers and asked them a lot of questions and set out based on their feedback. We got the deal based on our technology for optical coating and we are very strong in applied materials. Customers were very interested in the tools that we were making. We understand the standard systems very well and work with customers to design the structure hand in hand. During this period, we learned that the semiconductor industry is quite different from the optical industry. In the optical industry, you always go from zero to a final product and control the whole process. You take the substrate and make adjustments to each step, and then at the end of it, you have a final product. In the semiconductor industry, it is totally different and there are thousands of processes.

We understand that as a company there are a lot of things for us to still learn yet we understand that we have strong points, and those strengths lie in optics. For example, with some of our optical coating, there are more than 100 layers applied to the material. It is quite a different concept, and we saw that this is a big chance for us.


As you continue to face this large competition with these corporations are you looking for partners in the semiconductor field? If so, what type of partners are ideal for your firm?

Yes, partnerships are very important. 20 years ago it was existing technology, 10 years ago it was existing technology, now it is the future technology that will push things forward. Our policy is that we must have very good customers to work together with, solely because that will give you a clear target for which you want to achieve.

We have a good partner in the semiconductor industry in Taiwan and they understand that we have a strong point in optics. They need optical technology to strengthen their own semiconductor technology, therefore we have combined our technologies together to do co-development. That will help both companies move forward and prosper. On the technology side in the past, we have relied on our own technology, but now that we are exploring the semiconductor and 3D coating markets we didn’t have the technology we needed. Using M&As we have tried to acquire companies that are able to complement our existing technology in these new markets. Our M&A strategy is advantageous in that it gives us very clear and easy-to-understand targets. We have had very good plasma technology since the beginning, so we went ahead and introduced our plasma technology to every industry we could.  We were the first to introduce large batch plasma etching (PLE) through the use of a plasma deposition system (RPD). In just four years we have achieved over USD 100 million in the RPD market.


How are you able to handle those challenges when it comes to processing more brittle and newer compound materials for semiconductors?

When it comes to newer technology we don’t have it so we need to go out and find partners. For example, when it comes to wafer handling we have invested in a small Japanese startup company, which still hasn’t achieved a profit year to year, but they do have some excellent technology. They have the know-how to handle wafers that are as thin as 50-200 microns and are useful in power devices. Based on these kinds of investments we have tried to figure out and integrate those technologies into our tools for wafer handling.

As far as automation goes, we have been working with Rorze Corporation, a Hiroshima-based robotics company with expertise in vertically integrated manufacturing systems.


There were major chip shortages at the start of COVID-19 because the big makers stopped their orders and then suddenly consumer demand jumped causing massive delays and shortages all across the board. As a response, we have seen the foundries of the world like Intel and TSMC aggressively invest in new fabrication plants. In an environment where there is an increase in the production of semiconductors what opportunities do you see for your company? 

I don’t think we have good opportunities in that existing market. We would just be copying existing systems to be involved in it. There might be some opportunities in China, but for markets like the US, Taiwan, Europe, and Japan, I don’t think we have a chance. I see our chances coming from new and emerging technologies in fiber optics combined with semiconductor applications. We look for opportunities to leverage our strong points in new and interesting technologies.


The automotive world is going through a huge transformation with the jump to EVs. Already we are seeing that 10% of all cars sold worldwide are EVs, with the EU leading the race with 32% of all cars there being EV based. The latest technology is advanced driver-assistance systems (ADAS), but also when we think about the battery too there are applications for your technology. In the case of your firm, what parts of the automotive development industry are you targeting with your technology?

There are a lot of potential targets, especially for EVs. The first one I see is in the evolution of the dashboard. We are now seeing big moves away from gauges and more towards an LCD display for the driver. We have a good market share in this and manufacturers from Japan, Taiwan and China are using Optorun’s equipment.

The second area I see potential in is the optical sensors. Inside the vehicle there are a lot of sensors, and probably even more on the outside of the car with things like cameras and LiDAR. All of those need some form of coating technology. The inside applications seem more obvious than those, and especially with the dashboard, there will be an element of flexibility required in those OLED screens.

In regard to the new materials, such as silicon carbide, there are only a few vendors offering those right now, and those vendors have worked hard to develop their own in-house tools for the handling of those materials.

In terms of batteries, we do see business opportunities there. We have developed a sort of capping layer on lithium battery materials. This capping layer is designed to increase the lifetime of those batteries and materials. We see good opportunities in solid-state batteries.

We saw that you were listed on the Prime Tokyo Stock Exchange this April. What message would you like to send to potential investors?

This is a very heavy question for me and even now we define ourselves as a small-sized company. Our revenue is just around USD 300 million. What we really want is a strategic partner or some sort of business relationship where we might work together. We want to be very clear to any potential investors that we are not really interested in making a price bubble where we can inflate the stock price, but rather we are looking for step-by-step sustainable growth. The message we are trying to send is that an investment in Optorun is not going to give you massive returns in just a few years. Investment is something that we want as a steady way of sustainable and real growth. We look at some old European companies that have managed to sustain and survive for over 100 years, that is the kind of company we want to establish ourselves as.


International expansion will be key to maintaining your business going forward and we saw that you expanded to Shanghai in 2000, Taiwan in 2013, and most recently the US and Europe in 2014. Moving forward what countries or regions are you targeting and where do you see the most potential for future growth?

We have learned a lot of lessons from big global Japanese companies, and one of the key lessons we have learned is to keep the company small. If you keep your company under 300 employees then everyone can understand what they contribute. While keeping the company small you can set up different subsidiaries in different regions to conduct different activities. That is the business model we are trying to follow right now and we foresee ourselves continuing this practice for the next couple of years. Small companies can follow market trends very rapidly and are not encumbered by size.


Imagine that we come back and interview you again on the last day of your presidency. Are there any ambitions or objectives that you hope to achieve during your time as the CEO?

When I graduated from the Chinese Academy of Science and joined Optorun it wasn’t just based on the pay. I have had a chance to travel and make my presence is known in Japan, the US, and Europe. At that time I saw Optorun’s technology and felt that it was the best technology in the field. In fact, when I joined there were only 16 employees at the company, it was a very small startup. We didn’t have any air conditioners in the office, so it is remarkable to think how far we have come to become the biggest owner of market share in the global optical coating equipment market. Personally, I feel responsible for paying back this market by introducing new technologies and pushing the needle of optics forward toward the future.