Site: SDL, Inc.
90 Rose Orchard Way
San Jose, CA 95134-1365

Date Visited: September 27, 1994

Report Author: F. Leonberger



L. Coldren
R. Hickernell
F. Leonberger


Dr. Donald Scifres
Chairman, CEO, and President


SDL is a manufacturer of a large variety of semiconductor diode lasers and semiconductor OEICs. The company's primary focus is on high-power (.01 to 10W) applications at wavelengths from 0.63 to 2 microns. SDL was formed in 1983 as a joint venture of Xerox and Spectra Physics. In 1992, the company repurchased the shares held by its corporate owners. The company has experienced rapid growth and early profitability. It presently employs about 200 people in two adjoining facilities totaling 64,000 sq. ft., including 18,000 sq. ft. of clean room space. The company has the potential to increase production ten-fold.

Sales figures are not released. SDL has extensive MOCVD epitaxial growth facilities, a state-of-the-art vertically integrated semiconductor fab line, and an extensive quality assurance program.

The company's product sales are supplemented by significant contract R&D (CR&D) from the U.S. government (approximately 20% of total revenue). SDL has a roughly equal distribution of products in about ten different markets, including optical fiber communication, printing, data storage, display, satellite communications, sensors, and metalworking. SDL has over 200 products, and the broad range of applications it addresses, coupled with the developmental or niche nature of its customer's systems, result in most product runs being several hundred lasers. However, SDL does have high-volume customers, and the company's laser wafer processing capacity is comparable to that of the world's other leading laser diode manufacturers.


The JTEC panel members met exclusively with Dr. Donald Scifres and had both a wide-ranging discussion and a plant tour. SDL has tailored its investment in device development and process improvement to maximize business potential. Dr. Scifres believes SDL's growth capabilities are crucial to its success. While CR&D and some internal R&D (IR&D) support new product demonstrations, over half the IR&D budget is spent on manufacturing and reliability. Overall, IR&D is 10% of sales. A major space qualification program SDL successfully performed seven years ago is viewed as key in establishing its quality assurance infrastructure, quality products, and market success.

SDL uses engineering teams to do CR&D, engineering/manufacturing teams to do limited-quantity (<100) production runs, and manufacturing teams for large-volume orders. Product development/technology transfer is typically handled by joint engineering/ manufacturing teams. There was not a major culture of transferring people to manufacturing. SDL has as many technical staff members with doctorate degrees as with master's or bachelor's of science degrees. Most technicians and operators have an associate's degree.

At present, SDL sees limited value in extending to higher level of vertical integration than packaged lasers. Management worries about product-line confinement (i.e., abandoning other markets) and competing with customers, and believes it can achieve better returns by concentrating on total volume of production.

With respect to VCSELs, a key question is identifying the market area (beyond two-dimensional arrays) where the devices will have an unfair advantage over more traditional and proven cost-effective technologies.


SDL is the leading example in the United States of a small photonics company that has prospered in bringing new/emerging laser technology to diverse markets. It has focused on product quality, product reliability, and product diversity.

Several other items that the company is concerned with are the difficulty in penetrating competitive overseas markets and the relative lack of government funding for process improvement. It also sees a need for a larger U.S. presence in international standards committees, primarily for information gathering and dissemination purposes, so that U.S. companies are not blind-sided by the actions of the committees.

A significant number of the early demonstrations in SDL's new product development are funded via CR&D. The latter stage effort in product development (i.e., packaging and reliability) is funded by IR&D.

Published: February 1996; WTEC Hyper-Librarian