Timothy K. Deis, President
Robert M. Unetich, Chairman

Product Line or Service — Applied Electro-Optics Corporation designs, manufactures and sells fast, low loss switches and deflectors for fiber optic communication and image setting equipment. Sophisticated processing creates electrically controlled prisms within pure optical crystals. This basic element is coupled with electronics to provide complete laser switching or deflection subsystems for incorporation in fiber optic network equipment, image setting equipment, advanced displays and specialty industrial and medical instruments. Semiconductor manufacturing methods allow for efficient production while high speed and transmission allow for value pricing.

Technology/Proprietary Rights —  AEC’s electro-optic switches and modulators are based on advanced manufacturing processes with significant art required in their execution. Two of the inventors are co-founders of the company, and have spent over two years developing the art exclusively for AEC - these developments are being kept as trade secrets. Products based on the EO technology are covered by a US patent that AEC licenses. We have an offer from one of the owners to sell all rights to the patent, and can get similar protection from the other owner. 

Market Opportunities — Switches for fiber optic networks, especially DWDM systems, and advanced printing applications such as direct to press image setters, represent over $100 million of market opportunity within five years, with 25% CAGR for several years after that. Fiber optic network component sales are growing at 20 to 50% per year, and currently total about $2 billion. The printing industry is larger that the auto industry, with growth in advanced system sales of 10 to 15%. Switching elements are relatively small segments of these markets, but hold the key to the next generation of products and sales growth for high-end systems.

Marketing/Sales and Distribution —  AEC uses and will continue with a combination of direct and representative sales and distribution methods. There are relatively few large customers in the target market (less than 10 each), allowing for effective coverage of leading customers with a direct sales approach. Representatives cover overseas markets and are effective at creating sales opportunities with products developed to address the direct market. This marketing/sales and distribution system is in place and operating. 

Manufacturing — Manufacturing is currently being performed with a combination of in-house and subcontracted services. The critical and proprietary optical fabrication steps are performed by AEC personnel only. Arrangements have been made for the next stage of manufacturing ramp up with reliable, local vendors. All necessary manufacturing equipment to support sales of over $50M per year have been located on the new and used equipment markets — costs including installation and configuration are about $600k.

Competition — The complete competitive landscape is very complex due to the wide variety of applications, current shortcomings and proposed solution technologies. Existing fiber optic switches are primarily based on mechanical components — these cannot be scaled to the speeds and level of integration required for emerging and future network requirements. Proposed alternate systems include polymeric and crystallize waveguides, semiconductor optical amplifiers, liquid crystals, piezo-electric actuated mechanical systems and micro-electro mechanical systems (MEMS). These are being developed by organizations ranging from university researchers, SBIR and VC backed startups and major corporations. All of these alternates suffer from one or more issues related to high losses, high cost, inability to scale to large arrays or other problems. AEC electro-optic switches offer a unique combination of properties that make them more attractive than these alternates for next generation networks (installation in 3 years).