Hello and welcome to Coherent's Instrumentation Investor Market webinar. I will now turn it over to your host, Paul Silverstein, Senior Vice President of Investor Relations and Corporate Communications at Coherent.
Thank you, Liz. Good morning, everybody, or good afternoon or good evening to those of you who are joining us from overseas. It's my pleasure to welcome you to Coherent's Instrumentation Market webinar. This is the third in a series of investor market webinars with the goal of providing greater insight into our various market opportunities, including size, growth rates, underlying key trends and drivers, and our competitive positioning and competitive differentiation. Our previous market webinars covered our communications market on September 19th, 2023 and our industrial market on December 14th, 2023. The audio and PowerPoint presentations for those webinars, along with a follow-up to our communications webinar that we held on March 26th, 2024 at the OFC conference, are available in the Investor Relations section of Coherent's website. Joining us today in the order in which they are presenting are the following Coherent executives:
Dr. Sanjai Parthasarathi, our Chief Marketing Officer, who will address Coherent's overall instrumentation market opportunity, Dr. Kim Netzeband, Director of Instrumentation Marketing, Dr. Karlheinz Gulden, Senior Vice President, Laser Components and Subsystems Business Unit, and Darryl McCoy, Vice President and General Manager of Coherent Scotland, Division of Coherent Solid State Laser Business Unit. Following the conclusion of the four presentations, which were prerecorded, we'll host a Q&A session during which Sanjai, Kim, Karlheinz, and Darryl will be joined by Dr. Giovanni Barbarossa, Chief Strategy Officer and President of Coherent's Materials segment, and Dr. Chris Dorman, EVP of our Laser segment. For the Q&A session, sell-side analysts will have the opportunity to ask questions of Sanjai, Kim, Karlheinz, Darryl, Chris, and Giovanni.
For any investors listening in on the call who would like to ask a question, please feel free to send your questions to me at paul.silverstein@coherent.com, and I will ask on your behalf. Again, that's paul.silverstein@coherent.com. The presentations and Q&A session will be available for replay on Coherent's website. Please feel free to reach out to me following the event. I will welcome any feedback that you may have. Before we begin, I would like to remind everyone on this call that this presentation contains forward-looking statements relating to future events and expectations, including our expectations for future financial, operational results, and growth, and the healthy growth and opportunities in the markets we serve.
That such statements are based on certain assumptions and contingencies and involve risks and uncertainties, which could cause actual results to differ materially from those expressed in the forward-looking statements in this presentation or in previous disclosures. Risk factors that could cause actual results to differ materially from those set forth in this presentation are set forth in slide 4 of the investor presentation, the company's annual report of Form 10-K for the fiscal year ended June 30, 2023 and as may be identified in filings of the company. Coherent disclaims any obligation to update any forward-looking statements, which, unless otherwise indicated in this presentation, speak only as of May 14th, 2024. It is now my pleasure to turn the microphone over to Sanjai.
Thanks, Paul. Hello, everyone. I'm Sanjai Parthasarathi, Chief Marketing Officer of Coherent. In 2013, I joined what was then II-VI, and in July 2019, I had the distinct honor and privilege of being appointed the company's first CMO. Over my 33-plus year career in the industry, I've been fortunate to have had the opportunity to have leadership positions in diverse roles ranging from R &D to manufacturing, P&L management, and sales and marketing in all the markets that Coherent addresses. Today, I, too, would like to welcome you to our third markets day. As Paul noted, today's event focuses on our opportunity in the instrumentation market, which we define as platforms that serve healthcare, the environment, and scientific research.
We will review our growth opportunity, key underlying drivers, positioning, and competitive differentiation in this market, and we will discuss our current and future innovative technologies and products that address our growth opportunity, our competitive positioning, and sources of our differentiation. Let me begin with our total addressable market opportunity across all of our markets, namely industrial, communications, electronics, and instrumentation. We recently updated our estimate of the growth trajectory of our market size, and we now expect our aggregate TAM across all of these four markets to almost double over the next five years to almost $140 billion in Calendar 2028 from almost $70 billion in Calendar 2023. We segment our markets by defining verticals within each market. Our industrial market includes precision manufacturing, semiconductor capital equipment, display capital equipment, and aerospace and defense. Industrial currently accounts for nearly 37% of our total revenue.
We estimate that this market will enjoy an approximate 8% CAGR and grow to over $37 billion in Calendar 2029 from $25 billion in Calendar 2024. As Paul noted, we provided an in-depth insight into this market on our December 14th, 2023, investor market webinar, which is also archived on our website. Our communications market includes data com and the telecom verticals. This market currently accounts for approximately 45% of our revenue. We estimate the market opportunity is growing at an approximate 15% CAGR to over $59 billion in Calendar 2029 from approximately $29 billion in Calendar 2024. We're the world's largest manufacturer of optical communications products with the broadest and the most vertically integrated portfolio in the industry.
While we expect ongoing strong revenue growth in our datacom vertical, we also expect to enjoy robust growth in our telecom business during this five-year period, notwithstanding the current softness in this market vertical. Increasing AI adoption is the key driver of our datacom outlook. Underlying our longer-term telecom outlook, in addition to the never-ending need for network upgrades to address the always-increasing demand for bandwidth, we expect ongoing inventory digestion to lead to eventual order normalization, increasing revenue ramp from our new Coherent ZR and ZR+ transceivers, and share gains in certain key product segments. As Paul also previously noted, we provided in-depth insight into this market on our September 19th, 2023, investor market webinar, which is archived on our website.
For our electronics market, we estimate a 28% CAGR will drive an over $31 billion market opportunity in Calendar 2029, up from $9 billion in Calendar 2024. We define this market as being comprised of two verticals: consumer electronics and automotive electronics. Within our consumer electronics vertical, we enable advanced sensing applications for smartphones and wearable devices, including AR/VR headsets, through our broad portfolio of lasers, optics, and materials: silicon carbide substrates, epitaxial wafers, and devices for electric vehicles, which are now part of our Silicon Carbide LLC. In the wake of our transactions with Mitsubishi Electric and Denso, they are the focus of our automotive vertical, along with lasers and optics for autonomous and driver assistance systems. And finally, we segment our instrumentation market, which is a focus of today's event, into life sciences and scientific research verticals.
We estimate that this market will provide a $5.6 billion TAM in Calendar 2024, which will enjoy a 7% CAGR to almost $8 billion by Calendar 2029. While one of our two smaller markets at less than 10% of our total revenue, instrumentation provides an attractive incremental growth opportunity in and of itself, along with product and technology synergies with our other markets, which translate into incremental revenue growth opportunities outside of the instrumentation market. This market also enjoys attractive gross margins by the virtue of our market leadership, the value proposition of our solutions, and the nature and the number of applications and use cases that they address. Let's now examine key healthcare drivers and trends for our instrumentation market. The aging world is expected to result in a significant increase of neurological disorders such as dementia.
Darryl will later address how our products are helping to advance the neuroscience, the critical research required to eliminate such a disease. The increased use of technology promises to bring personalized healthcare enabled by advanced diagnostics. The wearable health sensor market presents an exciting opportunity for us as it intersects with a number of our technology platforms, including advanced sensors, detectors, optics, and thermoelectrics. The ever-increasing focus on the energy transition and the impact of greenhouse gases on the environment creates new requirements for monitoring by our photonic sensing solutions. We estimate the global healthcare market to be more than $10 trillion. We estimate the market for instrumentation to be $350 billion, out of which our TAM is primarily related to optical and thermal management applications, which we estimate to be approximately $5.6 billion. We segment our instrumentation market into biotechnology, analytical instrumentation, medical lasers, and scientific research.
Biotechnology includes research and diagnostic tools such as flow cytometry, PCR, and other gene sequencing equipment. Analytical instrumentation includes environmental testing and spectroscopy. Medical applications comprise direct treatment of patients and include medical lasers and imaging. Scientific research includes Microscopy and other research tools. As previously noted, we estimate our instrumentation TAM to be $5.6 billion, and we expect it to grow to almost $8 billion in Calendar 2029, which represents a 7% five-year CAGR. The vast majority of our instrumentation TAM is addressed by our life sciences vertical. Within our life sciences vertical, our addressable market opportunity is about evenly split between medical applications and biotechnology and analytical applications. Biotechnology and analytical is our fastest-growing segment within instrumentation, driven by new diagnostic tools and techniques, and we expect this trend to continue. Ongoing macroeconomic uncertainty currently continues to impact the instrumentation market.
We do not yet have visibility as to the timing of meaningful improvement in end demand. We are confident, however, that the current softness is transitory, and we are confident as to our robust long-term growth opportunity in the instrumentation market with our outlook for a 7% five-year CAGR for this market based on the strong underlying demand trends. Now, I would like to discuss market dynamics in the instrumentation market and to address our value proposition and differentiation. We enjoy a number of competitive strengths that should allow us to continue to build on our historical leading position in the instrumentation market across many applications and use cases. First, in general, instrumentation is a conservative market that highly values quality and performance and is characterized by long design cycles. These factors lead to a high degree of customer-supplier stickiness in this market.
For example, some of our products have been shipping into the same class of tools for over a decade. Accordingly, our customers value a stable supplier that they can depend on for decades, and in fact, most of our large instrumentation customer relationships go back decades. Second, our competitive position in the instrumentation market has been further enhanced by the increasing importance to our customers of speed-to-market, which was especially evident during the COVID pandemic. Our customers have taken advantage of our ability to integrate optics and lasers with electronics and software to offer turnkey subsystems. Third, another key competitive strength that is highly valued by our customers is our extensive, unrivaled global network of service centers and our corresponding ability to rapidly and effectively service and support our solutions. Indeed, service and support are a critical decision factor for our customers.
Finally, recent geopolitical dynamics have driven our customers to suppliers with diversified manufacturing for security of supply and IP. Coherent has the most diversified manufacturing footprint in the instrumentation market. In the context of these market dynamics, our brand recognition, broad technology and product portfolio, coupled with unparalleled vertical integration, allows us to tailor unique solutions to our customers at all levels of the value chain to reduce their costs and their time to market. In response to our customer requests, we have continued to diversify our manufacturing locations in order to enhance our continuity of supply and risk mitigation. We offer our life science customers nine diverse ISO 13485 certified sites. We are a longstanding leader in the instrumentation market through our broad and deep, cross-cutting portfolio of materials, optics, thermoelectrics, lasers, and their subsystems.
We address cutting-edge applications in biotechnology and analytical equipment, medical lasers, and scientific research. Dr. Kim Netzeband, who runs our instrumentation marketing, will discuss our biotechnology and analytical business, including our differentiation and positioning for growth. Following Kim, Dr. Karlheinz Gulden, Senior VP and GM of our Laser Components and Subsystems BU, will address our opportunities in medical lasers. Darryl McCoy, Vice President of our Center for Excellence in Ultrafast Lasers in Glasgow, Scotland, will discuss how we are enabling the advancement of scientific research. We have a unique heritage and history of innovation in the instrumentation market. Over the last few decades, we have developed and assembled a strong portfolio of materials, optics, lasers, and thermoelectrics to uniquely address the instrumentation market.
Next, I will briefly look back and examine recent trends to provide context for both our instrumentation market outlook and the importance of this market to our growth and diversification strategy. Our instrumentation market accounted for $98 million, or 8% of our revenues, in the third quarter of our fiscal 2024, and $479 million, or 9% of our revenue, for all of fiscal 2023. Our instrumentation market revenues grew at a 34% CAGR on a pro forma basis from fiscal 2018 through fiscal 2023. We saw a surge in demand for our life sciences products during the COVID years. As a key supplier of thermoelectrics, optics, and filters, and lasers into diagnostic tools, including PCR, we were in the center of the fight against COVID.
In line with our mission statement of enabling the world to be safer, healthier, closer, and more efficient, our global teams ramped up at warp speed our capacity on all COVID-related products to do our part in the fight against the virus. The pandemic served up some valuable lessons to the world. It drove the smart health evolution and highlighted the importance of advanced diagnostics, including at point-of-care, as well as telehealth and wearables. More broadly, the pandemic drove the increasing use of technology in healthcare to drive innovation, lower costs, increase access, personalized therapy, and improve quality. These trends led to a strong demand for our products and new revenue opportunities. In fiscal 2023, these favorable trends offset the significant decline in direct COVID-related demand and the impact of the macroeconomic environment to drive flat revenue in our instrumentation market.
Longer term, as we move beyond the COVID benefit and the post-COVID drag, these favorable secular trends fuel our positive longer-term outlook. I will now discuss some of our market segments within the instrumentation market that I'm most excited about, starting with our largest segment, biotechnology and diagnostics. All photonics diagnostic techniques involve a light source, which is usually a laser or an LED. The light interacts with the samples of interest, which are undergoing biochemical reactions and ultimately results in optical signals, which are detected after signal processing. Often, these reactions require precise temperature control, which is usually done through thermoelectric systems. A great example of which is the PCR tool. Coherent makes all of the enabling components for diagnostics, including lasers, optics, filters, and thermoelectrics. Medical applications include the use of the laser for cosmetic applications, dermatology, ophthalmic, dental, and other surgical procedures.
Karlheinz will present our broad portfolio of lasers, optics, and beam delivery fiber that enable medical lasers. I'm most excited about wearables, which are increasingly becoming personal health monitors. Due to their small size and low power consumption, semiconductor lasers are especially well-suited for wearables. Our customers are working on detecting and measuring various biological parameters such as pulse rate and blood pressure. They're also developing solutions to sense, among other diagnostic metrics, moisture content, blood oxygenation, alcohol, and glucose. Let me leave you with an example that I'm most excited about: non-invasive glucometry. The glucose molecule has over 10 absorption peaks that span the spectrum from 9xx nanometers to 2.5 microns. The chart shows the various compound semiconductor laser platforms and their wavelength capability. We are the market and technology leader in gallium arsenide and indium phosphide lasers and detectors for sensing in consumer electronics and communications applications.
We recently announced a 6-inch platform for indium phosphide, and our gallium arsenide VCSELs have been on a 6-inch platform for quite some time. We expect significant economies of scale as wearable devices, which use these platforms, ramp up. Returning to the glucose molecule, we noticed that it also has absorption peaks in mid-IR outside of the range of indium phosphide. We also have the exotic gallium antimonide platform, which enables lasers at those wavelengths. In summary, I'm excited about our instrumentation market and the significant amount of customer innovation being enabled and driven by our products. Thank you. I will now turn it over to Kim.
Thank you, Sanjai, for the introduction. My name is Kim Netzeband. I'm the Director of Instrumentation Marketing, originally joining II-VI in 2016 to help develop and grow our life sciences market. Today, I'll be discussing the biotechnology and analytical instrumentation segment opportunities within our instrumentation market. These are attractive market opportunities in which Coherent is a market leader with unique industry-leading solutions. I'll first review key market drivers and trends, then Coherent's intersection with these markets, followed by an overview of specific application examples. Lastly, I'll summarize Coherent's leading differentiators within the marketplace. Two key initiatives for Coherent are healthcare and the environment and safety, both exciting fields and growing markets. As Sanjai alluded to, Coherent specifically focuses on instrumentation solutions into the platforms, systems, and testing devices in both market areas. For healthcare, there's a growing awareness about the global aging population and increasing lifetime expectancy.
Along with age-related conditions, lifestyle diseases will continue to be leading causes of death, and new infectious agents will continue to rise and spread. Diagnostics is the pillar for detection and prevention, while drug discovery advancements are leading to new treatments, and genomics and personalized medicine are growing at a record pace. On the other hand, the environment and safety takes an outward look and focuses on analytics in the areas of monitoring air and water, food and beverage, pharmaceutical quality control, advancements in agriculture, and overall materials sciences in general. What I've just named is a wide range of applications, but they have one commonality that Coherent targets. Each application area utilizes instrumentation platforms that depend on photonic and/or thermal-based technologies, and Coherent's products and innovations are driving these next-generation platforms. Now, turning to how Coherent defines the life sciences instrumentation market.
As Sanjai described, we define the market in three segments: biotechnology, analytical, and medical. I will be giving an overview of the biotechnology and analytical applications, and medical will be covered in the following talk. Biotechnology involves the use of living organisms, or parts, for research, industrial, or diagnostic purposes. The analytical segment focuses on environmental applications and analytical sciences. Together, they represent a $2.4 billion TAM for Coherent in calendar 2024, with a five-year projected 8% compound annual growth rate to $3.4 billion in calendar 2029. Coherent's fiscal year 2023 revenue for these two segments combined was approximately $240 million, split between three main product areas: lasers, optics and materials, and thermoelectrics. The component-level market is fragmented. However, Coherent plans to leverage our expanded portfolio, application-specific solutions, and vertical integration to increase our market share.
While devastating, COVID was a catalyst for healthcare, environment, and safety transformation in so many ways as depicted here. What would have likely taken decades was achieved in the time span of 1-2 years. Again, the commonality in each example shown is the reliance on hardware, specifically instrumentation platforms, that help society by analyzing light and heat in innovative ways. Coherent's broad product portfolio and ability to leverage global manufacturing helped innovators in each of these areas deliver their solutions to the world at an accelerated pace. Exponential advances were made in biomedical science tools for disease detection, specifically within diagnostics and sequencing, along with medical laser-based therapeutics. We expect to see more advancements focusing on prevention and well-being in the form of point-of-care instrumentation solutions and wearables for health monitoring and tracking.
On the environmental and safety side, rapid hardware developments will continue to be made in the areas of UV sterilization, thermal imaging, and advanced monitoring solutions. Likely to be the most amazing transformation to come is technology integration to make these platforms faster, more accurate, and more accessible. Coherent is at the forefront of this transformation. Before we dive into Coherent's solutions for these applications, I want to highlight a few key market trends within the biotechnology and analytical instrumentation markets. First, life science instrumentation is largely a consumable-driven market. In fact, the aftermarket can typically account for over two-thirds of the total market opportunity. Detailed at the top, the total life science market is estimated at $17 billion. However, Coherent focuses only on the initial instrumentation systems portion, which amounts to approximately $5 billion, or one-third of the broader market.
Coherent then drills down even further to consider each product opportunity within an instrumentation platform. This is the detailed strategy Coherent uses to calculate the total $6 billion instrumentation TAM. Second, within the biotechnology market, there are distinct biomedical focus areas that Coherent recognizes and strives to address uniquely. Research tools such as lasers help investigators acquire new knowledge or validate existing theories. Platforms such as sequencing help to determine predisposition to diseases and illnesses. Diagnostics will detect and help enable all other focus areas listed here. Treatments are solutions and therapeutics delivered to the patient, and monitoring will help advance global healthcare. Next, biotechnology and analytical instrumentation platforms have similar architectural designs with four key elements that include: one, some form of illumination to deliver light. Two, an interaction with a sample or many samples. Three, a detection method. And four, a method to analyze and process data.
Steps one through three often depend on temperature regulation as well. With this in mind, Coherent's portfolio can support solutions for each element within this framework. Lastly, the life science market has two key geographical commonalities. First, the largest markets are typically North America and Europe-focused. However, looking forward, China and India are expected to offer the largest growth potential. Coherent recognizes the instrumentation solutions are highly dependent on cost and population accessibility within these regions and is prepared to address these challenges.
Now, to summarize Coherent's life science market focus and expertise in one slide, we first focus on product areas in materials, optics, lasers, and thermoelectrics, and then bring these solutions together into vertically integrated subassemblies and subsystems, thereby delivering unique solutions into each market segment on the right: biotechnology, analytical, and medical, overall with the goal to meet performance, quality, and cost reduction requirements for our customers. As you'll see on the next slide, Coherent is now uniquely positioned with an expanded portfolio with complementary technologies. With the integration of II-VI and Coherent Incorporated platforms in 2022, we now have an expansive life science product portfolio that can be leveraged to deliver innovative solutions for instrumentation, incredibly at all levels of integration, from materials to components to subassemblies and systems. Material examples include various crystals for medical laser applications or zinc selenide material for near-IR or IR spectroscopy.
Components span from precision optics to many different types of lasers to thermoelectric coolers. These materials and components are the building blocks that are integrated into higher-level subassemblies and subsystems. This expanded portfolio not only enables external life science customer base but empowers Coherent internally to create new technologies. Life science instrumentation manufacturers are racing to deliver platforms with decreased time to market, reduced costs, and improved performance. To do so, partnering with a vertically integrated supplier is critical. Coherent understands biological instrumentation, offers multiple components throughout a given system, and has the capability to vertically integrate into higher-level subassemblies and subsystems. Coherent also works with life science instrumentation manufacturers throughout the entire design process, from customer requirements through design and engineering, prototyping, pilot production, and full transfer to volume manufacturing.
This can all be completed within clean and dark-room environments and in critical quality and medical-grade certified manufacturing locations. From optical, mechanical, electrical design to building customer-specific testing platforms, Coherent is a system-level partner. A key Coherent strategy is targeting and designing application-specific solutions and portfolios. Why is this critical? We have two applications shown on this slide. On the left is flow cytometry from our biotechnology segment. This typically involves complex instrumentation that analyzes cellular material to output an enormous amount of data for downstream analysis. On the right is a medical laser platform that is used for aesthetic applications. Here, laser light is managed differently and delivered directly to a patient. So there are major differences in samples, architecture, integrated components, and critical system parameters, including safety.
Accordingly, Coherent selectively pulls from its expansive portfolio to design custom platform solutions on an application basis, as seen in the circular examples at the bottom: laser solutions, materials and optics, and thermoelectrics. Now, to cover a few application examples within each segment, first starting with biotechnology. As shown at the top of the slide, these platforms are often diverse in size and function but share a common light management architecture: simplified, light to the sample, to detection, to processing. I'll address two subcategories within biotechnology: analytical instrumentation and diagnostic instrumentation. For analytical instrumentation, we will just cover three examples: PCR, sequencing, and flow cytometry in the next subset of slides. Common trends include efforts to make platforms smaller, faster, and more sensitive, with enhancements to enable automation, user-friendly features, modular architectures, and overall generation of more data. The second subcategory is diagnostic instrumentation, which encompasses diverse applications.
We will touch on Coherent's intersection with the instrumentation platforms that support these technologies. Trends include rapidly changing and strict regulations, increased speed, and lower per-test cost, with focus to bringing testing closer to the patient. Let's take a look at our first application example: PCR, or polymerase chain reaction. Prior to COVID, few people would recognize this acronym or understand the function of the instrument. Starting with the left panel, a PCR instrument is typically the size of a large printer, although some can be much smaller, that can analyze many samples in the form of plates or individual tubes.
Light is used to interrogate the samples, and thermoelectrics or heat cycling helps to create millions of copies of genetic material for a wide variety of purposes, as seen on the right, not only for disease detection, as seen with COVID, but for sequencing, to environmental monitoring, to forensics, and more. The $4.8 billion PCR market in 2021 is recovering from record growth, but these platforms will remain a critical tool within life sciences. Top market players include Thermo Fisher as a lead supplier, followed by life science industry leaders such as Bio-Rad, Qiagen, Roche, Promega, Agilent, and more. Coherent delivers solutions to five key platform areas, as outlined in blue at the bottom of the slide: illumination, light management, thermal management, sample loading, and detection, which we can break down in detail in the next slide. Imagine opening up an instrument and viewing inside.
First, light is required, for which Coherent supplies LED-based light engines and lasers, as seen in purple. Coherent supplies precision optics, which are used for light management. Examples include optical filters and custom lenses, outlined in green. For sample loading, Coherent supplies glass-based optical subassemblies, represented in pink, along with thermal management when needed in the form of thermoelectric modules and subassemblies, shown in orange. Lastly, Coherent also supplies detection modules, shown in blue, to gather the data and test results. With vertical integration expertise, Coherent can build into higher-level subassemblies and systems, as shown in the lower right. We move to flow cytometry, which are complex instruments commonly used in clinics or specialized laboratories. Flow cytometry analyzes thousands of cells per second and can sort them for downstream disease detection or diagnosis, research, or even drug candidate screening.
A biological sample in suspension is commonly labeled with fluorescent markers, which bind to specific cellular targets, and then flow in a linear stream and pass through precisely focused laser light. Many measurements are made very quickly, and a vast amount of data is collected. This $2.5 billion market is serviced by the largest flow cytometry companies, including BD Biosciences, Beckman Coulter, a division of Danaher, Thermo Fisher, Miltenyi Biotec, Luminex, Agilent, and many other smaller players that are expected to grow. Trends are focused on spectral reach, or expanding wavelengths, single-cell analysis, single-use on-chip microfluidics, integration of AI, and therapeutic intersections. Again, Coherent delivers solutions throughout the instrumentation platforms, from illumination to detection, and we believe we are a key partner for next-generation solutions. Coherent solutions are critical for flow cytometry-based sorting, counting, and analysis of cellular material to advance life science research and therapeutics.
From an instrument in the upper left corner to the inside architecture in the middle of the slide, flow cytometry can integrate many lasers at different power levels and numerous wavelengths, represented in purple. Coherent has the largest laser portfolio, from individual modules to complete drop-in multi-wavelength light engines. Coherent's optics, shown in green in the form of filters, gratings, lenses, guide the light to and from the sample. Coherent's flow cells, shown in pink, are critical for handling the cellular suspensions and supporting any imaging efforts. Thermal management is often needed for reagents and/or within detection modules. We build these discrete solutions into larger and more complex subassemblies and systems, as seen in the lower right. Next, of huge importance is sequencing, or instrumentation that can help determine the exact molecular makeup of genetic material.
Sequencing also uses very complex instrumentation, using lasers and fluorophores to determine specific nucleotide sequences, which are used for a wide breadth of applications, from cancer and disease research moving into personalized medicine, reproductive and pediatric health, drug trials, and population studies. The $4.2 billion 2021 market is one of the higher growth areas for life sciences, with an 11% compound annual growth rate. The market has historically been dominated by leaders like Illumina, followed by Thermo Fisher, MGI or BGI, Qiagen, Oxford Nanopore, and PacBio. But there is an exciting list of new entrants that are introducing new technologies to drive towards the $1 genome and public access worldwide. For Coherent, sequencing is part of the overall $2.4 billion TAM for the biotechnology and analytical segments, and we believe we are a market innovator in supplying product solutions throughout entire instrumentation platforms, as diagrammed on the following slide.
As shown on this slide, looking inside one of these instruments shows a complex design, starting with illumination, with lasers or LED light engines, shown in purple. Coherent's laser technologies support wavelengths from UV to visible to near-IR and IR, with over 30 continuous wavelength options. Numerous optics, highlighted in green, help direct the light to and from the samples, with complex optical designs to prevent light scattering. At the sample, specialized optics can assist in the form of sequencing chips or cuvettes with integrated thermoelectrics for heat management throughout the system. Detection is typically camera-based, in which Coherent can help integrate various types of technology platforms, again building into higher-level subassemblies when needed, as shown in the lower right. Coherent is excited to be an integral part of the sequencing world that will truly transform healthcare.
Lastly, for biotechnology examples, Coherent is focused on diagnostics and specifically on the market transition from lab-based instrumentation to point-of-care technology. These are platforms that deliver solutions close to or near patients, from centralized facilities to accessible clinics, doctors' offices, and even in homes. Important factors are portability and miniaturization. Coherent's expertise in micro-optics and micro-platforms in other markets, like consumer electronics and telecom, is translating well here. Testing needs to be rapid, which largely depends on high-performance components. Simplified operation, robustness and durability in the field, and affordability and global access are all key initiatives. Coherent is partnering with leaders in this field, and we expect the market to focus on broader disease detection capabilities, along with servicing higher volume demands as global accessibility increases. Instrumentation technology will be the foundation.
I will turn to the analytical instrumentation market, with examples focused on environmental testing and spectroscopy, both large markets that will depend on next-generation instrumentation tools. As seen at the top of the slide, analytical instrumentation platforms function in very diverse end applications or environments, but generally use similar detection techniques. Market drivers include growing safety, pollution, and environmental concerns, increased pharmaceutical quality controls, and overall regulations. Customers are continuously driving towards miniaturization, enabling use in the field and increasing ruggedness while expanding sample handling capabilities. Let's look at a couple of examples of how Coherent is enabling these solutions. Coherent provides the components and subassemblies that are used for testing air and water, food and beverage, and agriculture. Different types of lasers are typically used that can accommodate a smaller instrument footprint and deliver narrow line-width illumination with high stability.
Unique optics, like mirrors, lenses, and windows, direct the light, and Coherent draws on our vast experience in materials to offer various substrates and coatings. Heat management can be integrated if needed, and higher-level subassemblies support it. We are excited to be part of the global effort to address environmental concerns. Another example is within the pharmaceutical market. Coherent solutions in the form of optics, lasers, and Raman-based products are enabling tools used throughout the entire pharmaceutical development market, starting with the upper left corner from instrumentation used during the drug discovery process, like flow cytometry, imaging, and sequencing, to bioprocessing in the sense of monitoring and sensing platforms, to manufacturing and, very importantly, quality control. Raman is a specific type of spectroscopy used for determining chemical composition. As we'll see in the next slide, Coherent has a dedicated instrumentation line as well as custom solutions to serve this market.
On the left side of Coherent's solutions come together to support typical Raman spectroscopy applications that are based on light interactions with a sample. Narrow line-width laser light is focused and directed by optics to the sample and then detected for downstream analysis. On the right is a more specific Raman technique called terahertz Raman spectroscopy, in which Coherent has a full product line to support real-time, non-contact analysis of samples to deliver chemical and structural information. The instrumentation platforms span from standalone analysis tools to accessories for microscope integration to a complete high-throughput screening system that can analyze many samples very quickly. Lastly, on AI and its intersection with life science application areas, all cited examples on this slide will depend on highly technical instrumentation in some form, which is Coherent's focus and intersection. As data is processed faster and analysis demands increase, hardware innovation is absolutely critical.
Whether a light source that's more powerful, or optics that enable faster data collection, or a material that could enable more precise analysis, or a novel subsystem design, Coherent is enabling the new instrumentation platforms that leverage AI. To summarize, Coherent is driving next-generation instrumentation technologies with focused solutions on materials, optics, lasers, and thermoelectrics, from the component level to higher-level subassemblies and systems. We are uniquely positioned to leverage an expansive portfolio of engineering expertise, global manufacturing, and vertical integration to meet performance, quality, and cost reduction requirements. Coherent is a system-level partner from proof of concept to design and volume manufacturing, and we are truly excited to be part of the global effort to address healthcare, environmental, and safety solutions. I will leave you with a short video that highlights Coherent's innovative solutions for biotechnology and analytical instrumentation. Thank you.
The high demand for innovation in biotechnology creates new opportunities for advanced products in the life sciences market. Biotechnology instrumentation is used in applications such as genome sequencing, polymerase chain reaction, or PCR analysis, flow cytometry, diagnostics, and more. Genome sequencing is a technique used to analyze genetic material to determine the order of bases or nucleotide subunits A, G, C, T, and U in a genetic code. Different laboratory sequencing methods are employed, but they generally involve complex instrumentation and chemical reactions that are rapidly evolving to address disease research, detection, and treatment. PCR is widely used in molecular biology for quickly replicating and amplifying genetic material. From a single template, millions of copies can be generated for further downstream research or for a wide variety of applications, from sequencing preparation to genotyping and cloning.
Flow cytometry is used to examine the physical and chemical properties of cells and microparticles. Cells are typically suspended in a fluid stream, passing by a detector to reveal cellular information such as size, shape, and other detailed characteristics. Specialized cytometers can sort or even image the cells for further analysis. Coherent designs the lasers, precision optics, and thermoelectrics, all on component and subassembly levels, for a wide range of biotechnology instruments to meet customer-specific performance requirements. Coherent enables next-generation platform development to help customers achieve their target throughput and accuracy, thanks to its advanced manufacturing capabilities in lasers, precision optics, and thermoelectrics, integrating these specialized components into customized high-performance multi-wavelength laser engines. Coherent is a collaborative partner, working with customers throughout the design cycle from concept to product realization. Coherent leverages a dedicated new product introduction team, a diversified product portfolio, and vertical integration capabilities to achieve innovative engineering.
Coherent brings an especially strong focus on design for manufacturability to achieve designs with optimal performance at the lowest cost. Coherent can then transfer the product designs and pilot production to high-volume manufacturing that can be assembled in medical-grade clean rooms, qualified to ISO 13485. Customers value Coherent for its vertically integrated production capabilities and its reputation for quality and reliable performance. At Coherent, we focus on innovation and excellence in the life sciences as part of our mission of enabling the world to be safer, healthier, closer, and more efficient.
Thank you, Sanjai, and good morning, everyone. My name is Karlheinz Gulden, and I lead the Laser Components and Subsystems Business Unit. In addition to having a PhD in physics, I am a Chartered Financial Analyst , CFA charterholder. For 30 years, I have been a specialist in the laser industry, the last 11 with Coherent.
Thank you for joining today to explore the exciting world of medical applications for Coherent's products. As Sanjai explained, we segment our instrumentation market into life sciences and scientific instrumentation verticals. Within life sciences, we further segment into biotechnology, analytical, and medical applications. Kim just addressed our biotechnology opportunities, and throughout my presentation, I will discuss our excitement around the medical opportunity and specifically how Coherent's advanced laser technology is revolutionizing healthcare and the attractive market opportunity presented by medical applications. Lasers were theoretically predicted more than 100 years ago by Albert Einstein. When researchers experimentally demonstrated the laser concept about 40 years later, it was not patented since the inventors could not envision commercial applications. About 10 years later, Coherent was founded with the goal to commercialize lasers. Since then, it has been a pioneer in the development of laser technologies for medical applications.
Today, laser technology plays a pivotal role in modern medicine, offering precision, versatility, and efficiency in diagnosis, treatment, and research. Popular applications include ophthalmic, cosmetic, surgical, and dental procedures. The global market for medical laser systems in 2024 is $2.6 billion, and we expect it to grow substantially to $3.6 billion in 2029 at a five-year CAGR of 7%. The growth is driven by a number of trends, including increasing demand for minimally invasive procedures, technological advancements, and rising healthcare expenditures worldwide. Coherent is the leader in providing laser solutions to this market. With our broad, vertically integrated model and customer intimacy, we are ideally positioned to lead the technology-driven smart healthcare evolution that Sanjai spoke about. Ongoing developments will result in more efficient, more cost-effective lasers and subsystems with smaller footprints, enabling further proliferation of laser use cases in the medical field.
Starting over 50 years ago, Coherent has pioneered the use of lasers for medical application. Over time, an increasing number of clinical procedures have employed systems that integrate our lasers. The procedures are performed on the patient. Therefore, processes and instruments require extreme precision and often involve custom laser designs. Key factors impacting our revenue in medical applications include technological differentiation, regulatory compliance, market demand, intellectual property protection, and track record. Coherent's competitive advantage stems from our industry-leading endowment of technology and talent and our commitment to innovation. With a focus on research and development, Coherent continuously introduces leading-edge laser platforms, products, and applications, addressing evolving customer needs and market trends. Moreover, Coherent's global presence, strong distribution and service network, as well as its established reputation for quality and reliability, further enhance our competitive position in the healthcare sector.
Coherent's products that address the medical market are integral to many demanding applications. These products range from fiber, solid-state, gas, and diode lasers to fibers, optical elements, crystals, and thermoelectrics. Coherent's lasers are advanced light sources known for their exceptional functionality and versatility. They emit a single, well-defined wavelength of light, enabling healthcare professionals to target specific tissues and cells with pinpoint accuracy, thereby improving treatment outcomes. Coherent offers a comprehensive and deeply vertically integrated product portfolio, highlighting the benefits of our technology and product market diversification. Starting from engineered materials such as zinc selenide, gallium arsenide, and indium phosphide, we make laser components that we also offer directly to the merchant market, in addition to enabling our own highly differentiated subsystems and systems. Historically, ophthalmology was the first medical field for lasers.
Coherent pioneered laser-based therapies for the treatment of macular degeneration by offering precise, minimally invasive alternatives to traditional methods. The introduction of the yellow-green laser tool in calendar 2000 enabled retinal photocoagulation for the first time. Today, this is recognized as a standard treatment, and Coherent is the clear market leader. The annual TAM for laser systems in ophthalmology is around $200 million. When the cells of the retina stop working correctly, blood vessels can grow in the wrong place or leak, causing degeneration of eyesight. Diabetic macular edema is the most common cause of visual loss in people under 50 years of age in the developed world. Approximately one-third of diabetes patients will be affected by this condition. The laser is designed to locally heat microscopic arteries in the retina to shrink these or to stop them from bleeding. This process is called photocoagulation.
Laser surgery can be used to correct and improve vision by using lasers to sculpt the cornea, eliminating the need for eyeglasses or contact lenses. Coherent is the market leader and pioneer of the use of excimer lasers that are used in LASIK. In this application, a femtosecond laser is used to cut a flap into the cornea, the top layer of the human eye. Because the pulse is extremely short, the cutting line is sharp and well-defined, better than what is possible with mechanical blade tools. In addition, the procedure is more reliable, improves patient comfort during the operation, and accelerates healing. After the flap has been folded back, the lens material is removed with the excimer laser to permanently correct the patient's vision.
The market for these operations is steadily growing, driven by three trends: the increasing incidence of myopia among younger generations as they spend more time in front of digital devices; the aging population with an increasing number of older people in the U.S. and most other countries throughout the world; and the increasing desire to eliminate the need for corrective glasses for aesthetic reasons. Hair removal is one of the most popular and growing non-surgical aesthetic laser procedures. Having developed a unique semiconductor solution, Coherent is the worldwide leading supplier into this market. We estimate the laser system annual TAM for cosmetics to be $640 million. For hair removal, laser wavelengths are in the near-infrared range, and instruments typically combine up to three different wavelengths in order to yield optimum results for the broadest range of patients, accommodating a wide variety of skin tones and natural hair colors.
As previously noted, Coherent has developed a unique semiconductor solution to simplify the operation of such multi-wavelength systems and is one of the worldwide leading suppliers into this market. Acne is caused by infected glands under the skin. We expect this market to grow faster than the other medical laser segments, given that laser-based treatments have only been recently approved to treat acne. Coherent has developed specific lasers that can be used for this treatment and is a leading supplier into this market. The lasers have an emission wavelength that causes damage to the infected glands, eliminating the source of the infection. Using this tailored laser light, acne can be successfully treated fast and reliably with minimum discomfort to the patient. The global market for skin rejuvenation products, where Coherent is actively participating, is expected to grow significantly.
Coherent has developed a range of specific high-power laser products and is one of the leaders in this market. For tissue tightening and wrinkle removal, it is important to achieve absorption in the second layer of the human skin, the dermis. There, the induced heat will trigger the production of new collagen. This will tighten the skin and remove wrinkles. Coherent has developed specific products to achieve this. Skin resurfacing and rejuvenation techniques are increasingly also applied to address other skin conditions such as sun-damaged skin or age spots. It is important to note that many medical laser systems include not only one but many Coherent components. Sanjai talked earlier about our broad portfolio in instrumentation. For medical laser systems, in addition to the active laser itself, we offer a variety of optical components, including optical mirrors, beam combiners, lenses, coated windows, and optical fibers.
Photodynamic therapy, or PDT, is a very young market for lasers that is also expected to enjoy strong growth. Coherent offers a range of custom products to address PDT and is well-positioned to grow with the market. The goal of PDT is to destroy malignant cells such as cancer cells inside the body with the help of laser light, leaving the surrounding tissue unaffected. It involves the administration of photosensitive drugs followed by localized illumination. This targeted approach selectively destroys diseased cells while sparing healthy tissue, making it an effective treatment for various cancers and non-malignant conditions. It requires a fine alignment of the specific photosensitizer with the tailored laser light. There is a diverse range of surgical applications that utilize lasers. Surgeons use lasers to cut, coagulate, and remove tissue and even kidney stones.
They offer an advantage over traditional mechanical procedures because they can cut tissue more precisely and at the same time coagulate blood, shortening recovery times, and reducing risk of infections. The annual TAM for surgical laser systems is around $200 million. Coherent is one of the leaders supplying high-power lasers into this market. With our existing product portfolio and innovation leadership, we are well-positioned to grow with the market and to expand our leadership. Examples of laser-based treatments are the partial resection of the kidney for treating kidney cancer and the removal of unwanted tissue from the prostate. In response to customer needs, Coherent has developed specific laser sources that are used to optimize the treatment. A wavelength of 1470 nanometer is absorbed efficiently by soft tissue. 980 nanometer is absorbed less and consequently penetrates deeper.
Typically, surgery starts off with a 980 nanometer laser wavelength to remove larger areas of affected tissue, followed by 1470 nanometer, allowing a very defined and shallow treatment that also efficiently seals the wounds. Varicose veins are relatively common. In the past, these were treated by physical removal from the body. This carries with it significant risks and long recovery times. In laser-based therapy, laser light is coupled into an optical fiber that is inserted into the vein, where it is delivered to the point of care and locally closes the vein. After the fiber is pulled out, the vein will remain non-functional and will be reabsorbed by the body. A physical removal is no longer required. Today, laser-based treatments are replacing traditional options. Again, Coherent is a leading supplier of high-power laser assemblies, enabling a minimally invasive solution with significantly lower risk, minimum side effects, and short recovery times.
Lasers have been used in dentistry since the early 1990s. They have been demonstrated in treatment of tooth decay, gum disease, biopsies, removal of lesions, activating bleaching solutions, and curing of dental composites. We estimate the dental laser system market annual TAM to be over $250 million. Coherent has shipped more than 3,000 laser systems into this market. Recently, Coherent has introduced a market-leading CO2 laser emitting at 9.3 micrometer, a wavelength optimized for dental applications. At this wavelength, the same laser can be used to remove tooth material and remove soft tissue and stimulate coagulation. This is now increasingly replacing mechanical drills, eliminating in many cases the need to use anesthesia while offering a dramatic reduction of processing time. We are excited by the growth of these applications and the opportunity it represents for our lasers.
Let's now switch gears and talk about the use of Coherent's products in healthcare wearables. Sanjai introduced these earlier this morning. Wearable devices such as smartphones and earphones are evolving into personal health monitors, enabling continuous and non-invasive monitoring. Applications include heart rate measurement, measurement of blood oxygen levels, hydration, glucose, and lactate levels in the body. With a trend towards proactive and preventive health monitoring, these provide a significant growth opportunity for Coherent's products, and our long experience with sensing will enable us to capitalize on this opportunity. Sanjai shared his overall excitement about wearables. Non-invasive optical biosensing is based on absorption or scattering of photons in the human body. Laser light of different wavelengths and power is used to penetrate different layers of the human body.
Sensors measure the absorption or the scattering of the photons, and different techniques are used to extract relevant information from the measured data. Because of the size, power, and wavelength requirements in wearable devices, laser diodes are the light source of choice. As an example, the glucose absorption in the near-infrared region can be addressed by Coherent's semiconductor laser portfolio. Integrating the laser diodes into a silicon photonics platform allows for highly compact, energy-efficient, and biocompatible sensors that have the potential to revolutionize the wearable biosensors market. Similar to glucose, the absorption spectra of other biomarkers such as hemoglobin and lactate are also addressable with Coherent's laser diode portfolio. The combination of Coherent's innovative power in consumer datacom and medical markets and its track record in commercializing and bringing to market novel nanotechnologies positions Coherent at the forefront of laser-based solutions in the growing wearable market.
We are fully leveraging our expertise and volume experience from the consumer electronics market for winning new designs in wearable platforms. Particularly, the combination of laser diode technology with photonic integration platforms leads to further minimization and additional biomarkers in future devices powered by Coherent lasers. With that, let me turn it over to Darryl.
Thank you, Karlheinz. I'm Darryl McCoy, Vice President and General Manager of Coherent Scotland, a division of our solid-state laser business unit. Based in Glasgow, we are Coherent's center of excellence for ultrafast laser design and manufacture across all market verticals. As Sanjai noted, scientific research is the other vertical within our instrumentation market. Our products include continuous wave lasers for microscopy, advanced ultrafast pulsed laser sources, and high-energy pulsed excimer gas lasers.
These systems are typically sold to universities and private and public research institutions across the globe, fueling ideas for the next generation of materials, processes, medical diagnostics, and treatments that address some of the greatest challenges for humanity today. We estimate that the total available market for our products into scientific research to be around $700 million in calendar year 2024. As funding for research is dominated by government grant schemes, the compound annual growth rate directionally tracks GDP growth rates with potential upside to growth driven by stimulus programs. We have established a prime position in the market and are able to command strong margins because of the high value add of our solutions. Coherent's scientific instrumentation revenue for fiscal 2024 will be around $150 million. Our growth strategy for this sector is based on a compelling product roadmap and strategic partnerships with leading research groups and institutions.
Our window to advance research also ensures we stay close to the latest emerging technologies and materials, steering our product roadmaps for the next generation of advanced manufacturing. It also provides an open engagement platform for the next generation of talented scientists and engineers to interact with and, in many cases, eventually join the company. I'd like to introduce a sample of the application areas we consider to be key revenue and growth drivers. Multiphoton microscopy is a form of light microscopy which enables deep imaging in biological tissue with extremely high resolution. The annual market for femtosecond lasers in this field is over $80 million per year. Over the past 22 years since our turnkey tunable Chameleon lasers entered the hands of the biologist who could really leverage this technology, Coherent's revenue from this application has grown to a total of $750 million.
microscopy requires the use of highly specialized ultra-short pulsed lasers in the infrared part of the spectrum. This is important as infrared light penetrates deeper into the tissue and is less damaging to samples than visible lasers. Two or more infrared photons combine at the focus of a laser beam and undergo a process called two-photon absorption, and in doing so, excite the sample with the same or similar effect to a visible laser. This phenomenon was predicted in the 1930s by the second woman to win the Nobel Prize in Physics, Maria Goppert Mayer, and finally proven with the invention of the laser in the 1960s. The laser beam is scanned across and through a sample labeled with a fluorescent sensitive fluorophore, with the corresponding fluorescence captured by a microscope capable of recording and reconstructing the three-dimensional image.
One of the fastest-growing areas of multiphoton imaging in the neurosciences is optogenetics, an elegant methodology which employs light to manipulate neurological activity using a combination of optical and genetic labeling tools. The laser needs for this field are growing at a 9%-10% CAGR as the pace of research accelerates. Coherent is a market leader with longstanding and strong customer relationships, giving us a deep understanding of the technology trends. Our broad product portfolio and excellent reference base provides a key competitive advantage as each deployment requires multiple laser systems. In a typical embodiment on a two-photon microscope, a high-power femtosecond laser source such as our Monaco fiber laser is split into multiple beams and directly targeted onto an ensemble of neurons.
These cells are labeled with a genetic marker called an opsin, which allows ions to pass through their membranes when exposed to light, thereby invoking or inhibiting a specific response. The associated brain activity is measured by scanning another laser, for example, a Chameleon laser, across the region of interest in the brain. Multiphoton optogenetics thereby forms a method for all optical physiology, empowering scientists to probe functionality, learning processes, and the underlying circuitry of the brain. The images on the right show a typical two-photon microscope setup, and below an image of a population of neurons which blink when they are firing, a direct result of photostimulation in another area of the brain enabled using Coherent ultrafast laser technology. Multiphoton microscopy can also be deployed using fluorescent label-free techniques.
This is important since dispensing with the need for synthetic dyes or fluorescent proteins enables the technique to be deployed into human clinical applications. This has led to a new field termed translational research. While this portion of the market is relatively small, we expect this research to fuel the next chapter in clinical tools in a very similar manner to the growth seen for flow cytometry described earlier by Kim. As adoption rates for clinical tools are limited by trials and regulatory approvals, we expect double-digit market growth starting in 2029. Multiphoton microscopy is proving a capable tool in the analysis of cancer biopsies. When coupled with advanced analysis tools such as fluorescent lifetime imaging, biopsies can be appraised non-destructively at high resolution without the need for time-consuming staining or slicing. In the future, one can also see the increasing role that AI will play in such important diagnostic processes.
Other translational research tools are emerging in the field of proteomics, the analysis of proteins, leading to biomarker and next-generation drug discovery. To address this growing trend, we have invested into a new generation of laser sources such as our compact and cost-effective Axon lasers, which are now being deployed into benchtop tools. Axon lasers differ from our wavelength tunable Chameleon lasers in that they are designed to operate at a single wavelength only, the analogy akin to a scalpel doing a single imaging task rather than a Swiss Army knife servicing multiple tasks. Physical chemistry and chemical physics take advantage of the unique properties of ultrafast laser systems. By using incredibly short pulses in the regime of femtoseconds, that is, a millionth of a billionth of a second, scientists can probe with astonishing precision the shortest processes observable by humans.
The tool of choice here is our Astrella one-box amplifier system, which sets new standards for reliability and usability of complex femtosecond sources. These lasers are typically paired with one or more wavelength tunable accessories that give access to pulses spanning the ultraviolet to the mid-infrared range, thus enabling spectroscopic measurements of a huge range of materials at subatomic scales. In recent years, there's been a drive for fast data acquisition using lasers with faster pulse rates. Coherent is addressing this trend with ultrafast lasers using a ytterbium-doped fiber, again internally sourced and highlighted in our Monaco laser.
I'd like to close with a couple of examples illustrating both the transition of optical technologies that started in the realm of university research and became mainstream commercial revenue streams, and the platform nature of our laser technology, and the benefit of Coherent's breadth of end markets that allow us to apply those technology platforms to and generate revenue from multiple markets. Excimer gas lasers are direct UV sources that for decades remained a mainstay of scientific labs in physical chemistry for applications such as laser flash photolysis and pumping dye lasers for spectroscopy. In systems such as our VarioLas, seen here on the slide, we power-scaled and industrialized to create our LineBeam series, now deployed in excimer laser annealing tools for mass production of OLED displays.
A technique called pulsed laser deposition, developed over years in laboratories using lasers such as our COMPex UV laser, is now evolving into a potential key technology to create superconducting tapes, a critical component for fusion reactors, creating sustainable power generation for our planet's welfare. Coherent remains committed to providing photonic solutions for the scientific research community, and we are excited to create the next generation of products that drive both shareholder value and advanced solutions for humanity's greatest challenges. Thank you, and I will now pass back to Paul.
This concludes our presentations. We'll now begin our Q&A session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I'll pass it over to Paul for a brief message.
Thank you, Liz. We will be happy to field questions from sell -side analysts on the call. Once again, for any investors listening in on the call who would like to ask a question, please feel free to send your questions to me at paul.silverstein@coherent.com, and I will ask on your behalf. Liz, go ahead. Let's open it up to questions.
The first question is from Samik Chatterjee with JP Morgan.
Hi. Thanks for taking my question. Just making sure, can you hear me all right?
Yes. Yes, Samik. Thank you.
So firstly, I mean, a lot of details here in terms of the different and the broad end markets that you serve. I'm just wondering, in terms of looking at the TAM that you're addressing in these different sort of end markets, how should I think about, in terms of leveraging some of the technology that comes through the instrumentation segment in particularly verticals like scientific research, etc., leveraging them outside of instrumentation when we think about industrial segments or other segments? Because even as sort of this is a broad end of end markets that you serve in instrumentation, on a standalone basis, the individual TAMs seem to be a bit more sort of more mid-size rather than large-size. So how do you think about sort of synergies in terms of the innovation that comes out of instrumentation being leveraged across the rest of the company?
How should I think about synergies in that respect? And I have a quick follow-up after that. Thank you.
Great question, Samik. Sanjai is going to respond.
Hi, Samik. Thanks for the question. So when we look at some of these markets, we look at the opportunities within that market segment. For example, if you take wearables as an example, as it relates to biosensing, it's under the instrumentation market. But you're absolutely right in the sense that we completely leverage the technology advancements for these platforms that were driven by, say, another vertical, in this case, consumer electronics, all the progress that we made on advanced VCSELs and the manufacturing capabilities. As an example, or an indium phosphide platform, those are directly applicable and they're used in some of our wearable platforms. In fact, both Karlheinz and I talked about an example where we have three different compound semiconductor platforms enabling biosensing applications. So hopefully, that answered your question, Samik.
Yep. No, got it. And for my follow-up, just, I know at the start of the presentation, you mentioned from a margin perspective, given the stickiness with the customer in terms of some of these design-ins, there's a favorable margin opportunity. But any way you can sort of ballpark for me or give me a sense of how much of the instrumentation business is more in relation to selling components versus sub-assemblies, and even in some cases, maybe you're doing a full system, and how does the margin profile look relative to those sort of different tiers that you might participate in? Is the margin profile more favorable at the system level or the component level? Where is sort of the sweet spot in that respect? Thank you.
Okay. Great question, Samik. Let me start, and then maybe others can chime in. So we do sell, and just like most of our verticals, we sell at all levels of the value chain. So we sell components, we sell crystals, we sell lasers, and then we sell higher levels of assemblies. And as we go up the value chain, if you're able to combine, Kim talked about subsystems are the great progress we're making in the subsystems area. The TAMs are higher. We are growing up the value chain and the margin profile as a vertical integrated company actually starts to get better and better. So that's the way we'd like to look at it. I don't know if it answered your question, or Kim, would you like to?
Yeah. I'd like to say right now, I would say we're heavy on the component delivery into many of these applications. But that's where we're going to see the future growth, is how we're going to take these components, integrate them, bring them together into these higher-level sub-assemblies. So you may see a percentage switch in revenue that's driven by the components versus sub-assemblies.
Yeah. I just probably want to add to that, Samik. As part of the combination, we've had great synergies between the lasers and the building blocks, whether it's thermoelectrics or optics or filters. And our customers have been over the last two years, they're seeing the value of it. And we have over two dozen opportunities that we are working on various stages of development and production where we take these building blocks and build higher-level subsystems, including in some cases with software and electronics.
Got it. Thank you. Thanks for taking my questions.
Thank you, Samik. Liz?
Our next question comes from the line of Jim Ricchiuti with Needham & Company.
Hi. I think hopefully, you can hear me. There's not too much background noise. But I think you addressed this in the last response. Looking at the legacy II-VI and the legacy customer business, where do you guys see the biggest synergies from the standpoint of the product that they are? Or is it just the case where the revenue synergies may not be?
Jim, can you repeat?
Myself.
Jim, you're coming in real muffled. Can you repeat that, please?
Yeah. Can you hear me?
Better.
Okay. So what I was going to say is just looking at the combined companies, and the legacy II-VI and the legacy Coherent, where do you see the biggest synergies? Or is this just simply a matter of having a bigger toolbox to cross-sell?
Yes. So I can take that. Thank you. Great question. I think you're absolutely right. It is a larger toolbox. But I think more importantly, it's how the toolbox comes together. So these are really synergistic technologies and platforms that we can leverage now. I think taking those and combining with our strategy across these applications to design application-specific solutions is where the value will be. So for each of these applications that we've described today, we have that toolbox to leverage, and we can bring those technologies together into these higher-level sub-assemblies.
So Jim, this is Giovanni Barbarossa. Thanks for the question. Good morning. I think I want to add that the legacy Coherent team brought to the company, to the combined company, a broad and capillary service organization which legacy II-VI did not have. That is extremely important to penetrate markets in these kind of segments, in these verticals. So it opened up a number of opportunities for the legacy II-VI platforms, which again couldn't penetrate the market because of the lack of, again, the broad and capillary service organization which legacy Coherent did build over the years successfully. So that's been definitely pretty valuable in exploring new opportunities with existing customers or new opportunities with new customers for the combination of the two companies together. So that's for sure was a it is today.
It's a very strong synergy that we are relying upon to further penetrate these verticals.
Got it. Thank you, Giovanni. Follow-up question is just with respect to the broader instrumentation business, clearly a wide range of applications. But what I'm trying to get a sense of, if you could help us, is how long are the design cycles versus other parts of the Coherent business? Putting aside revenues in this area, which frankly have been, I guess, somewhat mixed. And maybe the follow-up to that is, why have the revenues been mixed of late?
So I can at least comment for the instrumentation market. I think as Sanjay alluded to, the design cycles can tend to be on the longer side. So it's completely normal to experience something from design concept to production engineering over a course of, let's say, five years. So that might be quite different than some of the other markets. To your second question, can you repeat your second question?
Yeah. Yeah. The revenues in this area of the business have been somewhat mixed. Maybe it's just the post-pandemic hangover, or maybe it's just some of the same macro forces that are impacting parts of the industrial business. But I wonder, how would you characterize the overall demand that you've been seeing in this part of the business?
Sure. Sure. Thank you. Yes. So obviously, with the combined company, we had a combined revenue that surged during COVID. And that was largely driven by demand for PCR instrumentation and specifically the optics and thermoelectrics that are integrated into those platforms. And I think you can see on the graph that Sanjai showed that that spike somewhat maintained, I would say, over the past couple of years. Now, some of the market leaders, as you're probably aware within life sciences, had a post-COVID decrease that were high double digits. So although we're experiencing some of the, say, macroeconomic difficulties over the past 12 months or so, we are actually quite happy with the performance that has maintained, we'll say, over the past two years post-COVID. So we're starting to see some flattening, as you can see from the quarter-over-quarter results, which hovered probably around $100 million.
We're excited to see what 2025 brings. Does that answer your question?
Jim? Liz, I think we might have lost Jim. Are there any other questions? Liz?
As a reminder, if you'd like to ask a question at this time, please press star 11 on your touch-tone telephone. This concludes the Q&A session. I will now turn it over to Paul Silverstein for concluding remarks.
Thank you, Liz. I'd like to thank Sanjai, Kim, Karlheinz, Darryl, Chris, and Giovanni, and investors and analysts for taking the time to join us today. Once again, today's presentations and Q&A session will be available in the investor relations section of Coherent's website. Should you have any follow-up questions on our instrumentation market or any other aspect of our business, please feel free to contact me at paul.silverstein@coherent.com. We look forward to continuing our discussion with many of you and to seeing you on our next market webinar, which we'll announce at a later date. Thank you all, and have a wonderful day.
This concludes today's conference call. Thank you for participating. You may now disconnect.