Issue 7 Article 5

Sequencing the events behind Illumina's Rise

25/7/20

By:

Lee Zhe Yu, Nathan

Edited:

Wu Yuxuan

Tag:

Molecular Biology and Biochemistry

Today, Illumina is known as a global genomics leader, possessing more than 90% of the market share in the clinical genomics testing market. With its dominant monopolistic position, it leads one to wonder what were the factors that have led to its dominance?

The First Breakthrough

Illumina was officially founded in June 1998 by John Stuelpnagel, Mark Chee and Tony Czarnik, pioneering bead-based fibre optic array technology.

Figure 1: A workflow of a bead-based fibre optic array

The technology worked by etching optical fibres into microwells and then filling each microwell with a unique chemical reaction. This chemical reaction would then trigger a signal in the optical fibre which then can be analysed using image analysis software.

John Stuelpnagel was particularly interested in applying the technology to create DNA microarrays, which were then used to measure gene expression levels and detect DNA variations called Single Nucleotide Polymorphisms (SNPs). These small-scale changes can then have significant impacts on human characteristics.

In practical terms, this would allow scientists to link differences between human genome sequences with tangible variations in our characteristics, or even our susceptibility to various diseases. A pertinent example of the latter is in the SNPs in BRCA1, a tumour suppressor gene, with an increased likelihood of breast cancer.

With the new technology being able to run many experiments in a relatively short period of time, it was easily scalable. This arguably revolutionised the practice of genotyping, the determination of the different gene variants an individual possesses, which requires significant amounts of data processing due to the sheer length of the genome [1].

Between early prototyping stages up to its commercial release, Illumina eventually started offering proprietary genotyping services in 2001. A year later, it launched its first product, the Illumina BeadLab, and by 2005, Duke University conducted the first Genome-Wide Association Study (GWAS) which measured SNP frequencies amongst patients suffering from age-related macular degeneration, a chronic condition leading to vision loss caused by retinal damage. This led to a surge in GWAS studies, which increased the demand for DNA microarrays produced by Illumina.

While they enjoyed this initial success, there was a looming problem. The GWAS studies found out that many potentially disease-causing SNPs were located in non-coding regions, rendering the belief that statisticians could simply crunch the numbers and identify disease-causing variants invalid. In other words, most of the gene variations that were identified through data analysis were located in supposedly unimportant parts of the gene, which implied that the situation was much more complicated than just a game of numbers.

These discouraging findings had a few implications. Firstly, in spite of the various genotyping work and GWAS being carried out, humans did not significantly better understand their genomes as compared to before 2005. Basically, the only tangible insight we obtained thus far was that the identifying disease-causing SNPs was very complicated.

This also meant that genotyping was not the future of genomics. For Illumina to remain relevant, let alone dominant, it must quickly dominate to the new ball game: Next Generation Sequencing.

The Incumbent

At that point in time, Sanger Sequencing was the only genome sequencing tool available.

Figure 2: Sanger Sequencing workflow

This involved taking a sample DNA sequence and amplifying it with free deoxyribonucleoside triphosphates (dNTPs). These dNTPs would be incorporated into a complementary DNA sequence, hence producing another copy of double stranded (ds) DNA for every template dsDNA, “amplifying” it. At the last step, fluorescently-labelled dideoxyribonucleoside triphosphates (ddNTPs) were added to the reaction mixture. These ddNTPs would terminate the DNA amplification process, resulting in many fragments of DNA with various lengths (also called oligonucleotides). The DNA fragments are then separated according to length before being analysed by being excited with a laser. With each base (adenine, guanine, cytosine or thymine) corresponding to one colour, the output chromatogram would allow the user to derive the genomic sequence analysed.

However, it had a painful limitation — it could only sequence one tiny DNA fragment at a time. This made sequencing laborious and time-consuming, which was what made the Human Genome Project a 13-year endeavour (from 1990 to 2003) despite having the public sector and private corporations going head to head. It was also exorbitantly pricey, with the estimated cost of the first human genome sequenced to be USD 300 million for the private sector genome; public funding for the government-sequenced version reached USD 3 billion in 2003 (this corresponds to USD 524 million and USD 5.24 billion respectively in 2025 accounting for inflation). Most importantly, it was the only viable sequencing option regardless of efficacy, which was why both the public and private sectors used sequencers from Applied Biosystems, a leader in Sanger Sequencing.

By the 2000s, there were emerging contenders that threatened Sanger Sequencing’s deathgrip on the industry, the most significant of which was Solexa Incorporation.

Enter Solexa

Solexa Inc. was started by two University of Cambridge chemistry professors, Shankar Balasubramanian and David Klenerman, in 1997 as they discussed nucleic acid chemistry in a British pub. Together, they came up with a novel DNA sequencing method, sequencing by synthesis (SBS), which had the promise to reduce costs by a whopping 100 000 times.

Figure 3: Sequencing By Synthesis (SBS) workflow

This method worked by using only fluorescently-labelled ddNTPs in the DNA synthesis process. As ddNTPs prevent further DNA amplification from continuing, after each replication cycle, the complementary base can be identified from observing the fluorescence of each DNA strand. At the end of the cycle, an enzyme acts as a catalyst to convert the ddNTP to a dNTP, allowing further lengthening of the DNA strand to continue for the next cycle. At each cycle, the identity of the base on each DNA strand can be identified, allowing the DNA strand to be sequenced and identified. With this technology, multiple DNA strands can be sequenced simultaneously, making it have a “superior sequencing efficiency” than Sanger Sequencing, as written on 20 January 2023 by Dr Chu Ching et al. in “Frontiers in bioengineering and biotechnology”, an open-access research journal.

Throughout the early 2000s, Solexa lay low, only becoming publicly traded in 2005. In what would be the most consequential move in DNA sequencing, Illumina bought Solexa in 2006 for USD 650 million (USD 1.03 billion in 2025). Armed with SBS technology, Illumina began offering commercial sequencers by 2007.

Utter Dominance

Around that time, the DNA sequencing market was experiencing a period of rapid growth due to DNA sequencing’s far-reaching applications in forensics and pharmaceuticals. With increasing demand for precision medicine requiring DNA sequencing to be carried out and the development of robust and efficient bioinformatics tools to use on DNA sequencing results, a surge in demand for DNA sequencing services was to be expected, and duly played out over the next few years.

Within 3 years, Illumina launched the HiSeq2000 machine capable of sequencing a genome for USD 10000, significantly lower than the estimated USD 300 million the private effort to sequence the first human genome took. By 2014, it had captured 70% of the DNA sequencing market share, produced 90% of all genomic data globally, and, most importantly, won the race to the first $1000 genome. Needless to say, Illumina had capitalised on the influx of demand for DNA sequencing services across the clinical and commercial sectors to become one of its leading suppliers.

Its dominance has largely to do with economics. Firstly, there were significant barriers to entry, with Illumina’s novel technology likely publicly unavailable with patent rights in place. With exclusive knowledge of the cost-efficient methods of DNA sequencing, Illumina enjoyed significant information rent, translating to cost advantages that made their sequencing products significantly cheaper.

Illumina also benefits from economies of scale, where the cost of production of each unit of product decreases as more products are sold. With its novel technology and high pent-up demand for fast DNA sequencing, it was able to quickly expand and operate at a significantly larger scale. With that, the fixed costs of research and development was able to be spread out over multiple units of productions, leading to significant cost advantages. In addition, this also created more barriers to entry as startups would face cost disadvantages if they entered the DNA sequencing market at the small scale, especially with prohibitively high research costs that did not guarantee success.

As a company, they built a strong brand name based on quality, which built consumer confidence on Illumina. Coupled with the lack of strong competitors in the market and high costs involved in changing DNA genome sequencing systems, consumers became accustomed to use Illumina products for DNA sequencing. Its consistent performance over the years has led to its stock to be evaluated as “a better pick” over its closest competitor, Thermo Fisher Scientific, according to Forbes.

Illumina has also embarked on vertical integration, offering a streamlined workflow from the actual DNA samples to genomics data. With Illumina deeply embedded into the DNA sequencing and analysis ecosystem (most software and reagents used for DNA sequencing has been tailored to the Illumina workflow), it is highly differentiated from its competitors. This results in a high opportunity cost for consumers to switch away from Illumina products.

Recent Headwinds

That being said, it is now facing unique challenges. In retaliation to Donald Trump’s tariffs on China, Illumina was placed on its “Unreliable Entities” list, reducing domestic demand for Illumina’s products. A new crop of companies are also rising up to challenge Illumina’s dominance in the DNA sequencing market, including the Chinese company MGI, Ultima Genomics, Oxford Nanopore and Pacific Biosciences all competing for increased market share. This is especially in the context of Ultima Genomics’ promise of a genome below USD 100, which has triggered price cuts across the industry to remain price-competitive.

With the increase in the availability of substitute DNA sequencing services, consumers of such services have more alternatives to choose from, which makes them less obligated to purchase Illumina’s services out of necessity. Naturally, this would result in a decrease in the demand for Illumina’s products at every price level, which could erode some of its profits.

That being said, Illumina is still well-placed in this increasingly competitive market for the foreseeable future, especially with significant reserves built on huge profits over the past decade. This is aptly highlighted in its ability to spend USD 1.3 billion on research and development in 2023 and record a gross profit of about twice that amount (USD 2.4 billion) in 2024. Current Illumina CEO Jacob Thaysen made explicit mention of the importance of research and consistency this year in Illumina’s 1st quarter (January - March) earning call, stating that the “strategic focus remains on customer collaboration, driving differentiated innovations, and delivering on [Illumina’s] long-term financial targets of growth and profitability” despite “shifting policy and geopolitical developments” weakening its outlook for 2025.

In fact, this increased competition could bode well for the future of DNA sequencing, with Illumina now willing to invest more in research to maintain its competitive advantage over the new challengers. Ultimately, Illumina will remain the key player in the DNA sequencing market while being motivated to deliver high quality and cheap DNA sequencing products by its up and coming competitors.

[1]: Approximately 3 billion base pairs corresponding to around 100000 genes spread across 23 chromosomes

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Issue 7 - July 2025

Sequencing the events behind Illumina's Rise