The SMD-01 is a high-precision optical encoder that employs a diffraction image projection method. It incorporates an OEIC (Opto-Electric Integrated Circuit) and LED light source in a single package. Light emitted from the LED is projected onto a scale, and the reflected diffraction image is focused on a photodiode. The reflected light contains position information that is recovered to detect the relative movement between the SMD-01 and the scale. A photodiode array is used to reduce degradation in phase characteristics due to mounting alignment. This allows the SMD-01 to be mounted without monitoring the output signal, unlike conventional high-precision optical encoders which typically need to be mounted and aligned while monitoring the output signal.