China Laser Sector

Q1: What are some of the key drivers for the laser industry?

We believe that laser will consistently displace and outgrow conventional material processing technologies and become a critical tool in factory automation. Fiber laser is the most important industrial laser type and should continue to take share from legacy types such as gas and solid-state lasers. By industry, the automotive industry is the largest customer, with laser being used to make the car body and power train. Together with consumer electronics, these two sectors account for the bulk of demand although other usages like welding, micromachining and additive manufacturing are growing faster. In particular, the increasing complexity of the Apple iPhone in terms of functions and components involves more laser precision due to the form factor and a denser PCB (Printed Circuit Board). The miniaturization trend of the PCB drives adoption for more laser welding and drilling because of its higher precision in laser micromachining.

Q2: What are the competitive advantages of Chinese fiber laser source makers?

1. Chinese makers have favorable market access since China is a major manufacturing base in the world, as well as the largest market for laser marking and metal cutting systems with faster growing demand on laser applications.
2. Chinese players have achieved an attractive ASP (Average Selling Price) discount to foreign leading players such as IPG. IPG indicated a 17% CAGR of Continuous Wave(“CW”) fiber laser, ASP decline in 2015-18; while some Chinese fiber laser makers saw CAGR declines of ~25%. That said, the ASP gap of fiber lasers between Chinese players and IPG has been widening, thanks to both raw material unit cost savings and RMB/USD FX rate depreciation.¹

Q3: What are the ESG benefits of using industrial lasers?

From an ESG perspective, there are significant positives using laser as compared to traditional manufacturing methods. Firstly, due to more concentrated energy delivery and much faster processing speed in cutting and welding, fiber laser saves 70-90%² of total energy consumption compared to conventional methods, such as punch press and arc welding. Secondly, laser reduces the use of costly and hard-to-make physical templates, tooling, and supplements, therefore reducing the environmental footprint. Thirdly, thanks to its flexibility and precision, laser material processing is key in its technology in reducing waste and scrap, hence saving raw materials. Furthermore, laser also enables the use of innovative materials (e.g. aluminum, plastic, and composite) that are lighter and stronger, but difficult to process with legacy cutting and welding methods. Finally, laser replaces chemicals in marking and metal surface cleaning. It also saves hundreds of millions in tons of water used to treat these chemicals every year.

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