Modest growth in global manufacturing sets the tone for industrial laser revenues
David A. Belforte
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The year 2013 started out on a high note as fiber laser industry leader IPG Photonics booked and shipped volume orders. This company's performance in the first half, combined with improved performance of leaders in other sectors of the market, caused investment analysts to rush to their phones to check with their experts on possible stronger growth than had been forecast. Many industry veterans, the cooler heads of those who have experienced economic cycle swings before, cautioned that like sporting events the game is never over until the final whistle sounds. And true to form, a mid-summer slow-down in key market sectors (read this as China) slowed bookings and, even with strong fiber laser sales, the economy self-corrected and the year finished up just about where the experts had predicted at about a 4% total growth. Considering that ILS had projected a 2% increase last January and corrected this mid-year to 6%, as a result of strong fiber laser sales, we didn't do too badly.
I am pausing here because longtime followers of these annual reports will have noticed a not-so-minor change this year, which is explained in the accompanying sidebar "Changes to market data collection and processing" on p. 8. My colleague Allen Nogee, senior analyst at ILS sister PennWell organization, Strategies Unlimited, is contributing his expertise as an analyst to this report, and by so doing the market categories are being realigned to bring this report in-line with international industrial laser market reports.
The global marketplace
It was a mixed year in the global manufacturing markets for industrial lasers: the US held a strong position buoyed by export sales; Europe, supported by growth from major exporter Germany, managed to just about break even; the Asian markets, with encouraging increases from the Asean nations, helped to offset an unplanned slowdown in China and zero growth in Japan; and the failure of the BRIC (Brazil, Russia, India, China) nations to spark global sales all contributed to a so-so year for laser revenues, as shown in Table 1.
In and of itself, this would normally be discouraging, but as we said in January 2013 /content/ils/en/articles/print/volume-28/issue-1/features/2012-annual-economic-review-and-forecast.html: "… projections from laser suppliers … were for a mixed year in manufacturing ranging from flat to low single-digit growth." Lo and behold, regardless of 2013's strong first half led by fiber and ultra-fast pulse lasers, laser revenues ended up about where we had reforecast at mid-year. Note in Table 1 we have revised the reporting categories to mirror widespread market formats; succeeding tables will detail the major market divisions.
For the year, laser sales were up in the seven market sectors ILS had identified as key to continuing revenue growth -- markets that to one degree or another seem to be resilient to regional economic downswings and markets with processes that are judged to have long-term growth prospects. These are: transportation (165,000 new cars produced every day), energy (global wind power capacity in 2013 was in excess of 35.5 GW), medical devices (the annual global market for stents exceeds $5 billion), agricultural (world demand for agricultural equipment is expected to increase 6.8 percent per year through 2016), aerospace (airlines will buy more than 36,000 planes over the next two decades), communications (laser annealing is the process of choice for flat panel displays used to produce high-definition images), and fabricated metal products (a manufacturing industry that generates nearly $2 trillion in annual revenue).
These markets are all in demand for planned annual production that will be supported by industrial laser material processing operations. As shown in Table 1, these operations can include one or more of the revenue categories -- marking, micro, and macro -- that define the industrial laser market.
For 2013, revenues grew about 3.6%, in line with industry and analyst predictions of a flat to low growth year. On a percentage basis, Marking showed the largest increase, around 7%, due no doubt to the increased regulatory requirements set forth by government mandates. Macro experienced a slow growth as markets vacillated throughout the year, led mainly by a slowdown in capital equipment investment spending in China in the first 6 months of the year. Looking ahead to 2014, anticipation is that normalcy will return to the market by the midyear and that a modest increase in global revenues will boost totals by 4.6%.
Marking (including engraving) generated about 14% of total laser revenues in 2013, and as shown in Table 2, is dominated by fiber lasers which, growing at 13% per year, produced 66% of 2013 category revenues. Marking revenues grew 6.7% in 2013 and are expected to grow 7.4% in 2014, leading other categories in growth as new government and company regulations for permanent marks for traceability are being put in place, for example, mandated US government requirements for 2D bar code marking of all contractor manufactured parts.
In the marking category, fiber laser revenues increased as CO2 (-3%) and solid state (-5%) lost share, as most of the more than 225 system integrators opted for the fiber as the power source of their systems.
Micro Materials Processing (Table 3), led by Fine Metal Processing, produced 24% of total laser revenues in 2013. This category is still led by solid-state laser sales at 32% (Table 4), did not show much growth in 2013 (2.2%). Fiber lasers are challenging for leadership, growing at 76% in 2013. In this table, we now include diode, fiber, and solid-state lasers that are used as the power source in additive manufacturing applications, one of the fastest growing (76%) markets for lasers, led by 3D printing technology.
New to the Micro category this year are lasers used in Fine Metal Processing, which is defined as lasers using less than 1 kW of power that are popular in any application using metal material such as stent cutting and fuel injector nozzle drilling. The Other category includes those lasers less than 1 kW used in processing glass, plastics, and other non-metals.
In Table 4, the decline of the solid-state laser is evident, as it is replaced by fiber lasers; 2013 revenues did not grow, while fiber lasers gained 14% over 2012 numbers.
By far, the largest revenue producing category is Macro Material Processing (Table 1), where higher power lasers, with higher selling prices, are used to process mostly metals in the thickness range greater than 10 mm. In this category, as seen in Table 6, CO2 lasers represent about 47% of revenues and overall 36% of total laser revenues. It is in this category where the clout of fiber lasers on processing revenues is felt most, with CO2 and solid-state lasers experiencing negative growth in 2013, while fiber lasers grew an impressive 24%. Estimates are that high-power fiber lasers, up to 6 kW in power, have penetrated into the fabricated metal processing market for sheet metal cutting to as much as 35%, resulting in CO2 lasers experiencing a 7% decline in revenues. The same holds for solid-state laser revenues, which declined 5% in 2013. The bright light was a significant 26% increase in direct diode revenues attributable to sales of kilowatt-level units for auto body cladding and lower power units for joining of polymer materials.
Overall, the revenue picture for 2014 looks a lot like 2013, with slight increases in all three of the categories: Marking (7.0%), Micro (3%), and Macro (5.0%). Macro will show the largest dollar increase, growing $67 million as more high-power welding applications, particularly in the automotive industry, evolve.
Within the Marking category, fiber lasers are expected to show double digit growth while CO2 and solid-state lasers continue to experience market share erosion primarily through the growth of fiber laser sales.
Additive manufacturing is the hot technology in manufacturing today, and this is reflected in the double-digit projection for Micro laser revenues in 2014 (Table 3), where fiber lasers are expected to be the main beneficiary (21%) of system integrator interest (Table 4).
Metal Cutting and Welding (Table 5) make up 96% of revenues in the Macro sector as the Macro market is poised for modest growth in 2014. Continued uncertainty about progress in the important European markets and ongoing US congressional dithering, leading to anxiety in the capital investment plans of major industries, will hold this market sector to a 4.5% growth rate. ✺
Changes to market data collection and processing
Some 30 years ago, the publisher of Laser Focus World (LFW) challenged me to produce an annual report on the nascent industrial laser market. This was to complement the market report his magazine was publishing. The first of these was presented at a 1985 meeting in Chicago, where laser industry companies were convened. Out of this came agreement by these companies to support annual reports by commenting on industry numbers that I generated. From 1986 onward, with industry's support and in conjunction with LFW's annual survey of the entire commercial laser market, the industrial sector numbers were presented in this publication and at photonics industry meetings.
Thanks to industry support and contributions, the ILS annual market report became the most verifiable published data available at no cost publically. With the passage of strict regulatory financial reporting rules on public companies by the US Congress, ILS no longer had access to a flow of forward-projection information so collection of verifiable data became more difficult. Tactics changed and ILS began tracking published data by leading industry suppliers. These crimped our style a bit, because of varying fiscal year reporting, but once we settled into a pattern and could generate trend lines, ILS reports again were verifiable.
Over the past few years, ILS has cooperated with colleagues at Strategies Unlimited (SU), who themselves were publishing market data on the entire laser market. As changes in the publishing industry brought about by the impact of web-based reporting necessitated a tightening of editorial budgets, it was decided to concentrate market data collection and reporting with SU analysts.
This year, for the first time, the annual market report in ILS will use SU data. However, the analysis of this data, much of which is generated by ILS, will be ours. Readers may notice some disconnect in the numbers brought about by category changes that SU uses to conform to generally accepted definitions. For example, the revenues for the new category, Fine Metal Processing, were reported by ILS last year as part of Metal Processing.
Generally speaking, the numbers reported are within the error band of those reported by ILS in January 2013, with some differences reflected in the very active revenue numbers generated by fiber and diode laser suppliers in 2013. Inquiries about the market numbers should be directed to Allen Nogee, firstname.lastname@example.org.
More details on the laser markets is available from Strategies Unlimited in its new report, Worldwide Market for Lasers 2014 (www.strategies-u.com). -- D.A.B.