2017/09/25 15:58 | Pageview：667 | From： INDUSTRIAL LASER SOLUTIONS
In the view of industrial laser processing system manufacturers in the Western world, China is the single largest market for their products and, potentially in the near future, a significant competitor in their home markets.
The estimated market for industrial laser material processing equipment in China was about $3.8 billion in 2016, showing a 12.51% compound annual growth rate (CAGR) over the last five years. Growth in 2017 is expected to be in the 22% range to an estimated $4.6 billion. Putting this into perspective, the total global market for laser systems used for material processing was about $12.6 billion in 2016, so the China market alone represents one-third of all global system revenues. The hot markets for these laser systems are in manufacturing operations for smartphones, sheet metal cutting for fabricated products, batteries for electric vehicles, and display panels—the latter an application sector that vaulted micromaterials processing up by a strong 23% in 2016.
In 2016, China imported $640 million of industrial laser systems, down from a high in 2014 of almost $1 billion—about a 30% decline. This slowing of imports is expected to continue in 2017 by another 18%. FIGURE 1 suggests the crossover point for laser systems exports vs. imports that may occur in 2018.
FIGURE 1. By the end of 2017, exports of Chinese industrial laser systems may show a 21.9% CAGR, while imports of equivalent systems may show a -3.4% CAGR since 2010.
Looking at this from another perspective, Chinese suppliers of laser systems for material processing experienced a 16% CAGR in revenues over the past five years. According to sources, there are about 150 of these companies with annual revenues of more than $5 million.
These domestic suppliers have, since 2010, exported at a 22% CAGR to an estimated $480 million in 2017. The bulk of these system exports have been to other Asian markets in Korea, Taiwan, and Vietnam, as well as markets in countries with rapidly developing manufacturing industries such as India and Malaysia.
Exports of Chinese laser material processing systems to the US and Europe are now in an advanced introductory role, as exporters to these markets grapple with safety and reliability standards. This is especially difficult in the Western world, which has established demands for rapid service response and expedited replacement part supply. Chinese system suppliers are realizing that the overriding concern of buyers in the US and Europe is for equipment reliability, even more than system selling price.
Somewhat mitigating the service and reliability issues is the use of fiber lasers as the power source in many industrial laser systems on the market. The fiber laser is an energy-efficient, long-time-between-replacement, and easy-to-maintain device that ensures the prospect of cost-effective operation in the manufacturing environment. Long-time reliability has been a major factor in boosting fiber lasers to about a third of the installed base of all industrial lasers sold.
In 2016, Chinese system manufacturers integrated 70,000 fiber lasers into the units sold. Of these, 10,000 went into high-power (>1kW) applications such as welding and sheet metal cutting, and 60,000 units into systems requiring pulsed laser output (<1kW) for marking and microprocessing applications. Of note, about 60% of high-power continuous-wave fiber lasers and 30% of lower-power pulsed fiber lasers were from non-Chinese suppliers.
Now, the kicker in the competition situation is that successful international industrial laser and systems manufacturers invest a significant percentage of revenues in product research and development to gain or retain market share in this very competitive global market. Two examples include IPG Photonics, which reinvested about 7.9% of sales (FY17, Q1), and TRUMPF, which reinvested about 10.5% (FY15/16). The result—invest in research & development and attendant intellectual property (IP), and you get positive return on your investment.
This was not lost on China's government when they drafted the 13th Five-Year Plan, which seeks to set a high 6.5% growth rate to improve the average person's quality of life and for manufacturers to foster innovation (read this as IP) to assist their ability to compete in the international marketplace. It also seeks to guide companies to produce higher value-added products that are attractive in the competitive global market.
The Chinese government also looked to make breakthroughs in intelligent manufacturing to improve the quality and efficiency of supply and stimulate real demand to strengthen new growth momentum, focus on manufacturing innovation and the integration of information and manufacturing technologies, boost information technology as well as high-end equipment, and assist growth in robots and intelligent systems , all related directly or indirectly to industrial laser technology. These goals, if accomplished, are expected to grow Chinese companies' intellectual property, making them competitive in the marketplace.
Key to the new Five-Year Plan is China's Belt and Road Initiative, which encompasses two trade routes that will increase regional trade and encourage economic cooperation between China and more than 65 other countries along land and sea routes from Malaysia to Eastern Europe . An investment of more than $900 billion is already committed to build infrastructure networks. China's leadership plans to use China's wealth and industrial know-how to create a new kind of globalization, dispensing with the rules of Western-dominated institutions. The outcome is to restructure the global economic order, bringing countries and companies more tightly into China's orbit . This initiative may assist in reducing barriers to China's penetration into the European laser materials processing market.
Even with stimuli from the government, Chinese laser system manufacturers face some not-so-insignificant barriers to match and exceed a nominal 5% CAGR. First, the manufacturing cost of competitive low-power systems may boost current selling prices, reducing the advantage they now hold. And Chinese systems makers competing against kilowatt-level cutting and welding systems built to exacting international standards, and backed by appropriate after-sales service, may not have the selling price advantage they have now. Also, improved industrial laser technology (UV lasers, ultrafast lasers, and high-power/high-beam-quality diode lasers) by other global suppliers is entering the international markets well ahead of Chinese companies.
However, leading Chinese manufacturers are aware of the changing market environment. With the aforementioned R&D funding stimulus, these manufacturers could—with world-class equipment—finesse their way into lucrative, now difficult-to-enter markets, meeting the Chinese government-stated goals of being suppliers of high-value added laser equipment protected by IP rights.
Valuable assistance in preparing this perspective was provided by Dr. Qitao Lue (Han's Laser), Dr. Bo Gu (BOS Photonics), and Allen Nogee (Laser Markets Research).