Industrial laser markets mixed

STURBRIDGE, MA––There is an air of negativity in the U.S.

Jan 1st, 2008

STURBRIDGE, MA––There is an air of negativity in the U.S. right now brought on by not–so–pleasant economic news, which is especially hard to understand entering an election year. Economic growth in Europe, driven by continuing growth in the German laser industry (the world’s second largest), is expected to lag last year’s robust numbers. In Japan, one leg of the vibrant Asian laser market, 2007 numbers will be slightly lower than projections; while in China, the second leg, the laser market is expected to tail–off from last year’s 40% growth record, only because that number was so high. And the third leg, the rest of Asia, has strong economies with double–digit laser growth on modest sales.

Even in a dull North American market, industrial lasers seem to be outperforming other technologies supporting manufacturing. Many indicators––housing and automobiles in the U.S., machine tools and the weak dollar in Europe, and semiconductors in Asia––are acting as drags on their overall economies. In the U.S. that dreaded “R” word is now appearing in news media, and globally the world has yet to come to grips with the negative effects of $100/barrel oil.

So it is not surprising that our feedback on the industrial laser market (from countless industry sources) was mixed, some bragging about a strong fourth quarter while others were still feeling the effects of a down first quarter. Our usually reliable Job Shop Index produced such conflicting returns that we decide not to use it as a gauge of the U.S. economy prospects this year.

Putting everything together––perused survey returns, scoured reports from public companies and trade organizations, input from a variety of global resources, and contact with anyone who had an opinion––we come to the conclusion that 2007 pretty much matched what we had projected last January. And if that is not a self–fulfilling prophecy, then what is?

For the year we think the production of industrial lasers will approach 41,000 units, up 6% over 2006, with a value of $1.7 billion, up 8% over 2006. System sales will grow 6% and exceed $6.1 billion. The major contributors are fiber laser system sales at about a half billion dollars, growing almost 30%, and revenues from high–power CO2 laser sales up 10% over already significantly adjusted 2006 revenues.

A disclaimer: each year we adjust the previous year’s reported numbers to reflect data that comes to us from companies that report fiscal year results during the first half of the new calendar year. Normally this is a series of minor adjustments that serve to fine tune the report. This year the fourth–quarter 2006 reports from companies selling high–power CO2 lasers and systems were so high that we made double–digit adjustments in laser and system revenues. As a consequence the revised 2006 data is dramatically increased, that is, a 40% adjustment in high–power CO2 systems for sheet metal cutting, a market that represents 45% of all systems sold. Therefore our revised estimate for 2007 industrial laser system revenues, slightly more than $6.1 billion at a 6% increase over 2006, is more in line with reality.

The nominal 6% growth rate for 2007 and 2008 is a reflection of the industry’s and our view that the industrial laser market will continue an unbroken string of 15 years of continuous growth dating back to 1991, the one year in 37 years of reporting that did not show a positive growth rate for industrial laser sales. Since 1970 the compound annual growth rate for industrial laser sales is 18.1%.

Analyzing all the data available to us leads to the conclusion that 2007 was a year of fine tuning the markets and that 2008, assuming no global financial upsets, will see the suppliers of industrial laser products again adjusting to variety of regional marketing influences to sustain single–digit growth.

David A. Belforte,
editor–in–chief, Industrial Laser Solutions

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