STURBRIDGE, MA - To understand the 2005 industrial materials processing market, one has to understand that this year turned out better than anticipated. Unit sales growth more than doubled and revenue growth doubled over industry projections made more than a year ago.
Suppliers to this market sector attribute this strong performance to a generally strong economic situation in the world manufacturing sector. North American industry finally bought capital equipment thanks to an easing of restrictive investment credit policies, Japan returned to a positive situation after countless false starts, and China continued on a sharp upward trend. Eastern Europe showed increasing strength while Western Europe (less Germany) held its own.
The bottom line is that, overall, Industrial Laser Solutions will report a strong 2005. But this good news comes with a dose of reality; repeating the 2005 growth rate in 2006 does not appear to be in the cards.
However, before you start climbing out on the window ledge, consider this: a 4% growth in unit sales and revenues isn’t all that bad. Last year we projected 6% for units and 5% for revenues, and that didn’t seem to cause any undue concern.
A look behind the numbers may relieve any anxiety caused by the totals. For the first time a new category-fiber lasers-appears in the analysis. In the past these lasers were combined with the solid-state numbers. In 2005 sales of fiber lasers grew at an amazing 33%, of which more than 75% came at the expense of solid-state laser sales, mainly lamp-pumped Nd:YAG. The application driving this growth-marking-remains the hottest industrial laser application, with nearly 15,000 units delivered in 2005, half of which were solid-state-and of that amount, one-third were fiber lasers. For 2006 ILS sees the trend to more solid-state replacement by fiber lasers in marking applications continuing at a strong pace.
On a revenue basis solid-state lasers are under severe pricing pressure in the marking sector, especially in China and Japan, which are currently the most active markets for laser marking. One major international solid-state laser supplier has essentially abandoned this extremely cost-sensitive market to concentrate on higher value-added applications. This explains the 10% drop in solid-state revenues and part of the 52% increase in fiber-laser revenues.
The market for CO2 lasers is not yet feeling much impact from fiber lasers. On the high-power end, sales and unit prices are up and there is little pressure for dramatic change. Higher beam quality units offer users more power from lower-power configurations-realizing more bang for the $/W buck. Unit sales are expected to be up 9% and revenues up 7% for 2006. Sheet metal and plate cutting are the main markets for these lasers. News of a major multi-unit sale of Rofin Inc.’s slab CO2 laser for a remote welding application suggests that this market sector is ready for a breakout year in 2006. High-power CO2 lasers for metal cutting represents about 40% of the total laser market revenues.
On the low-power end it remains a very competitive playing field with unit sales expected to increase 5% and revenues only 3%, the latter due to what an executive at a leading supplier calls a “brutal” pricing situation. Marking/engraving is the major application for these lasers. Opportunities for growth in the low-power business remain, but some question whether it is worth it if there are other, more profitable laser lines available. This sector is the one true commodity market for industrial lasers.
Excimer lasers and direct-diode lasers had an up-tick in sales growth in 2005, and according to the few suppliers of these products, especially the high-power diodes, 2006 looks like a very good year. Applications related to the semiconductor and microprocessing industries were not at a stage to greatly affect solid-state laser sales in 2005, and prospects for 2006 look the same.
In a quick summary: look for large increases in fiber laser sales at the expense of solid-state, continued growth of low-cost, low-profit CO2, and a vibrant market in high-power CO2. 2006 should produce some interesting gains for high-power fiber lasers, possibly at the expense of high-power lamp- and diode-pumped Nd:YAG lasers. On balance, however, 2006 should be a good year.
-David Belforte, publisher/editor-in-chief, Industrial Laser Solutions