China’s changing laser markets: The new globalization model, uncertainties, and challenges

China is the largest single laser market in the world, and thus the presentation from Bo Gu was eagerly awaited. The Chinese laser market was growing in 2017 and 2018, went down in 2019, and then came the pandemic. It first hit Wuhan—the home of many Chinese laser and photonics companies—then Europe, North America, and the rest of the world. Fortunately, China recovered relatively fast—and so did the Chinese laser market. With a total volume of $10.91 billion, it crossed the mark of $10 billion in 2020.

Within the bigger picture, China is making some important changes. China’s GDP grew only 2.3% last year. Still, its volume reached about $21 trillion, which is 74% of the U.S. GDP. This is one starting point to understand the new Chinese concept of Dual Circulation, which refers to internal and external economic circles. After decades of ever-growing exports, China will develop its domestic markets now, and increase consumption. Gu recommends for American companies trying to maintain business in China to formulate a multiyear strategy for product localization based on the company’s competitive advantage over the good-enough products in the target market segment. If necessary, it should acquire local assets, where China has the strength that the U.S. lacks.

One upcoming strength of China is a growing engineering workforce. Every year, China produces 6 million college graduates with STEM degrees, which is about 10X the U.S. graduation size. This fits into a picture that Gu painted: Until about 2011, China benefited from its huge, cheap workforce, creating a population dividend. Now, it enters the era of engineering dividend. This will help China to shift up to higher added value in the industrial chain. This is a major goal of the Made in China 2025 initiative, which Gu presented two years ago. Within this initiative, China wants to modernize its manufacturing capabilities and move from the world’s largest manufacturer in 2015 to the world’s premier Tier 1 manufacturer in 2045.

The current developments of the Chinese laser markets fit well in this picture: More than 150 Chinese companies with considerable technical skills now offer industrial lasers. They have opened an aggressive price war, which squeezes foreign companies out of market segments. This domestication process has been finalized for low- to medium-power fiber lasers, it extends to high-power fiber lasers in 2021, and will come to the field of ultrashort-pulse lasers as well.

While unit prices for industrial laser systems continue to fall rapidly, the number of sold systems rises even faster. The Chinese fiber laser market size is about $1.38 billion (2020), of which the domestic portion is about $773 million, or about 56%. And that is also about 28% of the world’s total revenue. For 2021, Gu forecasts a solid 15% growth for the total Chinese laser market (see figure).

The background for this remarkable growth is multifaceted: There are new national infrastructure projects, including railways, bridges, airports, seaports, subways, etc., which drive industrial laser systems sales. In addition, 3C [Computers, Communications, and Consumer Electronics] electronics, the 5G network rollout, and investments in e-mobility are driving laser sales. Furthermore, the export for Chinese lasers and systems is growing steadily. This may be aimed at Asian markets at first, but it certainly will not stop there. After all, the Chinese laser market is flourishing and seems as if it will continue to do so.

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