The status of industrial lasers in China

The Chinese industrial laser market is experiencing a difficult time in 2019 after rapid growth over the past two years (FIGURE 1). As this is being written, the uncertain Sino-U.S. trade war has certainly worsened the situation. On one hand, fierce competition has led to a sharp drop in prices of lasers, especially those of fiber lasers and ultrafast lasers. On the other hand, unprecedented low selling prices make the application of laser technology even more cost-effective than many traditional manufacturing technologies, therefore making laser applications spread rapidly, especially in the sheet metal cutting, laser marking, and computer, communication, consumer electronics (3C) manufacturing markets. At the same time, the rise of improved domestic laser products is replacing imported ones, dramatically changing the whole laser industry landscape in the country that dominates global industrial laser revenues.

Chinese economic growth has been slowed for the last few years with annual GDP growth at 6.8% last year and 6.3% in the first half of this year. China’s manufacturing infrastructure is undergoing a transition from low value-added to high-end, smart manufacturing.

The photonics-based industry, with lasers at its core, is playing a big role in this transition. Last year, the strategic high-tech sector grew at much higher rates than the GDP growth at 11.7% and 8.9%, respectively, where lasers have found many applications. Many laser companies are doing relatively well compared to the impact experienced by other sectors, even though the slowing economy is impacting near-term revenues.

The shrinking market demand due to the slow economy, coupled with over-investment in lasers, encouraged and driven by the previous two good years, has caused domestic laser makers to cut their prices beyond a normal range. For example, the first-half 2019 revenue for fiber laser manufacturer Raycus is 1.012 billion RMB, a 34.75% increase from last year, while the company’s profit dropped 15.25% to 219 million RMB from last year mainly due to this lowering pressure. FIGURE 2 shows the typical price range for various power levels of fiber lasers in China. One has to keep in mind that this chart may have underestimated the price trend. In recent months, we found at least 10 domestic companies offering mid- and high-power fiber lasers.

Once the technical hurdles of making the high-power fiber lasers are overcome, more companies are going into the market, joining the competition. The consequence is a huge price drop for fiber lasers, especially in the power range of 2 to 6 kW (TABLE 1). It is anticipated that this price erosion will soon spread to the 10 kW power range and beyond.

We gained a glimpse on what is coming at the recent Chinese International Industry Fair (CIIF) held in Shanghai, China from September 17 to 21, 2019. We witnessed IPG Photonics 30 kW fiber lasers and nLIGHT 20 kW Corona fiber lasers with smart adjustable beam profiles from the U.S. side, and a 30 kW fiber laser from Raycus and 35 kW fiber laser from Max Photonics (FIGURE 3) from the domestic side. More interesting was Han’s Laser showing its own 6 and 12 kW fiber lasers (FIGURE 4). The race towards higher power is getting much tighter.

Fiber lasers have now become the main laser sources for material processing in China, taking more than 60% of the laser processing market. The positive effect of the laser price reduction is the rapid spread of applications where prices are sensitive to end users, especially in metal cutting, marking, and cleaning. In 2018, 30,000 units of mid-power and 6000 units of high-power laser cutting systems, as well as 130,000 units of laser markers, were sold in China.

Another noticeable area is the rapid growth of ultraviolet (UV) lasers and ultrafast lasers mainly driven by 3C applications. There are at least 15 ultrafast laser manufacturers competing in this attractive market (FIGURES 5 and 6). In China last year, 15,000 UV lasers were sold. It is anticipated this will reach 20,000 units this year.

Conclusions

2019 is destined to be an extraordinary year for China's laser industry. Both the trade war and the price war have brought opportunities and challenges to the development of China's laser industry. The result is the unprecedented consciousness and determination of laser manufacturers to innovate independently and to make more investment in R&D and in order to survive.

Although the global economic situation is still not optimistic, most of the Chinese traditional manufacturing industry is still in the stage of "converting the old to the new." Laser technology not only can promote the upgrading and transformation of traditional industries, but also make use of its advantages to make its own markets space broader. Also, the "one belt and one road" initiative has created a good economic growth opportunity for China's manufacturing industry as well as laser industry in the Middle East, South America, Southeast Asia, and other countries.

Future trends

The emergence of 5G communication generating demand for laser processing will prompt the emergence of new products and new formats from laser manufacturers. Demand for laser processing, especially for ultrafast lasers and its processing systems, will grow rapidly as OLED screens become mainstream products.

Laser cladding and laser repairing applications are entering a growth stage due to the maturity of laser sources and process qualification. This will benefit industries such as power utility, oil and gas, metallurgy, aviation, and space. Both fiber lasers and direct-diode lasers are used in these processes—however, it requires extra high reliability and stability processing under harsh working environments.

Laser welding will also see its growth in China through the growth of electric cars and the power battery industry. TABLE 2 shows the forecast for this market demand and potential capital investment—in particular, capital investment in laser equipment.

Summary

The Chinese industrial market is experiencing an ugly price war on both fiber lasers and ultrafast lasers amid the trade war between the U.S. and China. Most domestic companies are struggling with economic downward pressure. Technical hurdles in high-power fiber lasers and ultrafast lasers have been overcome by domestic manufacturers that are changing the domestic market landscape dramatically and very soon, the rest of the world will feel the consequential impact.